Japan has had a few years of minimal growth, though it shrunk in the first quarter of 2018, the country is still entrenched in another potential lost decade. Rising unemployment, stagnant GDP, and a terrible demographic future, the country that dominated the 1960s through 1980s has forgotten the source of its success.

Old ways die hard, and a reluctance to change may keep Japan stuck in another decade of minimal growth. The problem with Japan is the same problem that happened to the U.S., arrogance and a focus on profits rather than quality and customers.

Prior to WWII, U.S. products were known around the world for high quality and meeting customer needs. Things changed after WWII. As the only major country which emerged post WWII with industry still intact, the U.S. was able to sell anything it produced; there was barely any competition. Corporate executives changed the focus from quality to sell, sell, sell. As the Americans pumped out low quality products the Japanese were setting the stage for phenomenal success. Based on the teachings of Dr. W. Edwards Deming, Japan was able to change the country’s reputation as a producer of low-quality junk, to creating high-quality products and services that exceeded customer expectations.

Deming arrived in Japan in 1950. The country was in ruin and had a global reputation for producing low-quality products. Deming showed Japanese industry leaders that a focus on quality and customers could change the reputation of Japanese products in 5 years. Deming told the leaders to not focus on costs and profits, just focus on quality and providing customers with products and services they truly needed. Profits would follow. The Japanese followed Deming’s teachings and changed the country in 4 years – one year earlier than predicted.

Decades of success resulted in high levels of arrogance. Just like the Americans before them, the Japanese forgot the importance of quality and customer focus, and focused on cost-cutting and “paper profits” – profits only on planning documents. Then the bubble burst.

The result has been ongoing product recalls, boring product designs all led by unskilled management. A corporate culture of unquestioning obedience to superiors has resulted in “me too” products, lack of creativity and innovation, and employees who only do what they are told. The world has changed but Japan Inc. has remained stuck in the 1960s.

So why this rant? I have lived and worked in Japan, worked for Japanese companies in the U.S. for over 20 years and just got back from two weeks traveling the country. I have a close relationship to the country and an insiders’ perspective on how things are run. And things are not good. Executives and management, who still feel they are the best in the world, refuse to learn new methods of business, and continue to develop products based on constraints rather than market needs. The days of kaizen are long past. Corporate cultures refuse to learn and improve. Employees are out for themselves rather than the good of the company.

The only way for Japan to stimulate long-term growth is to look in the mirror and be honest with itself. As the Americans finally learned after 2008, quality products that meet customer needs and wants are what drive profitability, not false planning numbers. Japanese leaders need to relearn Deming teachings. They need to embrace new ideas from all levels of the organization and move from an inside-out mentality of product development and design, to an outside-in culture driven by the market and consumers.

Japan can easily do this. The country has a highly educated workforce, world-class research institutes, and leading manufacturing technology. All it takes is strong leadership that is willing to change and accept new ideas. Japan did it in the 1950s and the Americans started doing it again about 10 years ago. It can be done, but when arrogance overrides daily business practice, failure is imminent.

As the Japanese population declines, the youth become more-and-more disillusioned, and incumbent corporations hold-on to long-held but failed management policies, Japan Inc. must act. If you think you know more than the enemy and think you are better than the enemy, you are going to lose.

Japanese business leaders need to encourage continuous education and adopt modern business practices. They need to accept outside ideas to free-up resources and meet market demands faster. The solution is simple, but having the will to commit to change is much harder. I hope they wake up before it is too late.