Industrial Strategies and Learning Capacity for Quality Growth

Abstract

This chapter aims to provide insights into effective approaches for creating a learning society for quality growth. Bearing in mind that the outstanding cases of transformation from the previous chapter were accompanied by a learning process and enabled by learning capacity, in this chapter, I discuss effective approaches to initiate and maintain momentum and to scale up the learning process, building on cases of international cooperation for capacity development. These cases are analyzed from a “learning perspective.”

Chapter 3 analyzed five outstanding cases of industrial development and transformation that each illustrated the mutual causality between transformational development, and the constant development of capabilities and knowledge through learning. It was for this purpose that, in each of the cases, the respective governments facilitated learning and capacity development, and in most cases, effective institutions fulfilled the role of facilitator. The linkage between learning, innovation, and growth is something that has become an increasing focus of analysis among scholars, development policymakers, and practitioners. In their 2014 book, Creating a Learning Society: A New Approach to Growth, Development, and Social Progress, discussed previously in this volume, Stiglitz and Greenwald highlight the centrality of learning and argue that there is an important role for government to play in shaping an innovative economy and promoting learning (Stiglitz and Greenwald 2014, 7). This chapter draws from these conclusions.

In this chapter, I aim to provide insights into effective approaches for creating a learning society for quality growth. Bearing in mind that the outstanding cases of transformation from the previous chapter were accompanied by a learning process and enabled by learning capacity, in this chapter, I discuss effective approaches to initiate and maintain momentum and to scale up the learning process, building on cases of international cooperation for capacity development. These cases are analyzed from a “learning perspective.” They have not necessarily produced transformation directly, as with the above-mentioned outstanding cases, but have still had a significant impact on the learning process of a society and thereby enabled changes in companies or organizations, local or regional economies, or even national economies. This chapter also recognizes that each society or country has its own distinctive development agenda and different combinations of endowments, as well as its own particular development challenges.

Based on the above discussion, I pose the following research question: What industrial development strategies and approaches are effective in promoting learning to attain transformation along with good growth of quality, given the challenges countries face and the changing endowments they count on?

In the next section “Key Issues from an Analytical Perspective,” I discuss major issues and provide an analytical perspective. In the subsequent two sections, “Cases of Learning for Specific Capacity,” and “Cases of Learning to Learn and Enhancing Core Capacity,” I present and discuss some relevant cases focusing on the above-mentioned research question. In the conclusion, I offer some final remarks based on lessons from the case studies. In a final section, titled Further Discussion, I elaborate on the relationship between Kaizen (including related approaches), learning, and innovation for the achievement of the SDGs and quality growth.

4.1 Key Issues from an Analytical Perspective

4.1.1 Knowledge, Learning, and Transformation

Noman and Stiglitz (2012) emphasize that “long-term success rests on societies’ ‘learning’—new technologies, new ways of doing business, new ways of managing the economy, new ways of dealing with other countries” (7). Related to this notion of a “learning society” is Cimoli et al.’s (2009) view that great industrial transformation “entails a major process of accumulation of knowledge and capabilities, at the level of both individuals and organizations” (2; italics in original). I find a lot of similarities between this view and the capacity development (CD) approach in international cooperation. Capacity development is the process by which people, organizations, and society as a whole unleash, strengthen, create, adapt, and maintain capacity over time (OECD/DAC 2006). Knowledge and learning in a CD process have increasingly been a feature of recent discussions (Hosono et al. 2011, 180–181).

Cimoli et al. (2009) contend that “capabilities have to do with the problem-solving knowledge embodied in organizations—concerning, for example, of [sic] search and learning” (2). Here again, we find similarities between their ideas and the concepts of CD. The problem-solving knowledge could be considered a core capacity in terms of CD, which could include problem-identifying and problem-solving capacities (Hosono et al. 2011, 180).

Regarding this aspect, Greenwald and Stiglitz (2012) further elaborate: “The discussion so far has focused on ‘learning,’ but even more important is ‘learning to learn.’ Industrial and trade policy can enhance an economy’s learning capacities, its underlying ‘capabilities,’ and development strategies need to be focused on that, especially in an era with fast-changing technologies, where specific knowledge learned at one moment risks rapid obsolescence” (18).

As stated in previous chapters, most recently, Stiglitz and Greenwald (2014, 26) presented a more systematic and holistic analysis of what constituted a learning society, stating that “the most important ‘endowment,’ from our perspective, is a society’s learning capacities (which in turn is affected by the knowledge that it has; its knowledge about learning itself; and its knowledge about its own learning capacities).” They further state that a country’s policies have to be shaped to take advantage of its comparative advantage in knowledge and learning abilities, including its ability to learn and to learn to learn, in relation to its competitors, and to help develop those capacities and capabilities further (Stiglitz and Greenwald 2014, 26).

4.1.2 Learning Society and Capacity Development

In recent discussions on aid effectiveness and later development effectiveness, especially among aid practitioners, capacity development has emerged as a central issue. The Accra Agenda for Action, adopted in 2008 at the Third High-Level Forum on Aid Effectiveness, emphasized capacity development (CD) even more strongly than the Paris Declaration, which incorporates CD as a key cross-cutting theme in aid effectiveness.¹ The outcome document of the United Nations summit on its Millennium Development Goals (MDGs) in September 2010 repeatedly asserts the importance of capacity and capacity development. Underlying this trend is a growing recognition among donor organizations, donor governments, and partner countries that lack of capacity has been, and will likely remain, a major obstacle in translating policy into development results (Hosono et al. 2011, 179).

Knowledge and learning in a CD process have increasingly been a feature of recent discussions. Clarke and Oswald (2010) argue that mutual learning might even be considered to be CD. If CD is perceived as a mutual learning process, this demands that we shift our idea of what knowledge is and how it can be generated away from the traditional transfer-of-knowledge model toward a co-creation-of-knowledge model (Hosono et al. 2011, 181). As such, international cooperation for CD processes with a stronger focus on learning and co-creation of knowledge or innovative solutions could be considered one effective approach in creating a learning society within developing countries.²

4.1.3 Learning for Specific Capacity and Learning to Learn for Enhancing Core Capacity

Stiglitz and Greenwald (2014) distinguish between learning abilities, stating that “Learning abilities can, of course, be specific or general” and that “We can direct our efforts at enhancing specific abilities. These may serve an economy well if it is pursuing a narrow niche; or efforts can be directed at more general learning abilities that may serve it well in periods of rapid transition and great uncertainty” (50). They further mention that “Just as knowledge itself is endogenous, so is the ability to learn. Some economic activities (conducted in certain ways) not only facilitate learning, they may facilitate learning to learn” (50; italics in original). Several studies on capacity development also refer to the two types of capacity. Capacity embodies not only specific technical elements, such as particular health care or road construction skills, but also so-called core capacities (Hosono et al. 2011, 180). These core capacities include generic and cross-cutting competencies and the ability to commit and engage; to identify needs and key issues; to plan, budget, execute, and monitor actions; and most importantly, to acquire knowledge and skills (UNDP 1998; ECDPM 2008; JICA 2006, 2008). Learning for specific capacity could enable learning to learn, while the capacity of learning to learn could facilitate learning for a specific capacity.

4.1.4 Determinants of Learning

Stiglitz and Greenwald (2014, 56–57) identified the following major determinants of learning: (1) learning capabilities; (2) access to knowledge; (3) the catalysts for learning; (4) creating a creative mindset—the right cognitive frames; (5) contacts (i.e. people with whom one interacts) who can catalyze learning, help create the right cognitive frame, and provide crucial inputs into the learning process; and (6) the context of learning.

An emerging view regarding CD sees knowledge as the product of continuous human interaction within specific contexts, in which knowledge and innovative solutions are co-created through a mutual learning process and acquired through practical experiences (Hosono et al. 2011, 182). In this process, five factors are considered essential: stakeholder ownership, specific drivers, mutual learning, pathways to scaling up, and catalyzers (including external actors) (Hosono 2013, 257).

Figure 4.1 roughly illustrates capacity development as a dynamic, endogenous, and continuous process through which learning for both specific capacity and learning to learn (core capacity) take place. The above-mentioned “determinants of learning” are extremely important in this process, although the sequences and relationships among them could be different from those indicated in this figure, depending on different contexts.

Fig. 4.1

Source Author, based on Hosono et al. (2011)

Capacity development (CD) as a dynamic, endogenous, and continuous process.

4.2 Industrial Strategy and Effective Approaches for Learning

4.2.1 Research Questions

So the relevant question for this exercise is: What industrial strategies and approaches are effective in promoting learning to attain the desired quality of growth, given the various challenges countries face and the endowments they count on? I will draw from experiences of international development cooperation to discuss this research question. Cases have been selected from widely applied approaches in diverse learning contexts. This chapter focuses especially on how, in practice, the determinants of learning interact to initiate, catalyze, and maintain momentum in the process of learning and learning to learn.

