Thursday, December 17, 2009
Post-Galapagos Japan? - globalizing Japan's fantastic technologies...
"Why do Japanese companies make so beautiful mobile phones with fantastic functions, and have almost no global market share?" I asked this question back in 2003 to NTT-DoCoMo's CEO Dr. Tachikawa (see my article "Leadership questions of the week" in Wallstreet Journal of June 12, 2006, page 31), and offered several proposals to Dr. Tachikawa, of which he accepted one.
A related question is: "why can Samsung, LG and Apple beat Japan's initially far more advanced mobile phone makers, and why have Japan's phone makers taken no effective action to build global business in order to avoid extinction?"
Now six years after my initial presentation to DoCoMo's CEO, I have been invited as the only non-Japanese to work on Japan's "Post-Galapagos Committee". For most of this year our small group of industry CEOs, academics, government officials and other leaders have been working on understanding the reasons for Japan's "Galapagos effect" and how to overcome it.
Read about this work here in the New York Times, about my (Japanese language) presentation to the committee on the IT-Media website here (in Japanese), and download my presentation PowerPoints here (pdf-format, Japanese language).
The "Galapagos effect" has not been created by a single factor. Instead a collection of choices by the management teams of Japan's electrical conglomerates have prevented leverage of their domestic success stories into global success stories. These choices can be overcome. In our "Post-Galapagos committee" we have worked all-year on how to overcome these choices.
Unfortunately the "Galapagos effect" is only one symptom of the crisis of Japan's electrical giants: most have shown little or no growth in sales over the last 10 years, while at the same time margins tend to be small or negative. Over the same period, General Electric has increased sales by a factor of about three, while at the same time earning healthy margins.
Overcoming this crisis will create many opportunities. If at least some of the conclusions of our "Post Galapagos Committee" can be realized, then our committee's hard and totally voluntary work during most of this year and many late nights will not be wasted.
For an analysis of Japan's electrical industry sector see our J-Electric report.
A related question is: "why can Samsung, LG and Apple beat Japan's initially far more advanced mobile phone makers, and why have Japan's phone makers taken no effective action to build global business in order to avoid extinction?"
Now six years after my initial presentation to DoCoMo's CEO, I have been invited as the only non-Japanese to work on Japan's "Post-Galapagos Committee". For most of this year our small group of industry CEOs, academics, government officials and other leaders have been working on understanding the reasons for Japan's "Galapagos effect" and how to overcome it.
Read about this work here in the New York Times, about my (Japanese language) presentation to the committee on the IT-Media website here (in Japanese), and download my presentation PowerPoints here (pdf-format, Japanese language).
The "Galapagos effect" has not been created by a single factor. Instead a collection of choices by the management teams of Japan's electrical conglomerates have prevented leverage of their domestic success stories into global success stories. These choices can be overcome. In our "Post-Galapagos committee" we have worked all-year on how to overcome these choices.
Unfortunately the "Galapagos effect" is only one symptom of the crisis of Japan's electrical giants: most have shown little or no growth in sales over the last 10 years, while at the same time margins tend to be small or negative. Over the same period, General Electric has increased sales by a factor of about three, while at the same time earning healthy margins.
Overcoming this crisis will create many opportunities. If at least some of the conclusions of our "Post Galapagos Committee" can be realized, then our committee's hard and totally voluntary work during most of this year and many late nights will not be wasted.
For an analysis of Japan's electrical industry sector see our J-Electric report.
Labels: business in japan, fujitsu, galapagos, hitachi, nec, panasonic
Monday, July 13, 2009
Japan's games sector overtakes electrical sector
Japan's games sector is booming - and net annual income of Japan's top 9 game companies combined has now overtaken the combined net income of all Japan's top 19 electrical giants (including Hitachi, Panasonic, SONY, Fujitsu, Toshiba, SHARP... at the top, and ROHM, Omron... further down the ranking list).
Why does it make sense to compare electrical giants with game companies? In many areas, especially home electronics and personal portable devices these two sectors compete for exactly the same consumer spending budgets and mind share.
Pressure on Japan's electrical giants for much more fundamental restructuring is increasing. More details below and find our calculations and analysis explained in our reports: Report on Japan's electrical industry sector and our Report on Japan's game industries.
Figure compares the added total net income of Japan's top 18 electrical companies (Hitachi, Panasonic, SONY...) with the combined total net income of Japan's top 9 games companies (Nintendo, Bandai Namco..., not including SONY Computer Entertainment, because net income is not available).
