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Innovation behind the scenes

Article - August 8, 2017

Real innovation might be where you least expect it

Traditional technology pioneer Japan has faced increasingly stiff competition from the likes of Korea, Taiwan and China in the manufacturing stakes in recent years, and in many cases, has been completely overtaken by its regional counterparts in international consumer markets as some of the country’s most well-known technology brands have experienced a dramatic fall from grace.

To the outsider looking in, it would seem that Japan has somewhat lost its characteristic innovative edge. Both the Japanese and industry experts alike, however, argue that this is far from the truth. While goods made by once-leading Japanese electronics firms such as Sharp and Toshiba may have been steadily and undeniably replaced by gadgets from their Asian competitors on department store shelves, the country’s manufacturers are indeed still ahead of the game in the technology sphere, only in areas where it’s not so obvious to customers.

Though innovation is most often discussed in a business-to-client (B2C) context, with B2C companies (who brand, package and sell the final product) earning most of the credit, many business-to-business (B2B) companies who operate in a more behind-the-scenes role – supplying vital parts and research – have also earned recognition for their pioneering work. It is in this B2B field where Japan continues to lead the way, just as it did in the B2C market during the 80s.

Where once TVs and audio equipment were the icons of Japanese innovation, it is now with the likes of semiconductor devices, bullet train design, and robotics (in other words, products that your normal, everyday consumer wouldn’t buy) in which the country has an edge over its competitors.

Being a leader in this field, B2B innovation in Japan is by no means a new thing. With Korea, Taiwan and China having assumed the role of mass electronics producers, leaving the consumer market no longer cost-effective for Japan to focus on given the competition, it’s only recently however that the B2B segment has come more to the fore.

“These nations focus on replicability and mass-production, while we focus on customization,” explains Yoshiharu Katsuta, President of consumer electronics firm, Maxell, regarding the shift. “Most technologies developed by neighboring Asian countries have already been made by Western firms, so their success resides in lessening the cost of operations. However, when it comes to constructing electronic components and structural part, the Japanese spirit of monozukuri has a great competitive advantage.”

Left: Jun Yamaguchi, President, Tokuriki Honten | Center: Hirokazu Nakajima, Chairman, Kodenshi Corp. | Right: Satoshi Sawamura, President, ROHM

It’s this deep tradition for creativity in Japan (think of the painstaking effort that goes into making sushi or origami) that has allowed Japanese firms to prosper in the technically complicated processes involved in making vital components, affirms Mr. Katsuta.

“Manufacturing the pieces that will enable the end product to be assembled requires technique, expertise and professionalism; and Japanese monozukuri offers just that. So, while we cannot compete in terms of assembling ready-to-use devices, we remain extremely competitive in technological manufacturing.”

This is a sentiment and experience shared by a whole host of Japan’s B2B manufacturing firms, the majority of whom cannot count on internationally-famous brand status among the general public, but are no less respected and recognized as important pioneers in the world of innovation.

And it’s not just in the high-tech realm in which Japan continues to blaze a trail. The reasons given for the ongoing success behind the country’s B2B manufacturing industry remain largely the same no matter who you talk to, be it an electronics firm or a gold-refining company, such as Tokuriki Honten. They all attribute Japan’s achievements in the sector to the country’s long tradition for invention.

“Our greatest competitive advantage is based on our Japanese style of manufacturing,” says Tokuriki Honten’s president, Jun Yamaguchi. “We have a long history of almost 300 years, and during this time, we have always focused our business on precious metals. We have built a reputation of creditability by selling high quality bullions and precious metals to industries and jewelers.”

“Japan has a foundation of high-quality technology,” he adds. “By focusing on capturing what the market wants or needs, we will remain strong.”

Aside from the spirit of monozukuri, Mr. Yamaguchi also highlights another ancient Japanese philosophy as a factor in the country’s manufacturing success story: omotenashi (roughly translated as hospitality, and the trait responsible for Japan’s world-renowned customer service).

“The major feature that composes Japanese manufacturing is the ability to tailor the manufacturing process to our users’ needs,” he says. “We want to make customers happy. In Japan, there is a famous phrase which is ‘The Customer is God’.”

Semiconductor manufacturer ROHM is another example of a Japanese company that embraces both philosophies.

“First, ROHM has always applied the strictest standards of quality to all of its products and processes, and we strive to improve our activities every day,” says president Satoshi Sawamura. “Second, we hold customer satisfaction as one of the key priorities for business success. In addition, one of our core characteristics is that this philosophy is not shared by our top management only, it is embraced by all employees.”

Though B2B companies by nature are not very customer facing, Omotenashi certainly applies to business clients as well. Combined with their well-established reputation for world-class innovation and technological expertise, this makes Japanese B2B firms a popular partnership choice for international manufacturers. And such partnerships are only likely to multiply going forward as collaboration between multinational innovators increases in order to confront growing global challenges, such as in health and environment issues.

“Our next step is to move towards a smart society,” says Hirokazu Nakajima, Chairman of Kodenshi Corp, on the common challenges that lies ahead. “When talking about building a smart society, the elements are first smart cities and smart transportation, then smart life, for example medical equipment and environmental care. These are elements which will make our lives more comfortable, and which we are developing.”