4.2.2 Learning for Inclusive and Innovative Growth

In recent years, the idea of inclusive development has attracted increasing attention in the international community. In 2007, the World Bank president declared that contributing to inclusive and sustainable globalization was the vision of the World Bank Group. The Japan International Cooperation Agency (JICA) incorporated the term inclusive into its vision statement in 2008. A year later, ADB positioned inclusive growth as one of the three agenda items in its long-term strategic framework of Strategy 2020 (ADB 2009). The APEC Growth Strategy was agreed upon in 2010, with inclusive growth featured in the document as one of the five desired attributes for growth.³

In these documents, inclusive growth has two interrelated aspects: With inclusive growth, all people participate in growth, and at the same time, all people benefit from growth.⁴ But, from a learning society perspective, inclusive growth goes far beyond the above-mentioned aspects and has an intrinsic relationship with innovative growth. Growth could be really inclusive and, at the same time, innovative, when growth takes full advantage of the talents of all. As noted in Chap. 2, Stiglitz and Greenwald (2014) state that “Our argument for why inclusive growth is so important goes beyond the standard one that it is a waste of a country’s most valuable resource, its human talent, to fail to ensure that everyone lives up to his or her abilities” (Stiglitz and Greenwald 2014, 468). They suggest that policies that promote more inclusiveness may promote greater learning (Stiglitz and Greenwald 2014, 381).

Table 4.1 highlights some relevant approaches to international cooperation programs that aimed to promote learning for specific capacities or learning to learn for general or core capacity. From this perspective, these approaches are analyzed below to obtain some indication of how inclusive and innovative growth might be attained through learning. First, I present two cases related to learning for specific capacities. One is the case of the Smallholder Horticultural Empowerment Project (SHEP) in Kenya, focusing on individual farmers’ learning. The other is the case of the Local Government Engineering Department (LGED) in Bangladesh, which focuses on organizational learning.

Table 4.1 Approaches to learning for specific capacity and learning to learn

Following these two cases, I provide an additional three cases focusing on learning to learn or general/core capacity. In the first case, I examine livelihood improvement programs that focus on improvements other than those stemming from raising incomes (e.g., improved cooking stoves), because they primarily aim to enable rural women to become aware of the numerous problems that exist in daily life, and address them as problems that need to be solved. As such, the objective of these programs is learning to learn through learning by doing and making efforts to improve livelihood in its multiple dimensions. This approach has an advantage because the initiatives related to livelihood improvement are much less risky than initiatives of income improvement through production. However the process of finding solutions to livelihood problems and the uplifting of rural livelihood can lead to learning to learn and later the advancement of production activities. In Oita, Japan, where the One Village One Product (OVOP) initiative was born, women with experiences of livelihood improvement programs later effectively promoted OVOP’s production activities. I discuss the OVOP programs in Japan, Thailand, and other countries as the second case. Finally, the third case of learning to learn, or of acquiring core capacity, is a series of approaches normally utilized by enterprises and organizations, such as Kaizen, just in time (JIT), Total Quality Management (TQM), and knowledge management.

4.3 Cases of Learning for Specific Capacity

4.3.1 Case 4.1: Learning for Inclusive and Innovative Growth Enabled by Capacity Development of Small-Scale Farmers with Increased Responsiveness to Market Needs: Initiatives of SHEP in Kenya⁵

Kenya has considerable potential for commercial agricultural diversification thanks to good market access and the empowerment of farmers. Demand for horticultural products has been increasing in Africa. In Kenya, horticultural production has achieved an average annual growth rate of 20% since the 2000s. More than 60% of horticultural products are produced by small-scale farmers who have benefited from higher incomes from the sale of horticultural products. Compared to grain production in Kenya, horticulture is more labor-intensive, requiring more complex techniques and bigger inputs, including seeds, fertilizer, and pesticides. Land productivity is higher under properly managed horticulture. Based on this premise, the Kenyan government launched the Smallholder Horticultural Empowerment Project (SHEP) in 2006 (Aikawa 2013, 144–145). SHEP aimed mainly at developing the capacity of smallholder horticulture farmer groups.

Aikawa (2013) explains the learning process of SHEP as follows:

Various techniques were introduced in the project. They were simple and applicable, using materials easily available to the farmers. In fact, in Kenya, a country where they have reached a certain level of technological know-how at the research station, the issue was not how to develop new technologies, but how to validate existing technologies from the farmers’ perspective and put them to practical use. Based on this understanding, the project focused on the introduction of techniques that were immediately usable the moment they were learned, such as the technique for correct planting using twine. The guidance on these techniques was provided jointly by Kenyan experts with abundant experience in horticulture and by Japanese experts who could provide advice from an outsider’s point of view. Even when introducing technologies quite new to the farmers, the project made sure that they would be applicable with the materials and techniques already existing locally. Such technologies included road maintenance using sand bags (Do-no), fermented organic manure (Bokashi), and easy-to-handle weeding tools (154).

Aikawa (2013) further states that farmers’ skills improved significantly because farmers’ intrinsic motivation was significantly enhanced when they determined the target crops to produce based on the result of a market survey they themselves had conducted. This, in turn, increased awareness and motivated the farmers to learn techniques more thoroughly through in-field training. When the farmers succeeded in marketing their products, this successful experience further promoted their sense of competence, leading to even greater motivation. Thus, the whole process can be described as an interaction between enhanced intrinsic motivation and increased skill levels complementing and reinforcing each other, leading to sustained growth (Aikawa 2013, 159).

The SHEP approach can be roughly divided into four steps: (1) Selecting target farmers and sharing aims; (2) Creating opportunities for awareness; (3) Farmer-led decision-making; and (4) Providing technical solutions (JICA 2020).

From a learning perspective, the second step appears to be essential. Activities included in this step are the participatory baseline survey, stakeholder forum, gender and family budgeting training for both men and women, and farmer-led market surveys. The market survey carried out by the farmers themselves is considered to be the most important activity in this step. During the participatory baseline survey, farmers develop a clear grasp of their current situation by analyzing various kinds of data on farming operations, including yield. They carry out the survey themselves with the help of extension workers and others. During the stakeholder forum, farmers’ associations and those involved in the horticulture industry exchange information for the purpose of building business linkages. The gender and family budgeting training is a session that both male and female farmers and extension workers participate in together. During this activity, husbands and wives are encouraged to work together as agricultural partners, sharing farm work and operations in order to boost productivity. During the market survey, they make in-person visits to markets in order to conduct the survey. They collect information not only on prices, but on quality and volume demands, price trends, items that are selling out, and more.⁶

During the third step, the members of the farmer’s group decide which crops to grow while discussing shipping periods and other issues. During the fourth step, farmers learn the techniques they need to produce the crops that are in demand in their selected markets. Based on their work in steps 1–3, farmers decide for themselves which crops to plant. They then team up with extension workers to establish which techniques they will need to cultivate those crops. Because technical solutions are provided in response to what farmers need, farmers are motivated to learn, which in turn results in high adoption rates.

4.3.2 Case 4.2: Learning for Inclusive and Innovative Growth Through Capacity Development in Rural Infrastructure Development: Local Government Engineering Department (LGED) of Bangladesh⁷

The development and maintenance of rural infrastructure is a priority of the Bangladesh government, as stated in its National Rural Development Policy (NRDP), formulated in 2001, and in its first (2005) and second Poverty Reduction Strategy Papers (PRSPs) (2008). The semiautonomous Local Government Engineering Department evolved through a series of organizational changes from the Rural Works Cell (the “Cell”), which had inherited the infrastructure components of the famous “Comilla model” of the 1960s.⁸ According to Fujita (2011), LGED has displayed remarkable progress in organizational development. During this period, a highly decentralized LGED, with over 10,000 staff, firmly established a reputation for professionalism and excellence in rural infrastructure provision and maintenance (World Bank 2009). LGED has worked closely with local stakeholders (governments and beneficiaries) to ensure broad participation at all stages of projects. It has also adopted labor-based technologies to create employment for the poor and has used local materials in construction and maintenance. As such, LGED has been playing a growing role in the capacity development of local government and local community groups in the context of decentralization of central government functions. Rural infrastructure projects have now been extended nationwide. Today, LGED is one of the largest public sector organizations in Bangladesh, with a budget accounting for 14% (FY 2009–10) of the total development budget of the government (Fujita 2011).

LGED’s business model is conducive to organizational learning. Rural infrastructure, such as roads, village markets, and communal irrigation, is individually relatively small and can therefore be implemented quickly—in one to two years—and is of low risk to LGED, even if some fail. These characteristics have enabled LGED to distinguish project successes and failures within a short time and to adopt new technologies. These elements have contributed to knowledge and experience accumulation. A 2008 report on LGED’s assessment exercise pointed out that “The organization has quickly adapted itself to new experiments, technologies,” reflecting a process of mutual learning among the agency’s staff at various levels (Wilbur Smith Associates 2008). Mutual learning through interaction among stakeholders is vital for a clear understanding and identification of local needs. This enables local knowledge and resources to be identified and innovative solutions to be developed in partnership with local beneficiaries. This case shows that mutual learning and trust are vital to discovering locally appropriate innovative solutions to meet the needs of beneficiaries and stakeholders.

