Oral-History:Kazuhiko Nishi

About Kazuhiko Nishi

Kazuhiko Nishi’s oral history offers a glimpse into the mind of a true business entrepreneur, visionary, and management strategist. Dropping out of Waseda University after only one year, Nishi started his own company, ASCII Publishing Corporation in 1977 (now ASCII Corporation). With only minimal capital and an unrelenting drive, Nishi, who had founded the company to publish his articles that kept getting rejected from other publications, developed a corporate structure that became a model Japanese-style intermediary business, specializing in horizontal diversification. As a market-driven business that remained small in management style over the years, Nishi diversified his product investment with an unmatched flexibility, from publishing to software, to technical design, to semiconductors. Nishi describes his (and ASCII’s) management, employee, product, and marketing style as that of “synergy”: the understanding of diversified elements that supplement one another to create a strategy of working together.

In answering Aspray’s questions about “how to successfully manage a technological business,” Nishi’s oral history provides unique answers. Hailing from an unorthodox, yet still technical background, Nishi proffers insight from a management-minimal and product-diversified-heavy company. Additionally, though not covered in-depth in this oral history, his relationship with Microsoft and Bill Gates in the late 1970’s and early 1980’s, denotes the unique and important position that Nishi held in the growing software and pc industries. His corporate strategies focus on a delegated structural style, paired with a fiscal and budgetary autocracy, and a clear goal that technology is the tool, not the objective. Equally, his straightforward assessment of employee skills, the near retirement-age pool, and the practicalities of continuing education, demonstrate how Nishi’s mandates for ASCII have allowed the company to succeed, or rather survive (in his words), in the fast-paced technology market. ASCII Corporation now constitutes the largest media empire in the Pacific region, and Kazuhiko Nishi, the once college dropout, now teaches and lectures as a professor.

About the Interview

KAZUHIKO NISHI: An Interview Conducted by William Aspray, Center for the History of Electrical Engineering, February 16, 1993

Interview #146: Engineers as Executives Oral History Project, sponsored by Center for the History of Electrical Engineering, The Institute of Electrical and Electronics Engineers, Inc. and Rutgers, The State University of New Jersey

Copyright Statement

This manuscript is being made available for research purposes only. All literary rights in the manuscript, including the right to publish, are reserved to the IEEE History Center. No part of the manuscript may be quoted for publication without the written permission of the Director of IEEE History Center.

Request for permission to quote for publication should be addressed to the IEEE History Center Oral History Program, Rutgers - the State University, 39 Union Street, New Brunswick, NJ 08901-8538 USA. It should include identification of the specific passages to be quoted, anticipated use of the passages, and identification of the user.

It is recommended that this oral history be cited as follows:

Kazuhio Nishi, an oral history conducted in 1993 by William Aspray, IEEE History Center, Rutgers University, New Brunswick, NJ, USA.

Interview

Interview: Kazuhio Nishi Interviewer: William Aspray Place: Tokyo, Japan Date: February 16, 1993

Management Strategies

Aspray:

Could you tell me in what ways a technical background is important in managing the kind of business that you run here? How important is it to managing software, semiconductor design and publishing?

Nishi:

Technology skills?

Aspray:

What kinds of skills are important to senior management?

Nishi:

The basics of electronics are important. If a person is in software, he has to understand the basics about software engineering. If a person is in semiconductors, he has to understand all the technologies concerning engineering, and also physics. But most important, I think one needs a general perspective of where our target is ultimately located in the electronics field. And then an ability to create a road map from where we are now to where we want to be tomorrow. We are proceeding in fields where there is no road. So what is important is the talent to write the road on the map where there is no road.

Aspray:

Now that the management operations are getting to be fairly large to what degree do you leave technical decisions to others in the company?

Nishi:

Basically, we sit down with the management and agree on a target or a budget. Once we've agreed, the rest is just their responsibility. Once every two weeks, we sit down and have a review meeting. But at many review meetings we just listen to the people and point out if there are some mistakes being made, and we say, "This is a mistake."

Aspray:

Are there major technical decisions to be made from time to time, not of the character of: "should we enter this market or not?" But rather of the character: "do we use this tool rather than that tool? Do we think that this technology is too hard to develop at this time?"

Nishi:

That's all up to the division management.

Aspray:

I see.

Nishi:

My basic methodology of running the business is to make fifty people comprising one group or one profit center run independently.

Aspray:

I see. So, in a sense, there is decentralization in your operation.

