In stark contrast to most European countries and developed economies such as North America and Australia, the dominant cause of complexity in Japan appears not to be the burden of regulation, reported by just 18 percent of respondents. Instead, the economic environment and recession shoulders most of the blame for increased complexity, at 31 percent. Pricing pressure was also identified by 10 percent – the third highest rate for this option after China (12 percent) and Russia (14 percent).
Looking ahead over the next two years, businesspeople in Japan anticipate a further rise in business complexity with 59 percent expecting it to be somewhat or very significant. Only 3 percent believe the rise will be minimal. With 34 percent expecting a net future increase in complexity, Japan exceeds any European or Scandinavian country, putting it on a par with Singapore and India and lagging behind only America, Brazil, South Africa, China and Australia.
Contrary to the global picture, where regulation is blamed for causing most complexity in business today, Japanese firms are experiencing pressures from other areas. Information management (34 percent), tax policies (33 percent) and the increased speed of innovation were highlighted as crucial drivers in the survey.
As with the vast majority of countries included in the study, having more risks to manage registered highly in Japan, cited by 86 percent of respondents. But even more notable, 90 percent of those questioned saw greater issues in both increased costs and the need for new skills.
Aside from the risks, almost four in five Japanese respondents agreed that complexity can generate opportunities.
Reflecting the global pattern, the most commonly perceived benefit is the chance to gain a competitive advantage over rivals (68 percent). Making businesses more efficient, and expanding into new markets, also rated highly, at 67 percent each – although in terms of expansion, China (68 percent), Singapore (80 percent), South Korea (72 percent) and India (82 percent) were all even more optimistic.
While complexity is widely expected to accelerate over the next two years in Japan, the causes are expected to shift. More than two-thirds of Japanese respondents (69 percent) believe that increasing speed of innovation will be the primary driver of complexity in the near future. Globally, regulation changes (excluding tax) are expected to have the biggest impact, but in Japan only 58 percent consider this to be a major issue. In this respect, Japan reflects the picture in China, where innovation is also expected to power complexity changes, and regulation changes are similarly downplayed (34 percent).
To adapt to changing complexity, Japanese companies have closely followed the worldwide approach of improving information management (86 percent) and reorganizing their businesses (73 percent). Unlike China, however, Japanese businesspeople have placed far less emphasis on changing their approach to human resources (85 percent in China, as opposed to 69 percent in Japan) and outsourcing functions (64 percent in China, but only 56 percent in Japan).
More changes are on the way. Only one in five Japanese respondents don't expect their businesses to take different actions to address complexity over the coming two years. Like the majority of countries, attention will be focused on reorganizing all of part of their operations (65 percent) and improving information management (62 percent).
Certainly the scale of the complexity issue is taken very seriously by Japanese companies. When asked whether it was one of the biggest challenges facing their particular firm, 84 percent of Japanese respondents agreed – the second highest in the study, after China. Recognition of the need for new skills internally is dominant (92 percent), along with the belief from more than four out of five Japanese businesses that regulations should be simplified (81 percent) and governments should cooperate to create a less bureaucratic business environment (82 percent).