4.4 Cases of Learning to Learn and Enhancing Core Capacity

4.4.1 Case 4.3: Learning for Inclusive and Innovative Growth Through Rural Livelihood Improvement (Seikatsu Kaizen) Programs in Japan and Developing Countries⁹

Rural life improvement programs were implemented throughout Japan in the post-WWII period for about 20 years. Sato (2003, 34–35) emphasizes that the process of economic and social development in postwar Japan would have been impossible without a scheme for “social development,” particularly in terms of the achievements obtained by various life improvements in rural areas. The keyword for social development in rural areas of Japan at that time was seikatsu-kaizen (life improvement). Thus, Japan was able to quickly and broadly distribute the fruits of rapid growth because social development programs, referred to as the rural life improvement movement, had laid the groundwork over the 20 years prior to the period of rapid growth.

In the summer of 1945, Japan was encountering the same array of problems faced by many developing countries today, such as food shortages, malnutrition, health deterioration, and poor sanitary conditions (Sato 2003, 36). Amid these circumstances, livelihood improvement initiatives were implemented. This involved an approach in which women themselves were encouraged to actively take part in identifying problems in their own living conditions, determining issues, formulating living improvement plans, and applying and monitoring these policies (JICA 2003, 1). Livelihood improvement extension workers in Japan were expected to play the role of facilitators who enabled rural women to become aware of the numerous problems that existed in their daily life and recognize them as problems.

In fact, many of the problems in rural Japan were rooted in everyday living—for instance, the cooking stove. Rural women used to bend down low to use a kitchen stove located on the floor. They had to stoop while cooking, a physically grueling posture, and because there was no ventilation in the houses, the smoke resulted in eye problems. Such improvements as waist-high stoves and chimneys were introduced countrywide as solutions to everyday problems. Other innovations, such as improved work clothes and more nutritious food, were also introduced. However, it was not until village women became aware of the problems of the cooking stoves they were using, the inconveniences of their work clothes, and the problems of their daily diet that they started exploring ways for improvement. In other words, the extension workers did not impose the improved cooking stoves from the outset (Sato 2003, 39).

One of the most important factors behind the success of the rural livelihood improvement movement was the dedication of the women who became livelihood extension workers (or “home advisers”). Female home advisers worked together with male farm advisers (agricultural extension workers) in extension programs. According to Mizuno (2003, 24), the purpose of rural life improvement for farm households was to “improve the lives of farm households and foster thinking farmers,” through the improvement of livelihood skills of farm households. Behind this was the notion that improvements in both production and livelihood are on equal footing and that solutions to livelihood problems and uplifting of rural livelihood would lead to the advancement of production activities. This can be compared to the production-oriented approach, which argued that improving the existing production would automatically improve the quality of life.

Issue-focused specialists were posted in each prefecture to provide support to livelihood extension workers. This established a system in which specialists in food, clothing, and shelter offered advice to livelihood extension workers. Extension programs were designed by the Ministry of Agriculture, Forestry, and Fisheries, but part of the expense was borne by prefectural governments. For this reason, while unified instructions were issued from the central body, programs unique to each prefecture were also carried out to the extent that the local government budget permitted. Other ministries, such as the Ministry of Health and Welfare (nutritional improvement, birth control, and maternal and child health care) and the Ministry of Education (social education, etc.), also supported the rural life improvement movement. While green bicycles were provided as a means of transportation for rural livelihood extension workers, public healthcare nurses rode on white bicycles.

In terms of the initial results of rural life improvement programs in postwar Japan, there were 5461 home living improvement practice groups as of the end of March 1956. The most common target of improvement was cooking stoves, followed by the preparation of preserved foods and the making of improved work clothes. For example, according to the results of the 1956 national survey on cooking stove improvement, 2.2 million households (38% of all farm households) had already improved their cooking stoves, 1.58 million households (27%) had improved their cooking stoves after the introduction of the rural life improvement movement, and 1.47 million households (25%) were planning to improve their cooking stoves within one year (Mizuno 2003, 26).

This approach has been introduced in several developing countries in Latin America and Africa as well as Asia (APO 2003; Instituto de Desarrollo 2013; JICA 2013a). In particular, eight Central American and Caribbean countries (Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, and Panama) assimilated the approach to the extent that they have promoted networking in the region for better dissemination of knowledge. The Dominican Republic has gone so far as to establish a government bureau to promote coordinated efforts for better regional development (JICA 2013a, 2015).

4.4.2 Case 4.4: Learning for Inclusive and Innovative Growth in Incubating Inclusive Business: One Village One Product (OVOP) Initiatives

The One Village One Product movement began in 1979 in the Japanese Prefecture of Oita (population 1.23 million). The area was going through difficult economic times that resulted in many young people leaving. In light of this, OVOP was actively used to promote economic progress.

The original concept was to encourage local areas to create and sell special products in their communities. OVOP was based on the idea of local initiatives, which depend on the energy, creativity, and desire of local citizens using local resources to restore their economies. To achieve global recognition, the quality of local products must meet internal and international market standards. Thanks to the constant efforts of local communities, many new products from Oita were brought to market, revitalizing the economy there. Rather than award subsidies to local areas (something that had been found to reduce the spirit of independence in other parts of the country), the prefecture’s government encouraged each community by providing technical assistance (to improve production quality), market research, and advertising. To increase sales, the Oita One Village, One Product Corporation was set up to assist and identify new markets. This type of initiative could be considered as a potential model for incubating and promoting inclusive businesses¹⁰ and clusters.

The three principles of the OVOP movement are (1) the creation of globally acceptable products and services based on local resources, (2) self-reliance and creativity, and (3) human resource development. Kurokawa et al. (2010, 7) state that “The feature common to all three is an emphasis on local ownership.” They further explain: “The first principle is best expressed through the motto ‘think globally, act locally.’ Local residents are expected to create globally marketable products and services that embody people’s pride in the material and cultural richness of their home areas. The ‘story’ behind any product or its development helps to attract consumer attention. Such homegrown flavor adds value to local products while the use of local human and material resources helps to make economic activities sustainable.” In the OVOP movement, self-reliance and creativity are considered crucial in the development of marketable products and services, since local knowledge and instinct can aid in the discovery of local “buried treasures.” Everything local is potentially valuable, but whether that potential becomes a reality depends on the initiative and effort of local people.

As such, learning to learn could be considered one of the core elements of OVOP. Haraguchi (2008, 12) emphasizes that the process of interactive learning in their activities makes OVOP an effective and sustainable rural development method. He states that “For OVOP farmers, delivering their products to markets is not the end process of their production activities. It goes beyond, to the extent that it involves having direct interaction with retailers and consumers, obtaining feedback on product quality, prices and production volumes for continuous improvement.” This learning dimension appears to be similar to that of SHEP, discussed above.

Haraguchi further states that

To enhance their learning capabilities, some OVOP farmers have strengthened their ties with consumers by having their own cooperative shops and restaurants, which serve dishes using their products. These venues allow producers to interact with consumers and also provide opportunities to directly receive comments on their products, which helps to increase added value and promote their products by introducing innovative dishes made with their products. The feedback from customers is pooled together and shared within a producer group for joint learning and continuous improvement of products and marketing.

Haraguchi (2008, 14–15) concludes that, “In essence, taking part in the multiple stages along a value chain from production of raw materials, processing, selling and servicing, OVOP producers can maximize their learning opportunities … Moreover, such comprehensive information, together with their direct experience in different stages of a value chain, helps them to generate new ideas. By enhancing learning opportunities in their activities and sharing ideas among members of an OVOP group, they constantly work toward the goal of reaching a better marketing mix.”

The Thai government launched the official One Tambon One Product (OTOP) Development Policy in 2001 as a measure to revitalize and diversify the rural economy as a part of its national economic restructuring. OTOP, like OVOP, aims to encourage the development of rural economies through the use of local resources with community members’ participation. Although OTOP was a top-down approach compared to OVOP’s bottom-up approach, some important impacts have been acknowledged. For example, Wattanasiri (2005) stated that “The benefits of OTOP have not only been economic. Local community leadership and pride have also grown as a result.” As knowledge of local conditions is only available at the local level, the role of OTOP subcommittees under the auspices of the Ministry of the Interior in facilitating the process of decentralization has been crucial (Kurokawa et al. 2010, 13).

