One Saturday afternoon, as I struggled with the immobility of time, I observed one of the wonders of this world. Four 3-year old boys, who proceeded to become touts on the back of a packed pickup. They seemed the least pressured by societal proclivities, and relished the very sense of inviting invisible passengers into a well-designed, glitzy public service vehicle. According to them the best ever seen in the city, which mind you, they described about eloquently in the intense conversations they were having mimicking grownups. I would like to remind the reader that all I could see while this was happening was an old worn-down stooping flat-tired packed pickup, swinging precariously from the weight of these toddlers.
I would like to move our thoughts to another part of the world, to digest this paradox.
Japan was arguably the electronics powerhouse of the 70’s, 80’s and early 90’s. The name Sony, Hitachi or Panasonic was synonymous with quality and longevity. It seemed at that point in time, that these Japanese conglomerates breathed and ate innovation, and were invincible. It was an era where LG & Samsung products (read South Korean) were considered cheap and substandard.
But time went by, and the South Korean companies perfected the art of producing better quality products cheaply, with faster and better incremental innovations relevant in the marketplace and more aggressive marketing strategies. To them, these were precious lessons learnt from competing with their Japanese rivals. The Japanese firms on the other hands grew bigger and bigger, and like all giants, their movement became slower, haggard, dis-coordinated and impaired.
As we speak the Japanese conglomerates are no longer at the leading edge of technology. Many of them are hemorrhaging money (Sony, Sharp etc.), and laying-off thousands to survive. They are playing catch up to Chinese and South Korean firms. While they stagnated in the 90’s and became irrelevant, consumer markets shifted to digital media and games, mobile devices, software apps and the internet.
It is imperative to note that this was the same time Apple seemingly came out of the woodwork and became the dominant “computer phone player” (recently quoted as the most valuable company in the world). How? I hear you ask… By tremendous innovation, (The products they brought to market never existed before) and leveraging low cost manufacturing in China, Apple in essence obliterated the electronics market share that would have been the preserve of Japanese firms in less than 10 years.
In this current “animal farm” setup, most of the Japanese electronics makers are being forced to become parts-makers to stay in business. For example Sony makes the cameras in Apple iPhones, this arrangement only brings in 0.5 % of the profits coming from a finished product, while Apple retains the largest share of 58.5% profit margins.
What went wrong? I repeat.. it’s all about innovation. According to japancrush.com, the “Salaryman lifestyle” (shosha man) was one led by many engineers employed by these Japanese electronics firms. And unfortunately, their ethos was to get to the company early, stay late, follow the boss and always work hard. These engineers understood machines but didn’t understand people, meaning they had the technology but they didn’t understand the people who used these machines. They became out of touch with everyday life, indifferent to art and culture because they didn’t care much about food and clothes, and thus were oblivious to trends among women and young people. The people who they were meant to sell to.
Another reason is attitude. The Japanese view is that real men toil tirelessly to make things that you can see and touch. Services and software are for sissies. The fact is such attitudes are antiquated. Software firms typically make fatter profit margins than hardware firms, as seen above. The best ones easily hit 30%. Electronics firms struggle to even reach 5%. Innovation is vital for any country’s competitiveness and economic growth. According to a leading expert, Japan needs to train and educate its young people to be willing to take more risks to achieve more than average results. Substantial reforms need to happen in the current high school and college curriculums which are obsolete. Studying and working holidays in other countries should also supplement and infuse some level of independence, responsibility and maturity.
“But even as we make these assertions, the key ingredient to business success is learning to fail, which is discouraged and abhorred in Japan, and without it, a nation’s entrepreneurial spirit becomes predictable”, states Japanese-American entrepreneur William H Saito.
The Japanese firms have also failed because they lack leadership, vision and ability to implement strategy among top management, despite having tremendous resources at their disposal.
Many contributing factors donate to a country being termed as innovative, and the Global Innovation Index (GII) is a good indicator of what they are, Japan is 25th globally. It ranks lowly on ease of starting a business 80th, and 84th on ease of paying taxes.
In the same GII vs GDP Per Capita, Kenya is considered a learner. And together with its Eastern African neighbors is termed as an inefficient innovators (Burundi trails the group).In all honesty there is a lot to consider and borrow from the Japanese story, as they have been forced to reinvent how they look at innovation fundamentally.
In closing; for innovation to work for us East Africans, we have to invest more in both our graduate and tertiary education systems, to allow people to think out of the box and innovate. We have to have quality research institutions and researchers. Governmental institutions need to facilitate businesses to easily start and flourish. We must have world-class infrastructure, easy access to capital, access to research & development financing. We will also need to increase our knowledge and technology output, and at all times appreciate recreation and culture.
Are we ready for that journey?
Article was done for the CIO East African May 2013 issue