Focusing on Japan’s Strengths

TJ: What has made the Japanese automobile and electronics industries so successful in the U.S.?
TAKENAKA: Japan had its heyday in the decades following World War II. There was a shortage of quality products and the Japanese were very good at making products. They came in and supplied the world. The timing was right in terms of the world’s needs, the environment and Japan’s capabilities. You didn’t have to negotiate hard. You didn’t have to do a lot of sales and marketing. There was a lack of quality products being manufactured and people simply had wants and needs. The Japanese were excellent at manufacturing. Trading? Not so good. Marketing? Not so good. But you didn’t have to do a lot of that back then.

TJ: Is Japan going to continue to be a manufacturing country?
TAKENAKA: I think they have to. You have to focus on your strengths. If you only focus on your weaknesses, you’re going to become weak. The Japanese have an excellent skill set and commitment that suits manufacturing.

Let’s take a look at televisions. The Japanese used to be excellent at manufacturing TVs. But they stopped thinking about what the customer wanted. Konosuke Matsushita once said, “The customer is God.” In the old days, they really believed the customer was God, so they were always trying to figure out, “What does the customer want? What does the customer need?” They would find out so they could make good products that met their needs. Well, as you get more successful (this happened in America, too), you start to get cocky. They are still using the same words, “The customer is God.” Before they really believed it. But now it is only words. This is a common mistake with successful companies. They start imposing what they think their customers need on their customers.

TJ: Can you give us an example?
TAKENAKA: When I first arrived in the U.S., America was an automotive country. They had strength and power. What happened? Detroit forgot about what their customers wanted and began focusing on what they thought their customers’ needs were.

This is exactly what happened in Japan. The Koreans and Taiwanese said, “Hey, look. People want TVs but they don’t need to have all of these special functions. There are too many buttons. Most people just want to turn it off and on, adjust the volume, change the channel and have a few other basic functions. People want convenience, not over-designed gadgets.” So they focused on quality and efficiency and made a better, cheaper product. Meanwhile the Japanese continued coming out with new functions such as “the neck,” which allows your television to turn around 360 degrees. But who is willing to pay for that function? It doesn’t matter if it’s only another $50 or $100, most people don’t need it and they don’t want to pay extra for what they don’t need.

TJ: So what does Japan have to do in order to get back in the game?
TAKENAKA: Japan has to work on its strengths. Its strength is manufacturing. The Japanese are committed and they like coming up with very unique designs, as well as making continuous improvements and coming out with a new and improved model year after year. They need to get back to the basics and remember the customer is God. So improvements should be made in line with customer desires.

TJ: What does the Japanese automobile industry need to be most mindful of?
TAKENAKA: They need to pay attention to history and learn from it. The Edsel is a good example of what not to do. It was a big failure. Detroit made the mistake of trying to impose what they thought would be attractive on the customer with the Edsel’s new design. It was a unique model design-wise, but nothing special when it came to quality. Volkswagen, on the other hand, looked at what the customers wanted and Volkswagen came out with the Beetle. It was the perfect car for students and consumers who wanted to be transported from A to B in a fuel-efficient and inexpensive vehicle. The VW Beetle did not have the sophisticated design of the Edsel and it was quite small. But it was fuel efficient, inexpensive and you didn’t have to spend a lot of money for repairs and maintenance. It just kept on running.

TJ: So who was VW’s competition?
TAKENAKA: Toyota. When Toyota entered the market, they knew they couldn’t match Detroit. So they entered the market with a smaller car and basically overtook Volkswagen by being more creative. The Volkswagen Beetle was a good car but they never changed. The Japanese believe in kaizen – always trying to make improvements.

TJ: What do think Japan should do now?
TAKENAKA: Instead of focusing on economical cars, they should concentrate on the high-end market like Mercedes or Porsche. They won’t sell as many cars, but the profit is there. Japan clearly needs to shift their sales from volume to quality, which means higher margin and higher profit. tj

This article appeared in Issue #271 of the Tokyo Journal. Click here to order from Amazon

Written By:

Yukuo Takenaka

Yukuo Takenaka is Chairman, CEO and President of the Takenaka Partners Group. Prior to forming Takenaka Partners in 1989, he was a partner and National Director of KPMG Peat Marwick's Japanese practice. He also served as Chairman of Project Japan for the parent company, KPMG. A graduate of the University of Utah's Bachelor of Science in Accounting program and a Certified Public Accountant, Mr. Takenaka is recognized for his expertise in crossborder M&A and joint venture transactions. On both sides of the Pacific, he serves as a senior advisor to companies in a wide range of industries including technology, electronics, manufacturing, financial services and real estate. He is the author of the Japanese best seller, Merger and Acquisition Strategy.


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