Malawi introduced the OVOP approach in 2003. It was the first country to do so in sub-Saharan Africa. It was expected to support the economic empowerment of rural communities and contribute to attaining the Millennium Development Goals (MDGs) through helping to add value to local raw materials and promote import substitution wherever it could be achieved efficiently (Kurokawa et al. 2010, 20). In 10 years, the number of participants in OVOP in Malawi increased to 28,000 (more than 100 groups).¹¹

Note that OVOP initiatives are inclusive not only because community members’ participation in its activities is overwhelming but also for the significant participation of women. Nearly 90% of OTOP members in northeast Thailand were women, and in Malawi and Japan, a large number of women are members of OVOP groups (Kurokawa et al. 2010, 38). Based on the experiences of Japan and other countries, OVOP initiatives have been introduced in many Asian, African, and Latin American countries.

4.4.3 Case 4.5: Learning for Inclusive and Innovative Growth Through Kaizen, Just in Time (JIT), Total Quality Management (TQM), and Beyond, in Japan, the United States, Thailand, and Other Countries

4.4.3.1 Experiences in Japan¹²

Most Japanese manufacturing companies implemented quality and productivity initiatives for the first time after Dr. William Edwards Deming, a U.S. statistician and consultant, gave a series of lectures on the statistical process control of production and quality for hundreds of Japanese engineers and managers in 1950. Only a few Japanese companies, such as Toyota, were aware of the importance of the U.S.-derived statistical control of quality before Dr. Deming came to Japan in 1947. He came at the request of the U.S. Armed Forces to assist in the planning of Japan’s National Census, to be carried out in 1951. Accordingly, Japanese companies first introduced the statistical quality control (SQC) approach, which was developed from the U.S. practice of sampling and inspecting products in order to eliminate defective ones. Efforts were made to reduce the rate of defective products, or to improve yield rates (known in Japan as budomari). The quality control (QC) processes to attain these goals also improved productivity at the same time.¹³

4.4.3.2 Quality Control Circles with Kaizen: An Effective Approach to Learning to Learn at the Front Line

The Japanese way of QC was gradually consolidated when it was applied at the factory floor level. Instead of the top-down approach common in the United States and other countries, a bottom-up approach was adopted in Japan. A team commonly known as the quality control circle (QCC) is either organized spontaneously or follows the guidance of QC specialists in many Japanese companies. Several workers (normally more than three and up to ten) from the factory floor participate in each QCC. They identify the causes of defective products and possibilities for improving products or production methods. According to Ishikawa (1990),¹⁴ the basic philosophy of QC circle activities carried out as part of companywide quality control activities is (1) to contribute to the improvement and development of the corporate culture, (2) to create cheerful workplaces that make life worthwhile and where humanity is respected, and (3) to exercise people’s capabilities and bring out their limitless potential” (Ishikawa 1990, 78–79; italics added). Here we find exactly what Stiglitz and Greenwald (2014) emphasized regarding the real meaning of inclusive growth, which is intrinsically innovative growth in the sense that “it is a waste of a country’s most valuable resource, its human talent, to fail to ensure that everyone lives up to his or her abilities” (Stiglitz and Greenwald 2014, 468; italics added).

The number of QCCs registered at the Union of Japanese Scientists and Engineers (JUSE) increased from 50,000 in the mid-1970s to 420,000 in 2001. The number of participants of QCCs increased from 500,000 to 3,200,000 during the same period (DBJ and JERI 2003, 59). Together with QCCs, many Japanese methods of quality and productivity improvement have been developed and continuously improved. One of the most widely implemented in Japan is known as “5S,” which consists of seiri, seiton, seiso, seiketsu, and shitsuke; these terms stand for, respectively, sort, set in order, shine, standardize, and sustain.¹⁵ Today, 5S is considered to be an effective and smooth entry point to Kaizen, a Japanese approach of continuous improvement for quality, productivity, and beyond. Kaizen is a Japanese concept that can be translated, literally, as “improvement” or “continuous improvement.” It is not easy to define kaizen in a strict sense, since it corresponds to evolving initiatives and activities in the quality and productivity areas and can be adapted very flexibly to the context of each factory floor. Several methods, including 5S, are commonly practiced by teams like QCCs.

4.4.3.3 Total Quality Management: An Effective Approach to Organizational Learning

The Japanese way of QC was gradually scaled up from the factory floor level to the whole company. QC was introduced to cover design, marketing, after-service, purchase of materials and machinery, and other company departments. At the same time, all company employees, including managers, engineers, supervisors, office-workers, and frontline factory workers, participated in QC. This bottom-up holistic approach developed in Japan is called the Japanese-type companywide quality control (CWQC) or total quality control (TQC).

Total quality management (TQM) is a kind of management system and strategy based on CWQC or TQC, and it was widely promoted in the 1980s. However, the term TQM was first used in the United States when US companies learned TQC from Japan. In 1996, Union of Japanese Scientists and Engineers (JUCE) decided to substitute TQC and move to TQM (Fujimoto 2003, 302). The Handbook for TQM and QCC, edited by the Development Bank of Japan and the Japan Economic Research Institute (DBJ and JERI 2003, vii), explains that “Total Quality Management includes a number of management practices, philosophies and methods to improve the way an organization does business, makes its products, and interacts with its employees and customers. Kaizen (the Japanese word for continuous improvement) is one of those philosophies.” According to this handbook, “The success of Japanese business in Canada, Latin America, and the United States as well as in Europe is attributable to TQM, a concept now widely practiced throughout Asia.”

4.4.3.4 Impacts of TQC/TQM and Creation of a Learning Enterprise

One of the significant impacts of Japanese TQC/TQM is often explained through descriptions of the development of the car industry after the oil crises in the 1970s. During this period, TQC was extended to activities for energy conservation and measures for resource maintenance. It greatly impacted various industries and became more securely established as a valuable quality framework for Japanese industrial development.

The Toyota Production System (commonly called TPS) can be considered one of the most systematic and advanced Japanese TQC or TQM systems. As Liker (2004, 4), the author of The Toyota Way,¹⁶ stated, “Toyota invented ‘lean production’—also known as ‘the Toyota Production System’ or TPS—which has triggered a global transformation in virtually every industry to Toyota’s manufacturing and supply chain philosophy and methods over the last decade.” He further states that “TPS is often known as ‘lean’ or ‘lean production,’ since these were the terms made popular in two best-selling books: The Machine That Changed the World: The Story of Lean Production (Womack et al. 1990) and Lean Thinking (Womack and Jones 1996). These authors make it clear that the foundation of their research on lean production is TPS and its development by Toyota” (Womack et al. 1990, 3–4; Liker 2004, 15).

In the 1990s, through the work of the Massachusetts Institute of Technology’s (MIT’s) International Motor Vehicle Program (IMVP) and the above-mentioned best-selling works based on the MIT research, “the world manufacturing community discovered ‘lean production’—the authors’ term for what Toyota had learned a decade earlier through focusing on speed within its supply chain: shortening lead time by eliminating waste in each step of a process leads to best quality and lower cost, while improving safety and morale” (Liker 2004, 25; italics in original). The idea of shortening the lead time by eliminating waste in each step is related to the concept of Just-in-Time (JIT). “Simply put, JIT delivers the right items at the right time in the right amounts. The power of JIT is that it allows you to be responsive to the day-by-day shifts in customer demand, which was exactly what Toyota needed all along” (Liker 2004, 23).

Liker (2004) highlighted the importance of learning in TPS: “I believe Toyota has raised continuous improvement and employee involvement to a unique level, creating one of the few examples of a genuine learning enterprise in human history—not a small accomplishment” (Liker 2004, xv; italics added). He further states: “The highest level of the Toyota Way is organizational learning. Identifying root causes of problems and preventing them from occurring is the focus of Toyota’s continuous learning system” (xvi). This concept of learning enterprise is similar to the exploration by Stiglitz and Greenwald (2014, 88) of the learning firm that, together with a learning macro-environment, constitutes a critical aspect of learning architecture. The importance of the learning firm is emphasized by them “because so much learning occurs within organizations and because so much knowledge resides within firms.” Related to this view is that of Nonaka et al. (2008, 3), who stated, “We need a theory of the knowledge-based firm that can explain how firms perceive and interpret realities, interact with various players both inside and outside the organization, and synthesize various subjective interpretations into a collective knowledge that becomes objectified and validated as a universal knowledge asset of the firm.”

4.4.3.5 Experiences in the United States

DBJ and JERI (2003, 46–47) summarized the TQM dissemination process in the United States as follows.¹⁷ During World War Two, the U.S. Army and Navy actively introduced quality control to maximize their military hardware production. The American National Standards Institute (ANSI) established military standards and conducted seminars to disseminate those ideas. Yet in the 1970s, U.S. industry was losing its competitiveness in the world market.

In 1980, an NBC broadcast coined a famous saying: “If Japan can, why can’t we?” The program concluded that Japanese success was attributed to the teachings of Deming and Japanese adherence to his principles (Anschutz 1995, 17). Prior to this broadcast, Deming had not been widely recognized, yet the broadcast provided the springboard to a wider and far more receptive U.S. audience for Deming’s ideas. Soon after the broadcast, the U.S. government started its catch-up movement under the Reagan presidency. TQM was introduced by the Ford Motor Company, and many others followed. Later, President Reagan established the Malcolm Baldrige National Quality Award in 1987, aiming to expedite quick recovery actions to go beyond the quality level that Japan had achieved by the year 2000.