Nishi:

Yes. I have more emphasis on profit and sales. Telling the people the best way to make the best profit is creative. You need originality for that.

Aspray:

I see.

Nishi:

We tell our people not to be biased towards the technology. Technology is a tool; it is not our objective. Our objective is a product to sell.

Basic Research

Aspray:

Does that mean that you don't engage in so-called "basic research" within the company?

Nishi:

No. Not at all.

Aspray:

Not at all. I can understand that in the case of your publishing operations and in the case of your software, perhaps. It's a little less clear to me what the situation is in your semiconductor design.

Nishi:

Yes. We have subsidiaries and joint ventures who receive special government funds for research and development. We use such public money for pure research. Then we share what we learn with other people.

Aspray:

With the other partners?

Nishi:

Yes.

Aspray:

What is the advantage of this to your company?

Nishi:

These pure research expenditures are not short-term business outlays. They are long term investments. From common sense of ordinary business activities, it doesn't pay off.

Aspray:

I can see it from that direction, but I was wondering whether it was even a good thing to be in at all. I mean, you're looking to the short term with your business strategy, primarily.

Nishi:

Primarily, yes.

Aspray:

Why enter into these kinds of long-term operations?

Nishi:

We have discovered that if, from the center, you focus on short-term, fifty people in a group, twenty to thirty million dollars per group, profitable businesses, your operation does not grow big. It's very hard to grow big. Creating everything from scratch really builds up unique technologies and unique products. It is the only way to build up a 100 to 200 million-dollar business and make a good profit.

Relation to Other Japanese Companies

Aspray:

I noticed from the materials I've reviewed that you have business relations with some very large electronics firms in Japan, such as NEC and Fujitsu. Can you tell me something about the nature of those relationships?

Nishi:

We have lot of joint development, and we have invested a lot in U.S. start-up companies to produce specific products that are very hard to find in Japan. In America there is a lot of engineers' mobility. Because of this mobility, there is lot of cross-fertilization. In Japan this is impossible. These synergies of technological people make up for the development time lag. By investing in this company, and by making these products available to large companies such as NEC or Fujitsu, who have never thought about the kind of product we are engaged in, we develop successful joint operations. We are somewhat of an intermediary between U.S. ventures and these large Japanese companies.

Aspray:

I see.

Nishi:

Through these transitions and by serving as an intermediary and seeing how new technology is being developed, we have been accumulating the methodology of how we are going to get this kind of development to happen inside the company. That's what we have been doing.

Aspray:

Besides basic research, there are at least two ways that you might gain from a company like Fujitsu or NEC. One of them is that you could use their large manufacturing capacities. If you do some semiconductor designs, they can do the manufacturing. Is that the case with some of your work?

Nishi:

Sometimes we do the technical invention, but the product is usually designed in America. And we invest in that company. Then we retain Japanese distribution rights to anything being sold in Japan that is being manufactured by a company like Fujitsu or NEC. Our partner buys in America. We buy back from them and sell to Japan. So, the partners and myself are most happy with that kind of arrangement. It has been productive.

Aspray:

I don't know the Japanese industry very well, but my recollection is that NEC is the largest personal computer supplier in the country. Do you take advantage of that in developing software products?

Nishi:

Yes, a lot. Because we understand their market, and they provide us with whatever marketing information is necessary. So we have easy access to the market because we have no competing hardware businesses with them.

Aspray:

That's something that they require in their business partner, I assume?

Nishi:

Yes.

Aspray:

My guess is that a big traditional company, such as NEC, doesn't understand the personal computer business nearly so well as a small market-driven company like yours. Is that a fair statement?

Nishi:

No. NEC understands their market, I think. The market is changing very rapidly. So understanding the market is one thing. But the more important thing is having a vision about what is going to happen. With that vision and with what is happening in the market, you have to come up with the next plan of action. With that vision, the company should create an appropriate road map. That's more important. For the last ten to fifteen years I have seen everybody who said "I have a vision," or, "I have a great understanding of the market," all fail. Many people make mistakes. The mistakes always happen at the prime of success.

Diversification and Synergy

Aspray:

Your company does a variety of different things: publishing, semiconductors, and software. Could you tell me how these relate to one another? That will give me an impression of your conception of how you put a company together.

