Amoeba Management: Lessons From Japan’s Kyocera

Kyocera Corp.’s distinctive management system seeks to promote profitable growth by extreme decentralization — with thousands of small, customer-focused business units.

Solar modules from Kyocera are shown on the roof of this award-winning building in Switzerland.

Image courtesy of Kyocera.

A persistent challenge for companies as they become larger and more established is how to maintain the high level of dynamism and employee commitment that drove their success in the early days. Over the years, thoughtful managers and management theorists have formulated an array of approaches for dealing with the problem, including self-managing teams, self-organizing systems and division spinoffs — all designed to give managers and employees a more direct feeling of responsibility and accountability for the performance of their own profit centers. But very few companies have taken things as far as Kyocera Corp. Founded in 1959 as Kyoto Ceramic Co. Ltd., Kyocera, headquartered in Kyoto, Japan, produces a range of industrial ceramics, semiconductor components, electronics devices and information and telecommunications equipment. In the year ending March 31, 2012, it had revenues of $14.5 billion and employed more than 70,000 people globally. The company reported net income of $1 billion for its fiscal year ending in March 2012 — which represented Kyocera’s 53rd consecutive year of profitability. During its more than five decades in business, a key driver of Kyocera’s growth and success has been its distinctive entrepreneurial culture, known internally as “amoeba management.” The use of the word “amoeba” is meant to capture the concept of an entity at its smallest, most elemental level, as well as to describe its ability to multiply and change shape in response to the environment.1 In other words, amoeba management is intended to offer a spontaneous, homeostatic response to a business world characterized by rapid, dynamic change.

The Leading Question

What can executives learn from Kyocera’s amoeba management system?

Findings
  • Each “amoeba” unit is expected to operate independently and to develop its own ways of working with other amoebas to achieve profitable growth.
  • Amoeba management is best suited for business environments characterized by intense competition and fast technological change.
  • Organizational cultures that foster collective, collaborative behavior are more compatible with the use of amoeba management than highly individualistic cultures.

Unlike other successful electronics manufacturers, Kyocera is structured as a collection of small, customer-focused business units.

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References

1. K. Inamori, “Respect the Divine and Love People: My Philosophy of Business Management,” (San Diego, California: University of San Diego Press, 1999): 57.

2. Ibid., p. 31.

3. R.W. Adler, “Performance Management and Organizational Strategy: How to Design Systems that Meet the Needs of Confrontation Strategy Firms,” British Accounting Review 43, no. 4 (December 2011): 251-263.

4. C.A. O’Reilly, J.B. Harreld, M.L. Tushman, “Organizational Ambidexterity: IBM and Emerging Business Opportunities,” California Management Review 51, no. 4 (summer 2009): 75-99.

5. T. Hiromoto, “Management Accounting System as a Micro-Macro Loop,” The Hitotsubashi Review 134, no.5 (2005): 828-858; T. Hiromoto, “A Study on Business Organization and Management Accounting” (special committee report of the Japan Accounting Association, 2007).

6. M.E. Porter, “What Is Strategy?” Harvard Business Review (November-December 1996): 61‑78; W.C. Kim and R. Mauborgne “Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant,” (Boston: Harvard Business School Publishing, 2005): 4.

7. R. Cooper, “When Lean Enterprises Collide: Competing Through Confrontation” (Cambridge, Massachusetts: Harvard Business School Press, 1995): 69. A confrontation strategy permits no trade-offs between product/service attributes of cost, quality and functionality. Rather, it imposes high minimum thresholds for all three. Firms that are unable to meet these minimum thresholds become uncompetitive and lose market share.

8. T. Burns and G.M. Stalker, “The Management of Innovation” (London: Tavistock, 1961): 121; P.R. Lawrence and J.W. Lorsch, “Organization and Environment: Managing Differentiation and Integration” (Cambridge, Massachusetts: Harvard Business School Division of Research, 1967).

9. Lawrence and Lorsch, “Organization and Environment,” p. 96.

10. D.J.H. Watson and J.V. Baumler, “Transfer Pricing: A Behavioral Context,” The Accounting Review 50, no. 3 (July 1975): 466-474.

11. G. Hofstede, G.J. Hofstede, M. Minkov, “Cultures and Organizations: Software of the Mind,” 3rd ed. (London: McGraw-Hill, 2010): 96.

12. J.J. Sullivan, “Japanese Management Philosophies: From the Vacuous to the Brilliant,” California Management Review 34, no. 2 (winter 1992): 66-87.

13. These comments were obtained during the course of interviews conducted at Kyocera America Inc.’s San Diego manufacturing plant on July 13-15, 2010.

14. This comment was obtained during the course of the interview with the plant manager at Kyocera Corp.’s Kokubu manufacturing plant in Kagoshima, Japan, on October 1, 2009.

15. G.A. Yukl, “Leadership in Organizations,” (Upper Saddle River, New Jersey: Pearson/Prentice Hall, 2010): 104.

16. H.A. Simon, G. Kozmetsky, H. Guetzkow and G. Tyndall, “Centralization vs. Decentralization in Organizing the Controller’s Department” (New York: Controllership Foundation, 1954): 63.

17. A.J. Mayo, E. Masako and Y. Mayuka, “Kazuo Inamori, A Japanese Entrepreneur,” Harvard Business School case no. 408-039 (Boston: Harvard Business School Publishing, 2008); R. Adler and T. Hiromoto, “Amoeba Management: Why It Works at Kyocera and Which Other Firms Could Benefit From Its Adoption – Part I,” working paper, University of Otago, 2010; R. Cooper, “Kyocera Corporation: The Amoeba Management System,” Harvard Business School case no. 195-064 (Boston: Harvard Business School Publishing, 1994); H. Miya, “Micro-Profit Center System for Empowerment: A Case Study of the Amoeba System at the Kyocera Corporation,” Gakushuin Economic Papers 35, no. 2 (August 1998):105-115; J.P. Kotter and N. Rothbard, “Kyocera Corp.,” Harvard Business School case no. 491-078 (Boston: Harvard Business School Publishing, 1991).

18. J.R. Hackman and G.R. Oldham, “Work Redesign” (Reading, Massachusetts: Addison-Wesley, 1980): 85.

19. Lawrence and Lorsch, “Organization and Environment.”

i. Inamori, “Respect the Divine,” 28.

1 Comment On: Amoeba Management: Lessons From Japan’s Kyocera

  • hamricca | September 22, 2012

    I first met Inamori-San in 1970, and met him on many occasions, as Kyocera was a major supplier of ceramics to our company. I also met many of his company leaders, and one of his VPs became a good friend. My master’s thesis was on Japanese management accounting systems, and Amoeba Management was a large element.

    Your article is quite accurate, and I would highly reinforce those words that refer to the loyalty element. I have many stories of how this played out amongst the leadership team. You are probably correct in the assessment that his influence will fade; however, hopefully it does not, as he is a visionary in many ways. His approach in negotiation was unlike other senior Japanese leaders of the time, and it always made it much easier to deal with Kyocera as a result.

    Charles Hamrick

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