Late in 1986, MIT convened its first commission on a major national issue since World War Two, the Commission on Industrial Productivity. The goals of the study were to address the decline in U.S. industrial performance, then perceived to be so serious as to threaten the nation’s economic future (Dertouzos et al. 1989, xiii). The sixteen commissioners were all members of the MIT faculty. The ultimate aim was to formulate a set of recommendations that would help the nation to sustain strong growth in productivity (Dertouzos et al. 1989, 3). The Commission’s report, Made in America: Regaining the Productive Edge, found that an area in which U.S. firms often lagged behind their overseas competitors was in exploiting the potential for continuous improvement in the quality and reliability of their products and processes (Dertouzos et al. 1989, 74). The report noted that “The cumulative effect of successive incremental improvements and modifications to established products and processes can be very large and may outpace efforts to achieve technological breakthroughs.” It further states that, “In the long run, technological progress rests on a foundation of both incremental improvements and radical breakthroughs, and finding the right balance between them is a constant challenge. Branscomb (1987, 74) has suggested that Japanese firms have been more effective in combining the two approaches.”¹⁸

On the other hand, Womack et al. (1990, 3–4) discussed the motivation for engaging in the above-mentioned research of MIT’s International Motor Vehicle Program (IMVP):

We concluded that the auto industries of North America and Europe were relying on techniques little changed from Henry Ford’s mass production system and that these techniques were simply not competitive with a new set of ideas pioneered by the Japanese companies, methods for which we did not even have a name … [T]he Western companies didn’t seem to be able to learn from their Japanese competitors. Instead, they were focusing their energies on erecting trade barriers and other competitive impediments, which we thought simply delayed dealing with the real issue … [W]e feared that North America and Europe would seal themselves off from the Japanese threat and, in the process, reject the opportunity for the prosperity and more rewarding work that these new techniques offer. We felt that the most constructive step we could take to prevent this development from occurring would be to undertake a detailed study of the new Japanese techniques, which we subsequently named “lean production,” compared to the older Western mass-production techniques.

However, TQM was not well organized when it first was disseminated in the United States, according to DBJ and JERI (2003, 47):

Dr. J. M. Juran mentioned that only gradually did it become clear to upper-tier managers that the quality leadership could not be achieved by a pecking away—by merely bringing in this or that tool or technique. They learned that, instead, it was necessary to apply the entire array of quality knowhow (the quality disciplines) throughout the entire company, to all functions and at all levels of all departments in a coordinated way. At the outset there was no agreed standardized definition for TQM. As a result, the concept of TQM became a blur among companies and even in the general literature. This confusion has since been reduced by the publication of the criteria used by the National Institute of Standards and Technology, which was used to evaluate the applications for the United States Malcolm Baldrige National Quality Award (Baldrige Award). By the early 1990s, this wide exposure had made the Baldrige Award criteria the most widely accepted definition of what is to be included in TQM.

In this regard, Stiglitz and Greenwald (2014, 38) made an important observation. They discussed what is suggested by the performance of the U.S. manufacturing sector between the 1970s and early 1980s, on one hand, and the late 1980s and 1990s, on the other hand. Between these two periods, the annual rate of growth of U.S. manufacturing productivity rose by 2.0% from 0.9 to 2.9%. The improvement coincided with a marked rise in the U.S. real interest rate (normally associated with less investment in technology) and government deficits, a decline in U.S. research and development spending, and no detectable improvement in the performance of U.S. education (as measured by standardized tests). At the same time, it cannot be attributed to the availability of new technology. Such technology would have been equally available to other G7 economies. Over the period in question, the U.S. improvement in annual manufacturing productivity growth was 1.9% higher than that of the other G7 countries. The improvement was thus a U.S., not a global, phenomenon. What seems to have changed in U.S. manufacturing was an intensified focus on improved operations management through the rigorous implementation of procedures such as benchmarking, total quality management, and reengineering—in our language, an intensified focus on learning. America seemed to have learned how to learn. Stiglitz and Greenwald (2014, 528) further noted that, “interestingly, some of the learning involved learning from foreign firms, e.g., about quality circles and just in time production.”

Regarding the car industry, the MIT IMVP study referred to above found that the US companies improved car assembly productivity from 24 man-hours/car unit to 20 between 1989 and 1993/1994, while Japanese companies improved from 16 man-hours/car unit to 15 in the same period, confirming the catch-up process of the US car industry to its Japanese counterpart (Fujimoto 2003, 283).

These experiences confirm that the learning process has been closely related to approaches such as TQM also in the United States. Together with experiences in Japan, this provides insights into effective approaches to create learning firms and learning societies, which are the drivers for good growth in quality.¹⁹

4.4.3.6 Experiences in Thailand and Other Developing Countries

JICA’s full-fledged assistance in kaizen, quality, and productivity dates back to 1983 when it started to support the Singapore Productivity Development Project (SPDP) (see Chap. 3). Over about three decades, different kinds of cooperation activities to introduce kaizen were carried out by JICA in around fifty countries. Activities related to kaizen have been widely developed in Asia through the efforts of, among others, the Asian Productivity Organization (APO), Japan Productivity Center (JPC), Union of Japanese Scientists and Engineers (JUSE), the Overseas Human Resources and Industry Development Association (HIDA; formerly Association of Overseas Technical Scholarship, AOTS), and JICA. In Africa, several kaizen and related initiatives have been implemented (Shimada 2015).

In Asia, Japanese assemblers also played “a crucial role in the development of automobile production and supporting industries” (Techakanont 2015, 204). For example, the Toyota Production System (TPS) has been introduced in Thailand:

Toyota facilitated interfirm knowledge-sharing through supplier associations, knowledge-transfer consultants and small-group learning teams (Dyer and Nobeoka 2000). Toyota created the Toyota Cooperation Club (TCC) and established a training center in 1982, when they had around thirty-five suppliers. This number increased to more than 160 members (as first-tier suppliers) in 2014. The TCC organized activities to increase capabilities in the TPS. It shared explicit and tacit knowledge on its System through company visits by Toyota’s trained consultants. As a member, suppliers received free consulting services. Experts at Toyota Thailand also provided TPS training to parts manufacturers in other ASEAN countries. Another initiative was the coordination of learning activities in small groups, intended to encourage suppliers to learn and share specific tacit knowledge with each other. (Techakanont 2015, 205)

One of the largest public–private supplier development efforts, apart from private initiatives such as Toyota’s, was the Thailand Automotive Human Resource Development Project (AHRDP) for first-tier and second-tier suppliers, which ran from 2006 to 2010. It was implemented with the support of JICA and four Japanese companies, including Toyota, which provided TPS training. In total, 233 SMEs and 7151 workers participated in AHRDP. According to Techakanont (2015), a poll of 200 case studies conducted by the Thai Automotive Institute (TAI) on the results of the AHRDP revealed that, on average, suppliers were able to improve productivity by 30–50%, reduce work-in-process inventory by 25–75%, and free up 30–50% of factory space (206–207).

Recent studies analyzed the effectiveness of Kaizen to facilitate the participation of local firms in global value chains (GVCs). Today, GVCs’ share of world trade has increased to about 50%. Developing countries may derive benefits from participation in GVCs. The following remarks from the World Development Report 2020 are highly relevant in this regard: “In contrast to ‘standard’ trade carried out in anonymous markets, GVCs typically involve long-term firm-to-firm relationships. The relational nature of GVCs makes them a particularly powerful vehicle for technological transfer along the value chain. Firms have shared interests in specializing in specific tasks, exchanging technology, and learning from each other” (World Bank 2019, 70; Italics added). Due to these characteristics of GVCs, Kaizen could provide an effective vehicle for local firms to participate in GVCs: As Hosono et al. (2020) state: “the firms that persisted in the implementation of Kaizen appear to have moved up the value chain in the automotive sector” in Mexico and South Africa (20).

In short, through diverse experiences in many countries, it has been demonstrated that Kaizen and related initiatives can be put into practice in a variety of cultural and socioeconomic settings, not just some peculiarly Japanese characteristics (Ueda 2009, 63; Hosono 2009b, 29–36; Shimada 2015, 111–113).

4.5 Concluding Remarks: Lessons from Case Studies

We can identify several common features from the “learning to learn” perspective in the five cases discussed above, despite their diversity. The common features are, among others: (1) there are easy entry points to the learning process; (2) the costs and risks are low; (3) the focus is on learning by doing and mutual learning to co-create innovative solutions; (4) learning makes an intrinsic contribution to the objective, be it livelihood improvement, inclusive business, quality and productivity improvement, incremental innovation, and so on. Each of these is examined in greater detail below.