The games sector - lead by Nintendo - shows stable net income all through the current crisis years. While pressure on the electrical giants for more fundamental restructuring is increasing.
Combined total net annual income of Japan's games sector. (SONY Computer Entertain- ment is not included, since net income is not available)
Detailed analysis in our report on Japan's games sector.
Why does it make sense to compare electrical giants with game companies? In many areas, especially home electronics and personal portable devices these two sectors compete for exactly the same consumer spending budgets and mind share.
Pressure on Japan's electrical giants for much more fundamental restructuring is increasing. More details below and find our calculations and analysis explained in our reports: Report on Japan's electrical industry sector and our Report on Japan's game industries.
Figure compares the added total net income of Japan's top 18 electrical companies (Hitachi, Panasonic, SONY...) with the combined total net income of Japan's top 9 games companies (Nintendo, Bandai Namco..., not including SONY Computer Entertainment, because net income is not available).
The games sector - lead by Nintendo - shows stable net income all through the current crisis years. While pressure on the electrical giants for more fundamental restructuring is increasing.
Combined total net annual income of Japan's games sector. (SONY Computer Entertain- ment is not included, since net income is not available)
Detailed analysis in our report on Japan's games sector.
Labels: fujitsu, hitachi, nintendo, omron, panasonic, rohm, sharp, sony, toshiba
Japan's electrical companies & the crisis
Japan's top 20 electrical companies combined are about as large as The Netherlands economically, and have big impact on the world economy. Our analysis shows how dramatically Japan's electrical companies have been hit by the current crisis (except for Nintendo). We suggest that full recovery to 2008 (FY2007) levels may take until 2016 - about seven years in terms of income, and about 3-4 years in terms of revenues.
The crisis has thrown Japan's electrical companies back to 2002 in terms of combined annual net incomes. It has taken Japanese electricals 7 years to climb from the 2002 crisis to the 2008 (FY2007) boom. Since Japan's electrical companies have made relatively soft adjustments, but not a full fundamental industry restructuring yet, we think that it is likely that developments will proceed along a similar path as in the past: following such an analysis we think that it will take about 7 years from 2009 (ie. until 2016) for Japan's electrical companies to work their way back up to 2008 net income levels. (Find detailed financial data and analysis in our report on Japan's electrical industries)
Back to FY2003:
Combined annual sales for the financial year ending March 31, 2010, are at a similar level as in FY 2003, ie Japan's electrical industry has been taken back 6 years in terms of revenue growth. Again, since a dramatic and fundamental industry restructuring has not yet taken place, we believe that we can expect it will take about 4 years for Japan's electrical industry to grow again to 2008 (FY2007) size in terms of annual revenues.
The crisis spreads the field...
During the "good" years of FY1997 - FY2007 the differences between top and bottom performing electrical companies became steadily smaller: the field narrowed.
This figure shows that during the current crisis the spread between best and worst performing companies became more than twice as wide. The crisis clearly differentiates winners (Nintendo) from losers in terms of operating margins.
Read more details in our report about Japan's electrical industries
The crisis has thrown Japan's electrical companies back to 2002 in terms of combined annual net incomes. It has taken Japanese electricals 7 years to climb from the 2002 crisis to the 2008 (FY2007) boom. Since Japan's electrical companies have made relatively soft adjustments, but not a full fundamental industry restructuring yet, we think that it is likely that developments will proceed along a similar path as in the past: following such an analysis we think that it will take about 7 years from 2009 (ie. until 2016) for Japan's electrical companies to work their way back up to 2008 net income levels. (Find detailed financial data and analysis in our report on Japan's electrical industries)
Back to FY2003:
Combined annual sales for the financial year ending March 31, 2010, are at a similar level as in FY 2003, ie Japan's electrical industry has been taken back 6 years in terms of revenue growth. Again, since a dramatic and fundamental industry restructuring has not yet taken place, we believe that we can expect it will take about 4 years for Japan's electrical industry to grow again to 2008 (FY2007) size in terms of annual revenues.
The crisis spreads the field...
During the "good" years of FY1997 - FY2007 the differences between top and bottom performing electrical companies became steadily smaller: the field narrowed.
This figure shows that during the current crisis the spread between best and worst performing companies became more than twice as wide. The crisis clearly differentiates winners (Nintendo) from losers in terms of operating margins.
Read more details in our report about Japan's electrical industries
Labels: fujitsu, hitachi, nintendo, panasonic, sony, toshiba
