When Companies Fail to Change

The Triniton, TV, transistor radio, Walkman, and VCR are the stuff of time capsules nowadays, but not long ago they were cutting-edge technology. Japan was at the pinnacle of the home consumer electronics industry from the 1970s to the 1990s, introducing new innovations to the world each year.  Now those same Japanese firms are at the back of the pack and struggling to stay in the game. Japanese electronics production has fallen by more than 41 percent, and Japan's global market share of electronics goods and services has decreased by more than half since 2000 Sony, for example, did not earn any profits between 2008 and 2012, and then was falling behind again in 2014. What happened?

The simple answer is failure to innovate. While firms outside Japan pioneered digital technology and conquered the Internet, Japanese firms stuck to semiconductors and hardware. But the deeper issue is the refusal of Japanese managers to adapt to the changing global environment and to change their organizations accordingly. For instance, Sony mastered the technology needed for a digital music player years before Apple introduced the iPod in 2001, but its engineers resisted the change. Sony's divisions would not cooperate with one another fast enough to compete in this market or in the new market for flat-screen Ns. Even now, Sony has not managed to change its organization to reflect current global thinking in the industry. For instance, they and other Japanese firms make a larger number of products than most of their global competitors. Former Sony executive Yoshiaki Sakito said, "Sony makes too many models, and for none of them can they say, "This contains our best, most cutting-edge technology," Apple, on the other hand, makes one amazing phone in just two colors and says, 'This is the one,"Sony was attempting to adjust its behaviour by fall 2014, by realizing that it had too many models of smart phone. The plan is to focus on premium phones.

For Japanese electronics companies to survive, they must change. They were once able to structure their organizations around abundant, inexpensive labour to keep costs down and prices competitive, but that is no longer the case. One complicating factor is that Japan is an ancient country of many traditions, with a low birth rate and an aging population. The country's culture will make it even more difficult to realign to globalization It now must change to foster innovation, which may involve a cultural as much as an organizational transformation.

Questions -

1. What made the Japanese electronics industry initially successful?

2. Why is the Japanese electronics industry no longer a success story?

3. What types of organizational changes would you advise Japanese electronics managers to consider?

4. How do you think Japanese demographic trends have been a factor in the innovation problem?