Nishi:

First of all, I started the company by publishing magazines. Because I didn't have any money when we started, this was the only thing I could do. Also, no computers existed on the market. So I wrote articles about what kind of computer would come. It was really a type of propaganda. Then we published books, namely translations of American technology books. Then we published software — a lot of software. We became an agent of Microsoft and imported Microsoft software. Then I discovered what set the boundaries for software. The ceiling is set by semiconductors. So if you can do something creative with semiconductors, we can make the best use of them by combining them with the right software. That's so-called synergy. So we are getting into the semiconductor business.

Aspray:

I see.

Nishi:

We are also in the telecomputing business.

Aspray:

You mean services?

Nishi:

No. We sell different types of computer databases. We feel that's a style of electronic publishing. We are also in the movie distribution business.

Aspray:

That seems far removed from these other companies and products.

Nishi:

The reason why I wanted to be in this business is to be involved in movie production. Today people watch movies in just one way. You turn on the "play" button, and just watch for 150 minutes. When digital audio/digital-video is available on computers, somebody is going to think about making interactive movies. I would like to be in that business. So we want to be engaged in the movie industry.

Aspray:

I understand the rationale very well, but that seems to me to have a rather long-term pay-off.

Nishi:

Yes. That's the reason why we just want to pay off running the businesses by distributing movies and building up relationships with other producers or other studios.

Aspray:

I see.

Nishi:

Publishing, software, semiconductors, movies, and telecomputing comprise our business portfolio. There's enough reason in my heart to justify why we got in to those markets. But we don't disclose our motives. The more people hear that, the more they will ask: "Is he crazy?" But then, nobody really touches this business. Many of the businesses we are in don't produce money. If it breaks even, then the business continues.

Aspray:

It seems to me that to be in such a wide range of operations, you need specialists that have lots of very different kinds of technical skills.

Nishi:

Yes.

Aspray:

What do you do to get that kind of synergy? It's not likely you'll have someone with both the skills of a software designer and a semiconductor designer. How do you manage to bring those together?

Nishi:

We haven't come to the point where there is synergy — yet. But what we have now are eight or ten independent groups, independent business units, running independently and each making a profit. So our short-term goal is to have somebody conduct the synergy.

Software Development

Aspray:

Yes. In the 1970s and 1980s, there was a great deal of talk about programming methodologies or various kinds of design methodologies for software. Do you adhere to any of those in trying to produce software effectively?

Nishi:

Yes. Methodology is one thing. But it doesn't really make two-fold or three-fold improvement. Whereas personal differences make improvement. So our approach is to put the better programmer in charge.

Aspray:

When you're writing software, what is the typical size of a software writing unit? How many people would be involved?

Nishi:

Five.

Aspray:

So it's a small enough group that the individual really matters.

Nishi:

Yes. Our main product is our computer software. It is not large software. It does not involve tens of thousands of lines of code.

Aspray:

I would guess that concerns about reliability and quality are not as important as they are in some big databases for use on mainframes, as in the past.

Nishi:

No. We feel once it is known that I have developed a product, then such concerns are part of its maintenance costs. It's like receiving telephone calls about what's wrong with this product. That is an enormous task. So we have an inter-company quality assurance group, and they check the product in advance. They operate the finished product like a customer and see that it really works. Without the approval of that group, a product division cannot launch a product.

Aspray:

Do you distribute most of your products directly so that you have personal information from your users?

Nishi:

We distribute our products through multiple channels. Books are distributed through bookstores. Computer games are sold through toy stores. Personal computer software is routed through personal computer stores, value added resales, and manufacturers. They sell it together with hardware. Semiconductor chips are distributed through manufacturers. We deal directly and do things by telecomputing. We use credit cards. We have multiple channels of distribution.

Aspray:

To what degree do, say, your software people need to know about the market and the users' needs? When you are looking to hire a new set of programmers, are you looking for someone who has very strong programming skills, or someone who has a sense for a particular user community, or both? What is it that you are searching for?

Nishi:

We look for engineers with different strengths. There are different kinds. We seek somebody who has extraordinary talent in one category, and we forgive that person his weaknesses in other categories. Large companies in Japan set minimum requirements for engineers. They have to have at least 60 points in every category. Some require 100 marks in all areas. As I say, I forgive weaknesses in some areas as long as the engineer scores 90 or 100 in a particular field. I would forgive you even if you scored ten or even five or zero. That's fine with me. So many of the people we hire have dropped out from large companies.

Aspray:

That's interesting. I don't know what the situation is, but I thought I'd understood that these days it's difficult finding very strong talent in the software business in Japan.

