No. 21: Hardware or Software? No, it is Marketing (April 1, 2011)

Management: 
Electronic books attracted wide attention worldwide, but they are far from being successful at this time. In Japan, the year of 2010 was dubbed the first year of e-books, but every publisher that launched the e-book business has found the e-book business in a sorry plight. The same is true of e-magazine and e-newspaper. Neither of them succeeds in creating impressive profits. Presumably, the situation is almost the same in other countries. Manufacturers of apparatus attribute the slow business to shortage of software, while publishers blame them for slow-moving apparatus. Another dispute over hardware and software has arisen.

You can store more than 1,000 books even in a small USB memory. However, owning 1,000 books is one thing, and reading and utilizing them is quite another. You can find information and conduct analyses using the 1,000 books. However, you can get necessary information and conduct analyses faster and more easily on the Internet for free. A publisher offered an e-magazine that allows the user to read a total of more than 30 newspapers and magazines for a monthly subscription fee of 300-400 yen, but it is still unsuccessful in getting a good number of subscribers. Who can read as many as 30 media every month? Such smart people who wish to read 30 media every month are small in number. Human is not a computer. You can increase the capacity of your PC by replacing it with a new powerful PC. However, no human brain is replaceable.

You can easily find disputes over hardware and software in business. Think about the dispute between VHS and Beta in the videocassette format. Some say that VHS achieved success because it offered a far larger number of software titles than Beta. But the difference in the number of software titles is not the problem but the result. The real problem is that Sony made a mistake in positioning Beat. Unquestionably, Beta was higher in performance than VHS, but VHS was enough for the home market in terms of performance. Beta was more suitable for the industrial market than the home market.

The same is true of Panasonic’s 3D Real video game machines that ended in a disaster. Panasonic tried to cover various age groups by incorporating several functions in the 3D Real. Accordingly, it was initially introduced for more than 50,000 yen (US$500). Back then, the largest customers of video game machines were children up to 15 years old, and the purchasers were their parents, to be specific, their mothers. Which mother can buy a game machine priced at more than 50,000 yen for her children? Panasonic made a mistake in positioning the 3D Real. History repeats itself. 

The Japanese e-book market was about 60 billion yen in 2009. Surprisingly enough, however, 80% of the sales came from comics for teens. Believe it or not, they are mostly love affair comics, meaning that love affair comics for teenage girls dominate the market. Who could have imagined this situation? Product positioning in marketing is very important. No product can be evenly accepted by all consumers. Unless you position your product precisely beforehand, your product will fly to the direction that you never imagine.

No. 20: Do Not Forget That Momentum Does Not Last Long (March 23, 2011)

Management: 
It is advisable to take advantage of momentum in whatever field you are involved: warfare, business, and even politics. When you create innovative ideas, you can get momentum and win a battle. The point, however, is that the momentum does not last long, and it is lost all of sudden usually because of narcissistic decisions.

Take the Battle of Midway in 1942 for example. The Japanese Navy attacked the Pearl Harbor in 1941 and got momentum in the Pacific War. However, the momentum was lost in the Battle of Midway because of the incredible mistakes on the part of the Japanese Navy. It is quite natural to think that the Japanese Navy completely lost the possibility of winning the Pacific War in the Battle of Midway. Nonetheless, the Japanese government continued the reckless battles in the Pacific Ocean. Is it too much to say that the narcissistic decisions of Japanese military elite led Japan to the devastating defeat in the Pacific War? 

You can find another example in the dramatic story of Nobunaga Oda (1534-1582) who is unquestionably the most innovative feudal lord of the Japanese history. In the age of provincial wars (1467-1615), feudal lords placed importance on establishing a solid system to rule their feuds, and the system was to integrate worriers, farmers, and merchants for the stability inside their respective feuds. Equipped with an established system, they tried to expand their feuds should if they had surplus power and ability. This means that no feudal lords, except Nobunaga Oda, thought about establishing a new system in a nationwide scale. Back then, establishing a new system to rule the entire nation was truly a revolutionary idea. Nobunaga Oda got momentum with this new idea and successfully expanded his feud. Judging from his connections with missionaries of the Society of Jesus, his idea may have originated from the absolutism then widespread in Europe.

