Transcript

It was in 1980 that Nomura Research Institute—interestingly, a research affiliate of a brokerage firm in Japan; the largest Japanese brokerage firm, Nomura Securities—came to Harvard Business School, and spoke to John McArthur, saying they wanted to start a business school, and would we be interested in working with them?

Well, that was, in fact, a very unusual approach for most places to even consider thinking about going into partnership with a brokerage firm. They didn't come as a brokerage firm. They came as a research arm. And that was the company that was the leading computer service company in Japan, and also did all the research that the Nomura company produced about individual companies, which they use to sell stocks and bonds. Obviously, I thought of those as cases. And they were writing cases, and using them in public, writing them and publishing them, about all of the leading interesting companies of Japan. And I said, "Wow, that has got to be the best partner I ever saw!"

And I was coming off the experience of trying to build executive education using Exec Ed as an engine to drive faculty development. And when we opened up the European program, we all said, "We need Europe, we need Asia, and probably we need Latin America." So Europe was a prototype. If we could have made Europe work, the plan was to go to Asia and Latin America. It would have been much harder to go to Asia—we knew that—because of language, and lack of contacts, etc. But here came one right dropping out of the sky, in a rather unexpected way.

We didn't have enough resources to do it. We didn't have enough people who were curious to do it. We didn't have people who wanted to go away from Mother Allston to go spend serious development time in Japan. So it wasn't going to be easy. I knew that better than anybody around here. But this was very unusual. So we started out. McArthur said, "Why don't you talk to them, and figure this out?" . . .

So I went over there, and I came back saying, "This is a tremendous opportunity. Japan is the most interesting country in Asia for us at this moment. It's by far the biggest. It's like the United States. It has big, sophisticated companies, our natural marketplace. It's totally different from here. We don't know anything about it. And if we could get faculty to be stimulated to do it, this would be a way to learn at first hand, using our field research, case method, traditional sorts of methods. And we could become the people who understand this strange country more than anybody else. And Nomura will be the best partner. They want to do it, and we want them to do it, and we want to do it." Except I was the only one who wanted to do it. . . .

I think the value proposition for Nomura was that they could see great value to them of having a high-class, internationally known partner engaged in developing educational programs about Japan, in Japan, for Japanese managers. This was going to be not for internal house management development. It wasn't going to be for Nomura managers. It was going to be for the clients of Nomura; all the public companies of Japan. And they didn't know how to do that. They didn't know anything about executive education. There wasn't any such thing. . . .

On the Japan side, they had one young fellow who was going to be the worker bee. And he was an MBA from the Wharton School. His English was excellent. He had the first chartered financial analyst. He got it later. He was the first chartered financial analyst in Japan. And that was a program that I was familiar with because of my work with the financial analysts' federation, creating the investment management workshop. So I said, "This guy is the best Japanese I can imagine for this kind of work." He was the most cross-cultured person that I have ever met in Japan.

They also had an entrepreneur, who was a fellow named Jiro Tokuyama, who was much older. He was an international columnist for Newsweek, and widely known, and therefore an entrepreneur. He was an entrepreneur in Japanese companies where entrepreneurs don't get along very well. And they picked him to be the first Dean of Nomura School. And he also had worked for the Japanese government in an organization called [Jetra?], which was designed to promote business. So I thought, "Wow, here comes Nomura, with all the money in the world. A strategic commitment that serves them. There's no charity here. They want to impress their own potential underwriting and brokerage clients. And they want to use our reputation, name, and skill to do that. But they have somehow, out of the recesses of the company, produced two extraordinarily well-tuned people. And this is a miracle."

What was in it for us? For me, it was the same old question of how do we stretch and develop the faculty in an area where the faculty probably don't really even admit that they don't know much, but where they surely don't know much, and have no way of knowing much? We had a number of Japanese students who used to come here to programs like the AMP, and they were very important people. But they were often the outside people in the big Japanese companies. They weren't necessarily the ones who were going to have the key inside jobs. They were sent out to America to look, and to meet people, and build contacts. But that wasn't the real inside power in the companies, in many cases. There were exceptions. And much of Japanese industry and commerce never came. The people who came here were the banks and the trading companies, by and large.

