Nobuko Kobayashi is a partner with EY Strategy and Consulting Co., Ltd., Strategy and Transactions -- EY-Parthenon.

It is tempting to write Japan off as a sunset country when it comes to innovation.

From over 50% global market share in the 1980s, Japanese semiconductors fell to 6% in 2020, while none of the global digital giants that have dominated world market capitalization ranking since the 2010s is Japanese. If pressed for memorable Japanese innovation, the average global consumer aged over 40 would probably nominate the Sony Walkman, released in 1979.

But if speedy, consumer-branded innovation is not Japan's forte, it can still be proud of its business-to-business innovation. Never household names, these gems quietly thrive by relentlessly refining mature technologies.

Often, innovation is more about the weight of history than about patent protection. Think here of the broth that comes with ramen noodles, served from a stockpot that is never emptied, just added to and perfected day after day, year after year until it achieves that inexplicably luscious flavor.

Try as they might, copycats who simply follow the recipe will never reproduce the same flavor. In the end, customers will always return to the original.

The abundance of such industrial jewels belies the underrated resilience of Japanese manufacturing, which should make the nation proud. Despite this overall strength, slow response to market disruption represents their Achilles' heel. To prevent their downfall, Japan must ensure that its manufacturers are supplied with enough fresh technical talent to stay relevant.

Harmonic Drive Systems, a motion control component manufacturer with an annual turnover of 37 billion yen ($326 million), is one such hidden champion. The company's flagship product HarmonicDrive is handmade to meet precise customer specifications and graces the inner workings of small robots as diverse as medical surgery arms and Disney animatronics.

Tracing its roots to a largely forgotten American inventor, C. Walton Musser (1909-1998), Harmonic Drive Systems doggedly honed its one-trick-pony deceleration technology for 50 years. Because of the patience and skill needed to bring this American invention to maturity, HarmonicDrive found Japan a more suitable home than the U.S. Today, it has an 80% global market share of small, high-precision decelerators.

When Harmonic Drive Systems CEO Akira Nagai once invited me to hold and rotate one of his company's gears, it gave a slightly uneven, subtle push against my palm. The unique sensation tells the engineers who manually test their finished products piece by piece that customer specifications are met.

Harmonic Drive Systems' secret, says Nagai, is not the technology itself, patent protection has long expired, but the intangible craftsmanship of the company's engineers built painstakingly over time.

Craftsmanship is Harmonic Drive Systems' ramen stock. Every time a customer complained, the company's engineers would get to the bottom of the issue, adding that little extra dimension to the company's secret sauce. This dedication to quality is the soul of Japanese manufacturing. Even the famous Japanese automotive OEMs like Toyota are only successful because of the combined strength of their sprawling base of component suppliers.

But strength can invite weakness. Japanese companies, obsessed over incremental improvements, tend to miss the big picture, as when a disruptive technology sweeps in and rewrites the rules of the game. This is the existential threat facing Japanese manufacturing, which risks becoming an antique museum of high quality and obsolete craftsmanship.

What can we do to stay relevant while capitalizing on the virtues of quality?

At the corporate level, management must be vigilant to the possibility of disruption. Take Harmonic Drive Systems, which is forever on the lookout for new gear mechanisms and is co-researching its Abacus drive with the Stanford Research Institute. Harmonic Drive Systems understands that this new technology could eventually threaten its HarmonicDrive monopoly. Self-denial is hard, but it is necessary for survival.

At the national level, Japan must ensure a quality talent pipeline into the manufacturing sector. Technical high schools, of which there are over 250 in Japan, are underrated institutions. Governments should highlight these institutions to encourage enrollment. Despite their relatively low popularity, graduates are highly employable, with graduate placements near 100% among students seeking employment.

Secondly, we must invigorate the pipeline of ideas. If innovation could emerge as a new ideal, it may motivate cross-pollination of existing ideas and technologies. Governments could encourage collaboration between academia and industry, or between corporations and startups.

Finally, if necessity is the mother of invention, then Japan's myriad structural problems, such as its aging society and labor shortages, can help foster innovation, especially in fields such as robotics and artificial intelligence.

It is conventional wisdom that government is ill-suited to pick winners in business. However, the government can play a prominent role in promoting demand by adding financial incentives and simplifying regulations.

Japan's companies may have slipped from the global market capitalization rankings now dominated by American technology giants. But with a focus on quality, backed by history, Japan's companies can still compete using manufacturing gems like Harmonic Drive Systems. The challenge is to keep them coming.

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member companies.