Nishi:

That's correct.

Engineer Recruitment & Education

Aspray:

You are saying that you have the opportunity to provide a different kind of work environment to these engineers — one that appreciates different sets of skills. So you can attract people who may be very good for your company, but might not be good in a more traditional company?

Nishi:

The way we recruit the good types of people is this: We hire a lot of part-time employees and university kids. After a few years when we have invested enough time with that person to understand him or her, if we feel this is a good person to work with, we hire that person. It's mainly not our first-class graduates. It is mainly a person who has already established some different relationship with us in part-time work or a summer job.

Aspray:

It's not an old enough company to have had to face this too very much, but what kinds of continuing education do you feel that you need to give to your employees? This is such a rapidly changing field. Do you have formal programs for continuing education?

Nishi:

Continuing education, we don't have. We don't have any formal programs. But once a year we do a survey of individual preferences. We find out the place where you want to work; if you would like a different kind of task to perform; if you want to switch jobs, and what fields interest you. Based on that information, we make job rotations.

Aspray:

Do you find there is much value in formal university courses or short courses? If one of your employees said, "I have a strength in this area but I really need to learn, say, C++, can I go off to take a course in this?"

Nishi:

They don't have to go to college to learn C++. But there are some particular subjects that require college, e.g. business school for general administration and management. Otherwise, they can learn on the job, or off the job by themselves.

Aspray:

Do you send off some of your employees to get special business and management training?

Nishi:

We have sent our engineers to Ph.D. programs.

Aspray:

Do they continue to work for the company?

Nishi:

No, they've just gone.

Aspray:

They're just gone for a period of time?

Nishi:

One person was gone for almost seven years and just got a Ph.D.

Aspray:

I see.

Nishi:

He is now gone.

Aspray:

So it wasn't a pay-back to your company. That's a risk.

Nishi:

We have friends in the industry who understand us. In that sense we understood that risk from the beginning. I mean, his specialty was not what ASCII needs today. So with a consensus, we let him go.

Aspray:

I see. Why is it you think that it's valuable to send some of your engineers off for this kind of training? What do they learn from a formal program in business?

Nishi:

Sending one person to the Ph.D. program and having that person come back to the company once in a while and talk about what he's really studying in his Ph.D. research that is different from the operations of the company. Everybody has a clear understanding about the differences in getting their paper written and making a product.

Product Lifespans

Aspray:

What is the typical lifetime for one of your products?

Nishi:

There are many different kinds of products. The shortest life time of a product is three months.

Aspray:

What would be an example of that?

Nishi:

Software packages. An entertainment games software package that doesn't sell. If it's going to be a big seller, it lasts two to three years. In the case of semiconductors, if the same product is selling well, by changing here and there and updating it's going to last three, four, five years.

Aspray:

But I take it that even your longest-term products are fairly short by general business standards, not computer business, but all business standards.

Nishi:

Yes. Somebody who is selling gasoline, yes. Exactly. He's selling the same product for over a hundred years.

Aspray:

Right. So that means that you must be putting most of your future development into new products rather than improvements to or enhancements of existing products?

Nishi:

By enhancing existing products and changing the division on the product, the product changes as well. It is like publishing books or magazines. Changing the different divisions every month varies the product. Magazines are not really a single month product. A magazine is a continuation. The product is a subscription.

Aspray:

Yes. In fact, there's quite a security once you have a readership built up. You can maintain that if you do your job reasonably.

Nishi:

Yes. I think so.

Aspray:

It seems to me that may be the safest part of your business in some ways.

Nishi:

Yes, it's the most secure income.

Aspray:

Nonetheless, there's a great deal of fluctuation in your line of business. Change comes more rapidly than in most traditional businesses. How do you manage that? What kinds of rules do you work by to live in this fast-paced environment? Are there special lessons you can share with us?

Nishi:

We just keep going.

Aspray:

Just keep going?

Nishi:

Well, we have never touched selling gasoline or selling shoestrings.

Growth, Survival and Success

Aspray:

Yes, I understand. But you're unusually successful in a field where there are many, many failures of small companies. You've grown, you have dynamic products, and so on. So you must be doing something right that many people don't do right.

Nishi:

Well, my recognition of success is a little different from your view. We think we're not so successful. We think we have just survived. Since this business has a fairly large profit margin, it was possible to manage the company without careful management. So big money comes in, and you just grab the money, and spend it. The company has kept going on that basis. It's like a mom and pop operation. Because of the profitability, because of the size of the market, we have been managing the company on that basis. In that sense we're lucky. But my premonition is that since the market is not growing that fast our management strategy cannot last long.