4.5.1 Easy Entry Points for Commencing the Learning Process

In the case of SHEP, at the research station, a certain level of technological know-how had already been achieved. A preexisting knowledge base was already there—the issue was how to validate existing technologies from the farmers’ perspective and put them to practical use. Based on this understanding, SHEP focused on the introduction of techniques that were immediately usable the moment they were learned. The project made sure that the techniques would be applicable and compatible with the materials and techniques already existing locally. In the case of LGED, the characteristics of rural infrastructure, such as its relatively small scale and comparatively low risk, enabled LGED to distinguish project success and failures within a short time and to adopt new technologies, contributing to learning and the further development of the knowledge base. In the case of the livelihood improvement approach, the most typical targets of improvement in Japan and other Asian countries were the construction of simple water supply systems, communal cooking and childcare during the peak agricultural season, improvement of cooking stoves and toilets, preparation of preserved foods, and the making of improved work clothes. In OVOP initiatives, local people and their groups have been encouraged to “self-discover” promising local products and start selling in local markets. In kaizen initiatives, the first activities are normally 5S strategies, which could be performed by any worker.

4.5.2 Low Cost and Low Risk

We need to take into account two types of costs. The first aspect is the cost of acquiring knowledge and technology. The second aspect is the cost of implementing activities (running costs) and other costs, such as new investments (start-up costs). In all five cases, knowledge and technology were free public goods. The cost of implementing activities in all five cases was almost nil or very low. The lowest-cost activities among the five cases were those of livelihood improvement, and at the same time, almost no risk was implied. In SHEP, the risk was lowered by market research undertaken by the farmers themselves. Farmers were able to apply techniques provided for free. OVOP activities were able to be initiated with few substantial investments, and costs were low because only the reasonable costs of production of local goods and services were needed. Kaizen and related initiatives normally do not imply significant investment, because 5S and other activities only require modifications to the organization, workflow, and so on, in spite of significant effects on quality, delivery, and productivity.

4.5.3 Learning by Doing, Mutual Learning, and Co-creation of Innovative Solutions, Strengthening Cognitive Skills and Capacity of Learning to Learn

As Stiglitz and Greenwald (2014, 52) state, “we learn by doing.” In all five cases, individuals and organizations learned to learn through learning from others, or mutual learning, and they co-created innovative solutions to issues they needed to address. In the case of SHEP, farmers based their decisions on their own marketing survey, a process that may have strengthened farmers’ cognitive capacities as well as their motivation. Farmers have been able to learn to learn. In the case of LGED, mutual learning through interaction among stakeholders was vital for a clear understanding and identification of local needs. At the same time, this enables local knowledge and resources to be identified and innovative solutions to be developed in partnership with local beneficiaries. This case illustrates the importance of mutual learning and trust for discovering locally appropriate innovative solutions to meet the needs of beneficiaries and stakeholders.

In the case of livelihood improvement, rural women themselves were encouraged to actively take part in identifying problems in their own living conditions, setting issues, formulating living improvement plans, and so on. As such, this initiative was not just about the improvement of livelihood, but a learning process, particularly to enhance the capacity of learning to learn. In the case of OVOP, participants and their groups, can maximize their learning opportunities by taking part in multiple stages along a value chain, including production of raw materials, processing, marketing, and servicing. Such comprehensive knowledge based on experiences of learning by doing and mutual learning has helped them to generate new ideas and innovative products. By enhancing learning opportunities in their activities and sharing ideas among members of an OVOP group, they constantly work toward reaching a better marketing mix.

In the case of kaizen and related initiatives, quality control circles could be considered an effective approach for front-line workers to contribute to and receive the benefit of mutual learning through kaizen activities and to enhance the learning capacity to learn. Total quality management could be considered an effective approach to organizational learning. These approaches ensure that everyone lives up to her or his abilities and enables genuine inclusive and innovative growth.

4.5.4 The Impact of Learning on Innovative Solutions, Inclusive Business, Quality, Productivity, and Beyond

In the five cases studied, learning contributed, in diverse ways, to co-creating innovative solutions, starting up new industries through inclusive business, and industrial development through the continuous improvement of quality and productivity as well as incremental innovation. The livelihood improvement initiatives and LGED are cases where mutual learning facilitated the creation of innovative solutions to challenges that rural farmers faced. Learning is essential in incubating inclusive business, and enabling innovative and inclusive growth, as we observed in the cases of SHEP and OVOP initiatives.

Learning also contributes to productivity as well as quality and innovation. As the World Bank (2015, 128) states, increasing productivity is central to raising living standards, and productivity growth can arise either from augmenting the factors of production—human capital, physical capital, and technology—or from making better use of existing factors. “Learning” contributes to productivity growth in both ways. First, learning enables new and innovative ways to make more efficient use of existing endowments. Second, learning—especially learning to learn—through enhancement of learning capacity as the most important endowment contributes to changing comparative advantage, thereby enabling industrial transformation. Table 4.2 compares the different approaches mentioned above with the conventional technological transfer approach through the lens of learning.

Table 4.2 Comparison of different approaches to enhance learning capacity

4.6 Further Discussion (4.1)

4.6.1 Kaizen, Learning, and Innovation for Quality Growth

In this note, I elaborate on the relationship between Kaizen (including related approaches), learning, and innovation for the achievement of the SDGs and quality growth.²⁰

4.6.1.1 Kaizen as a Participatory and Inclusive Approach

Much of the literature on Kaizen concurs that the utmost goal of Kaizen is the improvement of quality and productivity. For example, JICA’s brochure, “Kaizen as a ‘Japan brand ODA’,” states that Kaizen is Japan’s approach towards improved quality and productivity (JICA 2016). However, it should be emphasized that Kaizen is distinctive in its approach to improving quality and productivity and that there are other approaches to improving productivity. For example, employers typically turn to monetary incentives: performance pay, bonuses, or the threat of dismissal (World Bank 2015, Ch. 7). Nevertheless, any increase in productivity resulting from these approaches over a short period is normally not accompanied by learning. Where Kaizen differs from these approaches is in its process for achieving better quality and productivity through its distinctive focus on inclusive and participatory learning. Stiglitz and Greenwald (2014) contend that, “if it is true that productivity is the result of learning and that productivity increases (learning) are endogenous, then a focal point of policy ought to be increasing learning within the economy” (5–6).

The Asian Productivity Organization (APO), an inter-governmental organization committed to improving productivity in the Asia Pacific region, explains that the inclusiveness of the Kaizen process is centered around improvement efforts through the participation of all. Its “Handbook of Productivity” asserts that “Kaizen means improvement and encompasses the concept of never-ending efforts to improve by all of the people working in an organization.” “Problem-solving in the kaizen approach is cross-functional, systematic, and collaborative.” “It is a strategy that puts every member of the organization, from top management down, continuously on the watch for improvement options” (APO 2015, 9–10). JICA (2016) succinctly states that Kaizen comprises “an incremental effort starting from small steps involving all individuals from top managers to those working on the factory floor. However, commitment from the top management is essential.”

4.6.1.2 Kaizen, Learning, and “Genuine” Inclusive and Innovative Growth

The next question concerns how Kaizen can facilitate learning. To answer this, we need to discuss the determinants of learning and how Kaizen is related to them. Referring back to the Stiglitz and Greenwald work that I cited at the beginning of this chapter, the authors identified the following major determinants of learning: (1) learning capabilities; (2) access to knowledge; (3) catalysts for learning; (4) creating a creative mindset, or developing the right cognitive frames; (5) contacts—people with whom one interacts—who can catalyze learning, help create the right cognitive frame, and provide crucial inputs into the learning process; and (6) the context of learning (Stiglitz and Greenwald 2014, 56–57). They further argue that, “Just as knowledge itself is endogenous, so is the ability to learn. Some economic activities (conducted in certain ways) not only facilitate learning, they may facilitate learning to learn” (50; italics in original).

Kaizen tools/methodology and process bear a close relationship to the above-cited determinants of learning and, in particular, learning to learn. As JICA (2016) emphasizes, the Kaizen process (1) changes the mindsets of managers and workers; (2) fosters personnel who can think and act themselves; and (3) solves problems as a team, thereby promoting teamwork. This learning process is most visible in the activities of QC Circles (QCC). As stated in the second paragraph of Case 5, “[T]he basic philosophy of QC Circles is (1) to contribute to the improvement and development of the corporate culture, (2) to create cheerful workplaces that make life worthwhile and where humanity is respected, and (3) to exercise people’s capabilities and bring out their limitless potential” (Ishikawa 1990, 78–79; italics added). Here we find exactly what Stiglitz and Greenwald (2014) emphasized regarding the real meaning of inclusive growth, which is intrinsically innovative growth in the sense that “it is a waste of a country’s most valuable resource, its human talent, to fail to ensure that everyone lives up to his or her abilities” (468; italics added).

