Ouchi first saw the need for Theory Z during the late 1970s when Japanese companies were expanding in the global market. Because of this, Ouchi decided to understand the reasons why Japanese organizations were more effective than their U.S. counterparts. In order to do this, Ouchi compared American organizations (Type A) with Japanese organizations (Type J). William Ouchi found that American organizations were more focused on individualism, whereas Japanese organizations relied more upon their culture value of collectivism. Using his results as a guide, Ouchi came up with a new management philosophy that would draw upon the strategic advantages of both cultures, and came to be known as Theory Z.
The proposed theory would take on board the finest aspects of Japanese organizational culture whilst preserving American individualistic tendencies. William Ouchi openly encouraged American companies to adopt his strategy and cited many reasons why they would benefit from this: increased job satisfaction, lower rates of absenteeism and turnover, higher quality products, and improved financial performance. Characteristics of Theory Z that would help in day-to-day management include shared responsibilities, specific careers paths, and concern for employee well-being.