Aspray:

I see. So the flag that change has to occur is not because you've grown to a certain size that you now have to manage the size of your operations. When you're a 50-person shop, it's a lot easier than when you're a thousand-person shop. Rather it's that the market has stopped growing at the very fast pace.

Nishi:

Yes. And maybe we have learned our management style of business by small groups without really digging deep. Expanding the business from magazines to books, software, business software, semiconductors, telecomputing, and movies continued our tradition that business had to be managed in small groups. The key then is who decides which directions to go. That, plus deciding what size the company should be. If all our sales and subsidiaries are going to be over $500 million, then we need fairly extensive managerial attention.

My experience is that budget is a key in giving people the feeling of achievement in business and engineering. We'll let this 50-people group write the budget themselves. Corporate management, that group made up of general managers and division managers, sits down and really discusses the strategies and decides on the road map and the budget. Once most of them agree to that budget or road map, they delegate the responsibility to operate to the smaller group and let the corporate manager keep them on track. As long as they clear the goals — such as quarterly goals and monthly goals — then we don't really touch them. Delegating authority and achieving goals are really important.

Aspray:

Are you building up some sort of central set of business skills that can be used as a resource for all of these different divisions?

Nishi:

Yes.

Aspray:

What are you consolidating into that business?

Nishi:

One, finance. Two, general administration procurement. Third is personnel achievement in management. Fourth is legal expertise: Understanding the contract, and the patent. We are also developing public relations and corporate information systems where each different profit and loss is all consolidated electronically on the same database.

Aspray:

It's into these kinds of positions that you want particularly well-trained, hard-nosed business people?

Nishi:

Yes. We feel that only somebody who has experience in a large company, or a bank or in a credit department, can be applicable for these responsibilities.

Aspray:

Is it hard attracting people with those kinds of skills to a company that has your profile?

Nishi:

Very hard.

Aspray:

What do you do to try to resolve that problem?

Nishi:

We carefully look around for the person approaching retirement-perhaps five years before retirement. So sixty years old is ordinarily the retirement age. So we approach people at the age of fifty years old when the company offers him a ten-year retirement package. We match this bonus, and then we offer to pick up the person. At fifty years old a person can work fifteen more years. They don't want to retire at the age of sixty. They want to work up to sixty-five or seventy. We go to them and say that if you join ASCII now, you can work fifteen or twenty more years. So these people come to us with their skills. As a result, our managers and executives at corporate headquarters include an ex-CPA, an ex-statistician, a former MITI official, and so on. We are requesting the Industrial Bank of Japan to send us three or four more people.

Aspray:

One problem that growing start-up companies face is that people don't grow as fast as the company does. How do you deal with that problem?

Nishi:

This has not been a very big problem. However, some of our very senior managers, many of whom started with me from scratch, are facing their personal boundaries. Some cannot grow up as the organization grows. We need to give that person an escape pass. We cannot give him more responsibility because he feels that he is beyond his capability already. We give him a more relaxed job, like a place in some subsidiary. But to the really talented young people, we give even more responsibility and accelerate promotions.

Aspray:

They are two back sides of the same issue. Have you moved some people, some talented young people, rapidly through the company?

Nishi:

Yes, any people who joined the company at the age of 22, we treat them very equally for the first five years. Then there is going to be a difference. The Japanese really care about the position of their classmates.

Aspray:

It seems that that's a very sensitive issue here.

Nishi:

It is a very sensitive issue.

Aspray:

One wouldn't face such an issue in the United States. Yet within the rigidity of the Japanese work system, you are able to accommodate your needs? You are able to move people at different rates?

Nishi:

Two issues are key: responsibilities and salary. By keeping salaries the same, we give the talented people more responsibility. After this person achieves results, then we change their salary.

Aspray:

Are salary and benefits important in retaining good talent within your company?

Nishi:

Yes. We always say: "Flower in both hands is impossible. Flower in only one hand." If you give responsibility and salary at one time, both at the same time, the person feels that they become king. That is going to ruin the person's life. So we really have to be careful about giving responsibility before raising the salary.

International and Japanese Markets

Aspray:

I notice that you have some subsidiaries in several countries. What is your strategy for growing beyond the boundaries of Japan?