4.6.1.3 Kaizen and Innovation

The relationship between Kaizen and innovation deserves special attention, because it can help us to understand how Kaizen contributes to productivity through innovation, together with diverse Kaizen tools and methods. In this regard, we need to first discuss how Kaizen differs from the widely accepted notion of “innovation.”

Imai’s (1986) views on the difference between Kaizen and “innovation,” as defined by him, are well known. This view could be summarized as follows: While the effect of Kaizen is long-term and long-lasting but undramatic, “innovation” is short-term and dramatic. Kaizen is attained by small steps through a continuous and incremental process. “Innovation,” on the other hand, is attained by big steps with an intermittent and non-incremental process. Kaizen is based on group efforts and a systems approach, while “innovation” is based on individual ideas and efforts. And even as Kaizen depends on conventional knowhow and state of the art changes, “innovation” depends on technological breakthroughs, new inventions and new theories. Finally, Kaizen requires little investment but great efforts to maintain it, in comparison to “innovation,” which requires a large investment, but little effort is required to maintain it. This comparison, emphasizing the difference between Kaizen and “innovation,” is widely known, most probably because it very clearly shows the main characteristics of Kaizen.

However, we need to recognize there are many definitions of innovation. In his comparison, Imai refers to innovation as radical and dramatic. However, innovation can also be incremental (JICA 2018, 9 of Part 1). Moreover, the effect of incremental innovation may be comparable, especially in the long-term, to that of radical or breakthrough innovation. As noted in Made in America, a report of the MIT Commission on Industrial Productivity, the cumulative effect of successive incremental improvements and modifications to established products and processes can be very large and may outpace efforts to achieve technological breakthroughs. It further states that, in the long run, technological progress rests on a foundation of both incremental improvements and radical breakthroughs, and finding the right balance between them is a constant challenge (see Case 5 of this chapter).

The Kaizen Handbook (JICA 2018) notes that, more recently, some people have begun to associate Kaizen with incremental innovation (10 of Part 1). The relationship between Kaizen and innovation could be more comprehensively analyzed with the use of “function of innovation,” which captures the extended concept of innovation, and presents a new approach to open the black box of innovation in the context of Cirera and Maloney’s (2017) Innovation Paradox. The Kaizen mindset and many of the Kaizen tools can be considered effective innovation inputs. The Kaizen Handbook argues that the Kaizen mindset, by itself, enhances the capability of the firms, enabling them to take innovative actions, experiment with alternatives, adopt new technology and, hence, achieve innovative outputs (10 of Part 1). However, we recognize that further studies are still necessary to explore the relationship between Kaizen and innovation.

4.6.1.4 Kaizen and Sustainable Growth

A core method of Kaizen is to eliminate muri (overloading), muda (waste), and mura (inconsistency) from the worksite through the efficient utilization of labor, materials, and equipment. As such, the concept of environmental sustainability is intrinsically incorporated into Kaizen, TQM and related approaches from the beginning. In Japan, these approaches have focused more on activities for energy conservation and measures for resource management in the post-oil crises period. In this regard, the “Total Energy Management Handbook” prepared in 2005 by the Energy Conservation Center Thailand (ECCT) and Energy Conservation Center Japan (ECCJ), puts stress on such items as motivation techniques, energy conservation attitudes and small group activities (SGA) including TQM, all contributing to energy conservation through the participation of all the people working together (ECCT and ECCJ 2005, 4). The Asian Energy Efficiency and Conservation Collaboration Center (AEEC) was established by ECCJ in 2007. There have also been many initiatives to mainstream environmental sustainability in Kaizen, TQM, and so forth. For example, APO started to promote ‘green productivity’ by focusing explicitly on environmental improvement.

It should also be highlighted that the widespread dissemination of Kaizen, QCC, TQM and related approaches have contributed significantly to the sustainable growth of Japan since the 1970s. The extensive dissemination of these approaches coincided with the era following the first oil crisis. In Japan, public awareness of environmental issues gradually grew during the 1960s as air and water pollution worsened with accelerated industrialization. The subsequent 1973 oil shock was a major turning point in that it forced Japanese companies and the general public to take measures for improving energy efficiency. As DBJ and JERI (2003) emphasize, “One of the significant impacts of Japanese TQC/TQM is often explained through descriptions of the development of the car industry after the oil crises in the 1970s. During this period, TQC was extended to activities for energy conservation and measures for resource maintenance. It greatly impacted on various industries and became more securely established as a valuable quality framework for Japanese industrial development” (46).

According to General Energy Statistics published by Japan’s Agency for Natural Resources and Energy (2005), energy efficiency in Japan improved 37% between 1973 and 2003. In this period, total energy consumption in the industrial sector has stayed at the same level (around 180 million kiloliters of crude oil equivalent), while real GDP doubled (from 250 to 520 trillion yen). The Energy Conservation Law, incentives offered by the government, company investments in energy-saving equipment and technologies, as well as their efforts through Kaizen-based QC activities, TQM and related approaches are likely to have enabled these achievements.

4.6.1.5 Kaizen and Secure Growth

The APEC Growth Strategy included ‘secure growth’ as an attribute of the quality of growth and stated: “We seek to protect the region’s citizen’s economic and physical well-being and to provide the secure environment necessary for economic activity” (APEC 2010, 9). Secure working conditions are explicitly and implicitly included among the basic aims of 5S, elimination of muri and mura, as well as related approaches. As such, Kaizen aims to upgrade quality and productivity, improving the security and safety of workers at the same time. A study on the impacts of a Kaizen project implemented in eight countries in the Central America and the Caribbean Region found that the introduction of Kaizen improved working conditions and strengthened the social capital of workers (Shimada and Sonobe 2018).

Kaizen could contribute to the improvement of medical care services and human security when it is applied to the health sector, especially hospitals. As an example, I elaborate on the case of “Kireina Byouin” (“Clean Hospitals” in Japanese) program in Sri Lanka, Tanzania, and other African countries. Tanzania became a pioneer in introducing Kaizen and Total Quality Management (TQM) in hospitals. Building on the inspiration gained from Sri Lankan best practice, and witnessing the visible changes in the first pilots at Mbeya Referral Hospital (MRH), the Ministry of Health and Social Welfare (MoHSW) of Tanzania officially adopted the 5S-Kaizen-TQM approach to provide the core of the national quality improvement program as part of the National Health Sector Strategy. With many specific initiatives of MoHSW, this approach has started to take root in a number of hospitals in Tanzania.

As of September 2012, some 56 hospitals—including all national, specialized and regional referral hospitals as well as a number of municipal and district hospitals—have established quality improvement teams (QITs) and have implemented 5S. Of these hospitals, 13 have moved to the second step of Kaizen: evidence-based participatory problem-solving actions for service quality improvement. Through the cascade approach, well over 5000 health workers have been trained in 5S. Some of the achievements made through Kaizen include reductions of overstocked inventory, reductions in waiting time for patient consultations, increases in hospital incomes through better processing of insurance claims, and reductions in the number of patients developing phlebitis (Honda 2012, 117–119; Takizawa 2013; JICA 2015). This experience demonstrates the effectiveness of the Kaizen approach in improving the quality and productivity of health care services.

More than five years of continuous efforts have made Tanzania a center of excellence in quality improvement of hospital care through the application of 5S-Kaizen-TQM in Africa. JICA is working in partnership with Sri Lanka in applying this approach to improve hospital management in over 15 countries in Africa (Takizawa 2013, 259). Several countries have mainstreamed or are in the process of mainstreaming the approach in their strategies and framework of quality assurance for health services. As such, Tanzania emerged as a pivotal country in this approach by providing an example for other African countries to emulate (Honda 2012, 119–120).

4.6.1.6 Summing Up

The case studies of experiences presented here illustrate the application of Kaizen in a variety of contexts with significant impact. As Kaizen and related approaches do not demand large investments, they enabled the Japanese manufacturing industry to improve productivity and competitiveness during the post-war period, when the availability of funds for investment was severely limited. During the post-1973 oil crisis era, a time when Japanese companies were seriously affected by energy price hikes, Kaizen and related approaches were introduced very widely—not only into manufacturing industries but also into finance, insurance, construction, health care, and other sectors. In the United States, improved operational management systems, including TQM, were widely introduced to manufacturing industries. In Singapore and Thailand, where Kaizen was introduced—at least into some of the sectors that are leading their economic growth—the increase in productivity was crucial to the transformation of their industrial structure. In Singapore, Kaizen and related approaches contributed to the transformation from unskilled labor-intensive industries to skilled labor-intensive or knowledge-intensive industries. In Thailand, the scaling-up of supporting industries for the automobile industry was facilitated by the development of small and medium parts industries that benefited from, among other things, Kaizen and related approaches such as TPS. The competitive automobile industry contributed to the transformation of the industrial structure of the country. Experiences in the hospitals of Tanzania and other African countries clearly demonstrate the possibility of introducing Kaizen and related approaches to sectors other than the manufacturing industry, as has occurred in Japan and other Asian countries. These diverse experiences provide evidence of some other important features of Kaizen and related approaches. For example, they are inexpensive without the need for much investment and are easily applied. The sizable dissemination of QCC in the 1970s and 1980s in Japan was possible because of these features.

