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Sony's fall and Japan's hang-ups

Sony's fall mirrors Japan's tech decline.

Sony's slow but sure descent is also about Japanese companies' obsession with doing things their way, even if it's the wrong way.

I lived in Japan during the peak of its technological and manufacturing heyday -- from 1983 till 1993. The final eight years in Tokyo. Not only did I visit scores of Japanese electronics and computer companies as a journalist (and analyst) but I was also irresistibly drawn to (read: I spent way too much time in) Akihabara -- Japan's electronics retail Mecca at the time.

The reason for the success of companies like Sony and Panasonic (National brand in Japan) was obvious. They not only designed popular products but were also very good at manufacturing them. Not unlike the U.S. in its industrial heyday.

But the seeds of Japan's technological-industrial undoing were there to see too:

  • Stuck on incremental, not disruptive innovation: the Japanese flavor of capitalism is averse to small companies with product-category demolishing ideas like iPhones and iPads (remember Apple was a lot smaller before the iPhone) -- or, to go further back in time, the original Apple Macintosh, the Compaq PC, or new distribution models like Dell's. Japan's form of capitalism favors incremental tech improvements that trickle out of vertically integrated companies. Even today.
  • Japanese hubris: No, not pride, hubris. I witnessed enough unbridled arrogance* (mixed with disdain for America) when I was in Japan that I believe they (Japanese companies and the government a la entities like MITI) thought upstart companies like Intel, Compaq, Dell, and even Microsoft, were relatively insignificant because they couldn't compete on the consumer product front with companies like Sony, Toshiba, Hitachi, and Panasonic. (*Akio Morita, the Sony founder and president, had a keen sense of Japanese industrial superiority. And, lest we forget, he wrote a book with Shintaro Ishihara, a radical Japanese politician who had, let's say, unusual ideas about Japanese superiority.)
  • Missed the PC revolution: Sony, Panasonic, Hitachi, et al became obsessed with mass production of whirring, spinning products like tape-based portable music players and video devices. Not to mention analog TVs. So obsessed that they missed the PC/digital revolution happening in the U.S. in the latter half of the '80s. Then they were slow to respond to the mobile consumer digital revolution when flash memory basically replaced everything as a storage medium.
  • Monozukuri: Or "making things." This is a religion in Japan (as it once was in America). Manufacturing is of course important to any economy--the U.S. not excluded. But Japan sometimes makes things just to make things. That works for a while, but it is doomed to fail. You can make conventional TVs for just so long before it becomes too obvious that they can be made better and cheaper elsewhere. Sharp, at one time an LCD manufacturing giant (and TV maker), now needs help from Foxconn because it is losing the LCD manufacturing war. In short, it is futile to compete on many manufacturing fronts with China, Taiwan, and South Korea, but not all Japanese companies have gotten that memo yet.
  • Software: Japanese companies have never had a firm grasp of the importance of software. Or the art of fusing hardware and user-friendly software into an appealing coherent whole, a la Apple or even a company like IBM and its mainframe culture. And this is a corollary to the obsession with monozukuri. When I lived in Japan, the message was clear: software really isn't that important. It's only hardware that matters.
  • Insularity: When I lived there, Japanese companies were masters at fabricating and propagating canards about the uniqueness of the Japanese consumer. Every market is unique, of course, but Japanese companies get carried away with making "special" products (e.g., smartphones) for the Japanese. Again this works for a while until a company like Apple waltzes into the market and the "very unique" Japanese consumer theory goes out the window.

    I remember a little game the Japanese media used to play back in the late '80s: they would ask Japanese consumers if they could think of an American product they would want to buy. Japanese consumers would more often than not scratch their heads.

    Well, I really can't think of any Sony product that I would want to buy today. How times have changed.