Panasonic's plasma pusher

When he took over as CEO of Panasonic's North American division in mid-2004, one of the first things Yoshi Yamada did was eliminate the executive parking spots. He then demolished the floor that held the executive offices and replaced them with cubicles.

It was part of a plan to make Panasonic--once one of the largest names in the business in North America--a wiry competitor once again. Panasonic in Japan had already undergone a massive overhaul.

So far, the changes in the U.S. seem to be working. Its TV sales are booming.

Yamada, who worked at Panasonic in the United States and Japan for decades, sat down with CNET News.com earlier this month at the Consumer Electronics Show in Las Vegas. He discussed the future of plasma TVs, Panasonic's camera drive, and why some U.S. companies just don't understand the consumer electronics market.

Q: Panasonic has undergone some massive changes in the past four years, and most of these are a mystery to U.S. readers. Can you give us a quick overview of what has happened?
Yamada: In Japan, when Mr. Nakamura became president of the company, it was 2001. (Kunio Nakamura is now CEO.) We did a major reorganization and restructuring. We changed the whole organization of the company. It was very, very painful. But it was very, very successful at the end. The change has been tremendous in the past three to four years.

When I came to the United States in July 2004, for some reason, although Panasonic Japan had changed a lot, the overseas companies had remained the same. People's minds, the way the way they ran the business--it was all the same. I was kind of shocked when I came to the United States. (Laughs.)

I worked in the United States almost throughout the '80s. In those days I felt there were many issues. But when I came back here in July 2004, I saw very similar problems almost 20 years later. People's minds and the culture had not changed at all, although a lot of the competitors in the U.S. had changed a lot. It was very strange to see.

Were there too many executives? Or was there slow decision-making?
Yamada: Really slow. (Laughs.) I met one of the executives in the (U.S.) retail channel and asked him, "What do you think Panasonic should do?" He gave me very clear direction. He said, "Panasonic is very, very slow to respond in terms of new products, in terms of new technology, in terms of the competition, in terms of business processes. Everywhere you are too slow." I was shocked, but also I was very pleased to hear it.

It was kind of a dinosaur.

How did you begin to change it?
Yamada: The first thing I tried to do was reduce layers of decision-making by reorganizing internally. It took seven or eight signatures to sign off on a project. I changed the signature procedure to a maximum of two. That automatically means reducing the number of people. What I learned was that the most difficult thing to do is change people's mindset. They get so used to they way they do things. Even if they understand the necessity, they are resistant to changing the way they work. Still, I see it to some extent.

Do you think you are mostly through the process?
Yamada: Yes. It has been over 18 months since I've been here and most of it is done. But it took more time, much more than I thought.

What have you done to revive the Panasonic brand in the U.S.?
Yamada: The first thing we did was, on Jan. 1 of last year, we changed our company name from Matsushita Electric Company of America to Panasonic Corporation of North America. That was the first major change. The second thing is that we made it very clear what our product category focus is.

It's very simple: plasma, plasma, plasma. You saw already our booth (at CES). We have over 100 plasma displays and in the center you see 40 65-inch plasma vertical displays. And a 103-inch plasma display.

Our message to consumers is Panasonic is a plasma TV company. Since August 2004, we really reallocated marketing resources and human resources onto plasma. Until then, our market share was around No. 2, 3, 4. It depended on the week. But since September 2004, we've had the No. 1 position every month in the United States. This last Christmas season our market share went up to 40 to 50 percent in the U.S. The second manufacturer is at 12 to 15 percent. That's a factor of three.

Clear direction and focus certainly resulted in the gain of market share. We really kind of increased our brand awareness by focusing on one product category.

What do you think when you hear all of the analysts say that plasma is fading out and that the future belongs to the LCD or SED (surface-conduction electron emitter display)?
Yamada: They are not really seeing what's happening in the marketplace. Today more than 75 percent of consumers prefer plasma for large-screen flat-panel TVs. I'm talking about 37 inches and above. There are two technologies for flat screens: LCD and plasma. More than 75 percent of consumers are buying plasma (over 37 inches). Because once you are over 37 inches, there is no comparison.

There is a reason for that. Both technologies are getting better, but there are inherent weaknesses in the LCD, especially in (capturing and presenting) moving images. Plasma is the best technology for the large screen.

We can't use plasma for small screens. (He points to cell phone.) That is true.

From a manufacturing standpoint, plasma also has an advantage. Plasma only takes two days in processing. LCD takes one week. That creates a difference in manufacturing costs. That is going to be more severe when the size of the screen becomes larger. There are inherent technology issues and inherent manufacturing issues.

Some, though, question the reliability and durability of plasma. Energy consumption is also an issue.
Yamada: Those people have not studied it well. If it were five years ago, they could be right. But the technology has been changing every year. Today, power consumption is the same. Some people like to say plasma is more power hungry than LCD. Yes it was, five years ago. I agree. Today the technology has changed. Our plasma is on the eighth generation. If there are people who think plasma is behind LCD, he or she should study much harder.