Kaizen, TQM, and related approaches are able to contribute to growth—and in particular to high-quality growth—by increasing productivity through learning. They also enable transformation through enhancing learning capacity, especially learning how to learn (“learning to learn” in terms of Stiglitz and Greenwald 2014), the essential endowment for industrial transformation. These approaches are intrinsically inclusive, because they are approaches in which participation and learning by all are essential. They are also able to contribute to sustainable growth because they reduce the use of materials and improve energy efficiency by eradicating muda. Such approaches improve security and safety for workers as well through the elimination of muri, mura and so forth. Therefore, Kaizen, TQM, and related approaches can contribute to the achievement of Goals 8 and 9 of SDGs by facilitating—directly and indirectly—quality growth, namely, sustained, inclusive, sustainable, and secure growth, and productive employment and decent work.

Most recently, we observed a series of new initiatives regarding the focus of firms’ activities. The New York Times (Aug. 19, 2019) reported that the Business Roundtable, which represents many of America’s largest companies, had issued a statement on “the purpose of a corporation.” Breaking with decades of long-held corporate orthodoxy, the Roundtable argued that companies should no longer only advance the interests of shareholders. Instead, the group said, they must also invest in their employees, protect the environment, and deal fairly and ethically with their suppliers. They stated that we share a fundamental commitment to all of our stakeholders. In December 2019, Klaus Schwab, Executive Chairman of World Economic Forum (WEF), pointed out: “Stakeholder capitalism is gaining the momentum … It offers the best opportunity to tackle today’s environment and social challenges. The WEF is launching a new ‘Davos Manifesto’” (Schwab 2019).²¹ Kaizen, TQM, and related approaches could be revisited from the perspective of these new initiatives. However, it should be recognized that there are challenges to implementing these approaches in the many diverse contexts and that further in-depth studies are needed to address these challenges effectively.

Notes

• 1. For a literature review on CD, see Hosono et al. (2011).

• 2. This perspective is reflected in Japan’s development cooperation approach. The Development Cooperation Charter of Japan states: “In its development cooperation, Japan has maintained the spirit of jointly creating things that suit partner countries while respecting ownership, intentions and intrinsic characteristics of the country concerned based on a field-oriented approach through dialogue and collaboration. It has also maintained the approach of building reciprocal relationships with developing countries in which both sides learn from each other and grow and develop together. These are some of the good traditions of Japan’s cooperation which have supported self-help efforts of developing countries and aimed at future self-reliant development” (Government of Japan, Cabinet Office 2015, 4–5).

• 3. For a definition and recent discussion of inclusive growth, see Kozuka (2014) and Chap. 5.

• 4. For a more extensive discussion on transformation and inclusive growth, see Hosono (2015).

• 5. This case draws heavily on Aikawa (2013).

• 6. This and next paragraphs draw on JICA (2020).

• 7. This case draws heavily from Hosono et al. (2011, 188–194) and Fujita (2011).

• 8. Wilbur Smith Associates (2008) and Government of Japan, MOFA (2006).

• 9. This part draws from Hosono (2009a).

• 10. UNDP (2010, 3) defined inclusive business as models which include poor people into value chains as producers, employees, and consumers.

• 11. One of the most popular items to come out of Malawi’s One Village, One Product initiative was moringa powder. Made from the leaves of the highly nutritious moringa tree, the powder is said to contain twice as much protein as yogurt, seven times more vitamin C than oranges, and four times as much calcium as milk. The powder can be boiled and then applied to the body as a medicine, drunk as tea, or added to food. Another Malawian product is the 100% natural mapanga honey, which comes from the nectar of mango flowers in the south of the country. Another noteworthy example is the growing lineup of products made from the baobab tree. In Malawi, oil extracted from the fruit of the baobab tree is commonly used as a cooking ingredient. In Japan, the vitamin-rich oil is popularly used as a moisturizing ingredient in cosmetics. A sweet-and-sour jam made from the fruit is also popular (JICA 2013b).

• 12. This part draws heavily from Hosono (2009b, 23–29) as well as DBJ and JERI (2003). It is also based partly on the author’s experiences in some Japanese cooperation projects in the areas of kaizen, quality, and productivity improvement, such as the Chairman of the Advisory Committee for the “Technical Cooperation for Brazilian Institute of Quality and Productivity Project” from 1995 to 2000.

• 13. The close relationship between quality and productivity was widely recognized in Japan, and the two words, quality and productivity (quality control and improved productivity), have often been referred to together. In defining the concept of quality, it is necessary to establish industrial norms or standards. This is so because a product is considered defective only when it does not satisfy the quality norm or standard. The Japan Industrial Standard (JIS) and Japan Agricultural Standard (JAS) were introduced by law in Japan in 1949 and 1950, respectively. JIS defines QC as a part of quality management. At the worldwide level, ISO 9000, established by the International Organization for Standardization (ISO), is well known as the international standard relating to quality management systems.

• 14. Dr. Kaoru Ishikawa, ex-rector of the Musashi Institute of Technology (recently renamed Tokyo City University), is considered the founder of quality control in Japan as well as the father of the QC circle, as a result of the important theoretical and practical contributions he made. His book Introduction to Quality Control, first published in 1954 (Ishikawa 1954), is one of the most widely read books in Japan in this field. The third edition (1989) was translated into English and published in 1990 (Ishikawa 1990). There are a large number of well-known engineers and managers who have promoted quality activities in many Japanese companies. One of the most prominent is Taiichi Ohno, ex-vice president of Toyota Motor Company. He is one of those who consolidated the Toyota Production System (TPS). Another prominent Japanese engineer who contributed substantially to quality activities is Dr. Shigeo Shingo, a consultant for Toyota and Panasonic, among other companies. In recognition of his work, Utah State University created the Shingo Prize. Imai, who once worked for Japan Productivity Center in Washington, DC, founded the Kaizen Institute Consulting Group in 1986 and wrote, in the same year, Kaizen: The Key to Japan’s Competitive Success.

• 15. While these five watchwords have been translated in various ways, they roughly refer to removing unnecessary things, arranging tools and parts for easy view, keeping the workplace clean, maintaining personal hygiene, and exhibiting disciplined behavior.

• 16. According to Liker (2004, xi–xii; italics in original):

  The Toyota Way can be briefly summarized through the two pillars that support it: ‘Continuous Improvement’ and ‘Respect for People.’ Continuous improvement, often called kaizen, defines Toyota’s basic approach to doing business. Challenge everything. More important than the actual improvements that individuals contribute, the true value of continuous improvement lies in creating an atmosphere of continuous learning and an environment that not only accepts but actually embraces change. Such an environment can only be created where there is respect for people—hence the second pillar of the Toyota Way. Toyota demonstrates this respect by providing employment security and seeking to engage team members through active participation in improving their jobs.

• 17. This and the following paragraphs draw on DBJ and JERI (2003).

• 18. In this regard, Imai (1986) compares kaizen and innovation. The terms correspond, respectively, to “incremental innovation” and “breakthrough” in terms of Dertouzos et al. (1989). According to Imai, kaizen is of long-term and long-lasting effect, with small steps and the involvement of everybody, based on conventional know-how and state-of-the-art practices that require little investment. Innovation is of short-term but dynamic effect, with big steps, with the involvement of a selected few “champions,” based on technological breakthroughs, new inventions, and new theories, requiring large investment (Imai 1986, 25).

• 19. According to a recent study on productivity gaps for Japanese and U.S. industries by Jorgenson et al. (2015, 21–26), total factor productivity (TFP) gaps were very large both in manufacturing and nonmanufacturing sectors in 1955. The gap for manufacturing productivity relative to the United States (U.S.  =  100) disappeared by 1980, peaked at 103.8 in 1991, and deteriorated afterward, leaving a current gap that is almost negligible. The gap for nonmanufacturing also contracted between 1955 and 1991, when the gap reached 8.9%, but expanded afterward. Japanese “motor vehicles,” “primary metal,” and “other electrical machinery” sectors have higher levels of TFP than their U.S. counterparts. In machinery, computer, and electronics products, U.S. levels of TFP are higher than Japan’s. In nonmanufacturing sectors, the U.S. TFP is generally higher, especially in agriculture, forestry, and fishery. However, in medical care and communications, Japan’s TFP is higher.

• 20. This section draws heavily from Hosono (2020).

• 21. This shift comes at a moment of increasing distress in corporate America, as big companies face mounting global discontent over income inequality, harmful products and poor working conditions (New York Times, Aug. 19, 2019). In the same year, Professor Joseph Stiglitz published a book titled, People, Power, and Profits: Progressive Capitalism for an Age of Discontent.