He worked out several strategies to realize the new system. First, he completely separated warriors from farmers and created professional warriors. Back then, farmers did agricultural work in peacetime and fought in a battle in wartime. This means they ware unable to be warriors in the farming season. With the professional warriors, Nobunaga Oda got the military force to fight a battle all year round. He forced his warriors to live around his castle and established the military system to manage them. The well-organized warriors were trained to stand always ready for a battle. His warriors naturally were far more competent than part-time warriors of other feudal lords.

At the same time, he was the first feudal lord to introduce guns in Japan. Back then, a gun needed more than 10 seconds for reload. To make up for this shortcoming, he set up a team made up of three rows and asked each row to fire in shifts. This revolutionary idea allowed him to defeat horse soldiers utterly. Another point that characterized him is that he promoted human resources regardless of their personal history and background. However, his best days ended all of sudden when one of this subordinates attacked him.

A great earthquake, which is dubbed an earthquake once in 1,000 years, attacked the Tohoku and Kanto districts in Japan while the current regime is in the height of narcissism. As is often the case, disaster strikes when you least expect it. 

No. 19: Define the Ability of Your Company Precisely: Sorrow of a Venture Company

A venture company of electric vehicles in Japan announced on March 1, 2011 that it would shortly file for voluntary bankruptcy. The amount of debt is 1.1 billion yen, and the company dismissed most employees on the same day. The company got an order from Japan Post for its EVs, but Japan Post cancelled the order in January this year for fear of possible delay in delivery. Believe it or not, the number of EVs that the venture company had to deliver is 1,030 units. The contract required the company to delivery 30 units of the 1,030 units between January and February this year, but the company was not able to deliver them. This means that the company failed to deliver even 30 units of the contracted 1,030 units on schedule. Where are the delivery plan and production plan? The company seems to be dreaming the day of three cheers all employees shout together in line when it finishes delivering the 1,030 units.

It is questionable that Japan Post placed such a big order for as many as 1,030 units for 3,500 million yen with a venture company, and it is more questionable that a venture company capitalized at less than 500 million yen took such a big order. Konosuke Matsushita, the founder of Panasonic, taught us “No one can go up to the second floor in one stride,” but this company tried to “go up to the 10th floor in one stride.” Business does not end with the delivery of ordered products. Think about the business of a medical doctor. His business does not end with diagnosing his patient and writing a prescription for him. When his patient resumes his healthy daily life and shows his heartfelt gratitude to the doctor, a doctor knows that his business with the patient ends. The business of an ad agency does not end with placing an ad on the TV screen or newspaper. When the designed advertising campaign successfully increased consumer awareness of the product and made the client happy with increasing sales, the ad agency can say that the business with the client ends. 

If you think about business in the above way, you will realize how big an order the venture company took. Suppose that this company successfully executed this big order, is it realistic to think that it can get such a big order again in the future? Technological progress is growing faster and faster. Think about Sony’s Trinitron technology. It is an outstanding technology when it was introduced, but it cannot be outstanding forever. Sony forgot this fact. This is why Sony was late in entering the flat-screen TV market. Because Sony is such a big company, delay in market entry is not a big problem. Actually, it is now the world’s second largest flat-screen TVs manufacturer following Korea’s Samsung. However, medium-sized companies including venture companies should not take an example from such a big company as Sony.

Another big problem exists with this company. It does not have the main bank that usually should be one of the leading banks in Japan. As soon as the order with Japan Post was cancelled, financial institutions naturally asked the company to reimburse the loans. For all companies whether they are big or small, the last hope is always the main bank. Even more, political power should not be ignored in this business because the customer is Japan Post that is formerly affiliated with the Ministry of Post and Telecommunications. You have to remember that reemployment of retired bureaucrats is still widespread despite the new regime’s promise to eradicate it. No company can live only on ideas and technologies, however excellent they are.