What changes or improvements do you foresee for plasma?
Yamada: One is the size. We announced a 103-inch plasma with 1080p (progressive resolution), which means full high-definition. This is the direction we believe consumers want to see. If you look at the picture of those plasmas, you'll be surprised (at the picture quality). I was surprised when I first saw it. There is a big difference.

Unfortunately most of the consumers in the United States don't know how beautiful those pictures are. They are still watching poor-quality TV today. But once they see (high definition), I don't think they can go back. Until they see it, they maybe don't think they need it.

The fall sales-season of 2004 was interesting. There is a version called ED, extended definition, which is different than true high definition. In the fall season of 2004, the proportion of HD TVs among Panasonic's plasma TV sales was about 25 percent or less. The remaining was ED. I was shocked to see the results for fall 2005. The percentage of HD is now 75 percent. It flipped completely. I didn't expect that. I expected that about 50 percent would be HD. That was my forecast in January 2005 at CES last year. I was completely wrong, but in a good way.

One thing that's difficult about plasma is the size. I live in a home in San Francisco. You couldn't get a 103-plasma in there without an extensive remodeling job.
Yamada: Ah, but you could get a 65-inch one.

True, but how about screens below the 40-inch line. Do you have any interest in extending plasma down in size?
Yamada: We have a threshold at 37 inch. That is the line. Anything bigger than 37 inch we use plasma. For screens below that, we use LCD. I should say IPS (in-plane switching). It is a version of LCD, but it helps with the drawback LCD has, which is the response time. We are still using the word LCD, but I don't want to use it because it is confusing.

What is your opinion of the SED TVs or carbon nanotube TVs that some of your competitors want to bring to market?
Yamada: I'm not a fan of the technology. The problem, in my opinion, is that when they started in development, or when they started talking about it in public a couple of years ago, I don't think they expected the market to change so drastically in terms of the price, in terms of the screen size, in terms of the quality of plasma screens. Maybe three years ago they picked a target, and the target was plasma. But the target moved probably much more rapidly than they thought.

In terms of street price, a 42-inch high-definition plasma, not ED, cost about $3,000 (in) December. A year and a half ago, something like that cost over $8,000.

What other products will Panasonic emphasize in the U.S.?
Yamada: High definition is the direction Panasonic is heading. We are not marketing just plasma TVs. We are marketing home theater applications: DVD recorders, and later this year maybe Blu-ray players, and amplifiers and speakers. You can also combine HD TVs and digital cameras: You take a picture and put the SD (Secure Digital) card in a slot in the plasma. Now you enjoy the picture not from a print, but on the big-screen TV. You can show a slide presentation to your friends and family.

You even have IP security cameras. You can watch the house, the garage, the window in the backyard. You can add sensors to the camera. If someone comes in, you can get a picture in the corner of a plasma TV. It was not possible when we had analog type of technologies. Thanks to the digital technologies those things are possible now.

The issue is how are we going to communicate this to people. They don't know they can do that, so we have to do a much better job at reaching the consumer. People think that TV is TV. But today TV is not just a conventional TV. You will see it be part of telephone video communications, eventually.

Do you plan to emphasize videoconferencing? It's one of those ideas people love, but it hasn't gone mainstream.
Yamada: Not this year, but next year. People want it.

How about HD camcorders? Some models came out last year, but they are really expensive.
Yamada: We have one for not real consumers, but "prosumers." We just announced it last month. Next year, we are coming out with consumer ones. We are showing design mock-ups now. Around $1,000, that is kind of a hot spot (for consumer pricing for the new cameras), I think.

It seems like you're showing off a lot of cameras at CES.
Yamada: We started to put some emphasis on it in the second half of 2005. And this year, 2006, is the year of digital still cameras for Panasonic in the U.S. I think we are going to triple our business in them over 2005. Our main focus is on optical image stabilization. Even if you shake, the picture will be very, very clear. We also have some with aspect ratios of 16:9, like widescreen TVs.

Two years ago at CES, all of the American companies said they were planning on entering consumer electronics in a big way. But there's less activity now than there was then on their part, and you certainly don't see a huge Dell booth on the main floor here. Did they underestimate the difficulty of breaking into electronics?
Yamada: I certainly don't see them as a competitor at all. I don't know why they failed. Probably, well, let's go back to plasma. We focus on the quality of the picture. My background is as a computer guy. Before coming into the U.S. (in the '80s) I was in charge of the computer business for Panasonic. I know the mentality. It is very different. In TV we are always very serious about the quality of the TV, the colors. But in the computer industry frankly, they don't care. I didn't care. It shows moving pictures. That's all that matters.

On that note, do you ever think of trying to push into the U.S. consumer notebook market? Panasonic sells a lot of them in Japan.
Yamada: Here in the U.S., Panasonic focuses on government, police, telecom industry. We sell the Toughbook. They are very rugged. You can drop them.

In Japan, I put the priority on portability and long battery life. Here in the States, people don't pay the money for portability or light weight. They carry heavy notebooks. That is the difference of the markets.