Nishi:

We have some operations in the United States. We invest in companies. In some of the companies we own the majority, in some we own just a few percent. For the time being our primary business focus is Japan.

Aspray:

I notice your publications are only in Japanese at the moment. I don't know the situation with your software products, but do you feel that you need access to more than a Japanese market to recover your costs to get the appropriate kinds of earnings on them?

Nishi:

My business pays off within Japan.

Aspray:

Within Japan?

Nishi:

Anything overseas is just extra plans. My basic belief which has evolved is that the Japanese market is one tenth of the worldwide market. For example, Microsoft is a large-scale company. It is about a $4 billion company. Our company is about $400-500 million. Its value is one tenth of Microsoft. So if we go after the worldwide software market, then we have to be ten times larger. But the issue is, can we manage such a worldwide organization? That's a different issue. I choose to diversify horizontally in Japan and deal exclusively in the Japanese market. Microsoft is very weak in publishing. They publish some books, but that's really it. So I see in my businesses, two categories. One is content-oriented businesses. Publishing, entertainment software, audio-video software, telecomputing services are content businesses. The other is functionally oriented business that included database software and semiconductors. We have to go on worrying about our semiconductors because our equipment is all original technology. But the software business is America; American software companies are five to ten years in advance of Japanese businesses. So it's tough to compete over there. Publishing is a very culturally oriented domestic business. So there is no point in expanding to America in that area.

Aspray:

That was to be my next question. In what ways are the kinds of businesses you do international or national? Would a product sell just as well in England or the United States if it sells in Japan?

Nishi:

In the publishing business, the target is Japan. Entertainment software, we think we can sell worldwide. Business software, we sell only in Japan. Semiconductors are a worldwide business.

Patents

Aspray:

You mentioned in one of your earlier answers the issue of patents. What role do they play in a company like this?

Nishi:

Patents are really key for protecting us against competitors producing the same product. It really protects the lead position of the product. We feel that protecting our lead is one of our key strategies in semiconductors, but not in software.

Lessons from Experience

Aspray:

You have apparently grown to a position where you're spending a great deal of your time on management issues rather than in publishing decisions.

Nishi:

Yes.

Aspray:

Can you tell me about your adjustments to this? What in your formal education, and what in your experience, was useful for you to do this? What lessons have you learned over time? What mistakes have you learned from? What did you do right from the beginning?

Nishi:

Basically, I didn't go to college. I only went there one year. At the end of that first year I started my company, ASCII. So I had no college education. I learned business on the job, starting the company from scratch. At that time my partner was the president, and I was the executive vice president running product development. I became president six years ago, and then we went public to get money. We invested the money. Our continuous growth can be attributed to the growth in the market. So even without management we have come to this point.

My premonition is that we are at the point where we can get organized. If we can get organized, we can be a billion-dollar company. If we get organized, we are going to win. It's just a matter of time. That's my basic understanding. So I am making an effort to systematize this 50-people business organization, including research and development. That's one thing.

The other thing is how I spend my time. I compartmentalize my time. One part is spent on management in businesses especially. Another one third of my time is for my personal research and development, where I do my own programs by myself. Plus I teach at the university.

Aspray:

What do you teach?

Nishi:

I teach things for the media, systems engineering. I teach two hours a week. But because I am busy, I'm requesting four hours every two weeks. Then I can travel. I have my own staff for my personal research and development. It's like brain athletics.

Aspray:

I'm sorry?

Nishi:

Brain athletics. Like you train by running in tennis. Your brain has to really do something like that. One, because management is something that you don't really do. You just say "yes" or "no." You just show the road map. For example, when I am working as a manager, I have only a red pen. When I am working in my personal research and development, I have no red pens, just a pencil for drawing the pictures. One third is my personal life, which is my family — my parents. I used to bundle my personal development together with my personal life. At that time I was very unproductive. By having stronger mental concentration, you can improve the productivity by two times or even three times easily. Then using the rest of that time for something different. We have discovered it is very important for the balanced life.

Raising Capital

Aspray:

I can see that. Has capital been a problem for the company?

Nishi:

It was not a problem in the past; but today it is a problem. Today, a lot of Japanese companies are suffering from inability to get the money from the bank.

Aspray:

What is the way of solving that problem? What are your options?

Nishi:

The only option is making the product that will create a lot of cash flow and cut down on expenses. Cut expenses to the minimum, increase the cash flow to the maximum. Its a very traditional style of arrangement.

