When Japan exclusively developed and manufactured Walkmans, Honda hatchbacks and Nintendos, it was set to overtake the United States as the world’s largest economy. Today, Japan continues to be a world-leading high-tech innovator. Yet in commercial terms, the competition has caught up, and is often running ahead. As the Apples and Samsungs of the world outcompete Sony and Panasonic, Japanese companies are trying to revive the country’s economic miracle.
“Japan is in desperate need of a new philosophy of management, a new paradigm for competitiveness, a new sense of self,” Sony founder Akio Morito warned as far back as 1992. Twenty years later, as once-omnipotent Japanese tech corporations continue to lose ground to rampant global competition, it seems some are now heeding these words.
“Japan’s high tech sector is finally waking up to the need for a new management philosophy ... there is evidence of a growing sense of renewal,” wrote global management consultancy Accenture in a 2013 report.
One key shift is an attempt to invest profits, and technological capital, from shrinking traditional businesses into dynamic new markets. Accenture points to the way specialized high tech firms such as Canon and Fujifilm are using established optical, printing and imaging capability to successfully break into new medical imaging and other sectors.
Even so, this emerging new drive to competitiveness in Japan has some catching up to do.
Between 2010-11 and 2012-13, Japan fell four places in the World Economic Forum’s (WEF) Global Competitiveness Report, from 6 to 10. Though the report ranked Japan No. 1 for business sophistication and No. 5 for capacity for innovation – Japanese companies are the world’s second highest spenders on R&D – the island nation’s raw competitiveness is in a bit of a free fall.
While Denmark and the Netherlands now lead Japan in terms of global competitiveness, for the Japanese, the problem is closer to home. China, which in 2010 leapfrogged Japan to become the world’s second largest economy, now makes more cars and PCs than Japan, while South Korea outsells Japan in most TV and smartphone markets.
Leading business and economic figures like Mr. Fukukawa are demanding solutions and deep reforms. “Many of Japan’s leading enterprises that once dominated the global market are now suffering huge losses and lagging in performance behind competitors in South Korea, China and Taiwan,” Mr. Fukukawa wrote in the Japan Times in December.
Japan’s spending on R&D remains high but South Korea now invests more in R&D as a per cent of GDP, Mr. Fukukawa noted. And though Japan still makes the most patent applications in the world, these are in steady decline. Applications from China, by contrast, have increased exponentially in recent years. China will inevitably lead Japan in terms of this innovation indicator, Mr. Fukukawa wrote.
Others argue that Japan’s declining competitiveness is less a lack of innovation than of leadership. “Innovation by itself, though mesmerizing, is worthless without productization. And productization is worthless without monetization,” says James Santagata, managing director of SiliconEdge, a Tokyo-based leadership development consultancy working with startups in Japan and the United States.
Mr. Santagata describes a number of pioneering innovations emerging from Japanese corporate R&D, such as Sony’s Location Free TV. “Yet due to corporate constraints on monetization of these innovations for fear of rocking the boat, or cannibalizing some products, they allow scrappy firms like Sling Media [U.S. producer of the Slingbox Internet TV interface] to come from behind that gobble up the market,” he says.