What we were going to get from Nomura was a true cross-section of the publicly owned companies in Japan. So we would get department stores, advertising agencies, as well as banks and trading companies. We had steel companies, and airlines. And we would get, as the program ultimately developed, about 75 senior Japanese managers, AMP level, from 75 or maybe 60 different companies, and they came to learn about the content, and we came to learn from them. . . . .

The Nomura building had some empty space on the 44th floor. And they dedicated it to the "Nomura School of Advanced Management," as they called it. And we converted that into an amphitheater type classroom, simultaneous translation equipment, audiovisual, discussion breakout rooms, all, again, according to our design. And they took our advice absolutely and followed it because we were, quote, "the experts" in executive education. And I thought that was right and fair that they do that.

I should go back for a moment to say how I got to be so directly involved, because by this time, I was just a faculty member. Dean McArthur said, "Why don't you go over there and look at it? Take your wife. Get to know the people." I came back and said, "This ought to be a go." And ultimately, John McArthur said, "Go ahead." I said, "I think we have to do it. We have to learn from the European experience. We have to do it sort of off balance sheet. We have to do it as a private program. If we try to do it as an institution-to-institution tie, we'll be all caught up in the staffing of all the other HBS programs. We'll be in the politics of all the areas and programs. We'll be in the compensation systems that we have to operate under. And I don't think that will work. This is going to be too difficult, and too demanding a job. And if the purpose is development, and deep, fundamental, multi-year development, we won't be able to staff that in a way that will pay off. So my suggestion would be that if we do it we have to do it off balance sheet as consulting."

And he said, "Would you be willing to do that?" I said, "I would, but obviously, it's kind of sensitive. It has to be done in such a way that you know that my whole interest is for the School. And that if I'm getting money and writing cases, I'm willing to stop any time you want me to stop, or change it any time you want to change it. But if we're going to try and go forward, I don't think we can do it on a halfhearted way." . . .

John said, "Go ahead and do it." And that got us to the involvement that I have described in designing the classroom, and writing cases. And we ultimately wrote over a hundred cases over there, a number of which came back and were taught here by individual faculty.

I also made the choice of which faculty to go over there, in terms of development. I wanted to get people over there who would be willing to do development. And that's the way I made the choices. And I wanted some who were willing to symbolize that we were development-oriented. So one person I asked to go over there one time was Alf Chandler. Alf Chandler had done research on American industrial organization, with an enormous impact. He was comparing the German structures with the Americans. And he had the idea of comparing with Japan, but he didn't know much about Japan. And so I asked him if he would go over there. I got Nomura to agree to have him come over. They were delighted, because he was such an eminent, prestigious professor. And he got a chance to talk to a lot of people about how Japanese companies are organized.

And the same thing happened with other people. David Garvin had done research on the air conditioning industry and quality. He had done all the air conditioning factories in the world except the Japanese. And I said, "That's crazy. That's where quality is supposed to be paramount. And you're writing about quality in AC, and you haven't done it in Japan? You ought to go to Japan." He said, "I don't know anybody. I don't have any contacts." I said, "I can get you some contacts through Nomura."

Tokuyama got him into every single Japanese air conditioner factory. And he was able then to expand his research. And he came back to me, and he showed me a chart. And he had two axes, and he had some circles, some light circles, and some dark circles, and they overlapped. And he said, "These are the results from the quality studies in Japanese factories and American factories." And the white and black were all mixed up. He said, "Oh, I forgot one thing. The scale is different for the two. And if I put them on the same scale, all the Japanese are down at the intersection of the two axes, and the Americans are all far away." In other words, he had proven his point, but with much more dramatic extension to other data. He had proved that the Japanese were fundamentally better in that narrow industry.

And so I was looking for ways like that to leverage the program. We were doing something that they wanted, but I wanted to get back an ounce of flesh, if I could, in the form of case development, knowledge, and sometimes quite tangible research done by a variety of faculty.