Aspray:

Is it possible, though, for example, to take in a bank as a partner? I know one particular software company that's about your size that has recently had financial problems and has decided that the way to handle it is to take in a large bank as a partner, give some seats on their board, and so on.

Nishi:

Yes, that is what we do. We are asking the Industrial Bank of Japan to send management to sit on a board seat, and give us a loan, some credit lines. We only invite long-term investment banks, not merchant banks. Ordinary merchant banks cannot cope with the problem we are facing.

Distinctiveness of ASCII Corp.

Aspray:

What would you say differentiates your company from other companies in your business areas in Japan? You have various business areas, and so you may have different competitors in each of them.

Nishi:

Yes. In every category our size differentiates us. We are the largest in computer publishing, we are the largest software company in total volume. In semiconductors we are very special. No one in the software industry touches semiconductors. So we maintain our unique positions. Our feeling is that our competitors are not other companies. Our competitor is ourselves. If you don't touch an untouched area, that's a mistake.

Further Management Lessons

Aspray:

What other kinds of management lessons or management philosophy can you tell me about for your company? We're looking at various people's management philosophies and trying to understand how to manage a technological business better. What other lessons can we draw from your company that we haven't talked about already?

Nishi:

I think a key is a budget system. When we are writing the budget for the next year, we assess the talent and the capacity of each group, and then agree on the sales and the profit goals. That's really the key. If you impose goals that are too high, then the manager is going to end up writing an unrealistic budget and they sort of destroy themselves. If the manager sets easily achievable goals, the worker doesn't really work. And if you look at other groups of the same size making more profit, more sales, then you look foolish. So I typically assess the next year's goal at ten percent higher than last year.

I then give that division appropriate financial, technical, personnel, and sales support. We incorporate lots of work stations, but connect them in a local network. Ascii is a united company, a united division. That is my concept. I have learned that if you are going to diversify horizontally, the key is to create a system that will react in real time to the changes of the market. You cannot make every decision by yourself. You really have to delegate. But what are you going to delegate? My style is delegating execution, but I don't delegate budget planning. That's consensus between that general manager and myself. As long as I don't agree with a division's budget goals, that division doesn't start business. If the employee is not doing good business for three or four years, then I say, change him because he violated the promise for three years. That's the system.

Long-term investment — a five- or six-year development project — is another issue. We create a separate research field and invest the money and run it differently. The key is we can make money not really doing high-tech stuff. The best way to make money is to do the low-tech stuff. We make a better profit margin by selling not books, but magazines. So the company should be divided into one part, the division generator and the other should be development.

Personal and Company History

Aspray:

I was wondering if you could briefly tell me about your personal history. I know that American audiences, at least, don't know much about you. You went to Waseda University?

Nishi:

Yes, that's right.

Aspray:

What were you planning on doing? What were you studying there? What were your career plans?

Nishi:

I wanted to study robotics. Then the professor assigned me to a robot-computing computer. So my interest is in numerical control.

Aspray:

Why did you decide not to pursue that direction?

Nishi:

There are a lot of boring undergraduate classes. Instead of going to these classes, it's more fun to run the business.

Aspray:

How did the business get started in the first place?

Nishi:

I wrote a lot of articles on computers. I submitted these articles to a lot of magazines, and a lot of magazine publishers rejected them. So I published them myself. That's the body of the editions for our magazines.

Aspray:

I see. And how did you make the decision to become a company? I mean, one can do this as a hobby for a short period of time. At some point it has to become a business decision.

Nishi:

I always wanted to be organized. So we assigned a person the responsibility of running it, assigned one person the responsibility of sales, and one person the responsibility of editing — that's organizational diversification.

Aspray:

It's always hard to start a new company.

Nishi:

It was not that hard.

Aspray:

It wasn't that hard? Why was that?

Nishi:

The reason is quite easy. There was no personal computing industry sixteen years ago. We were the first maker of computer publications. We had no competition.

Aspray:

But you had to find capital at least, you had to learn about doing business, and so on.

Nishi:

I accrued the key money, which was $30,000, from my part time job. I went to my father to borrow $300,000.

Aspray:

You alluded before to having a partner. What was the division of labor? What were your responsibilities, and what were his?

Nishi:

I had two other partners. They left almost a year and a half ago. One was the chairman, and one was assistant vice president. The chairman used to be president. He was running the business since I was running the product creation. The assistant vice president was in charge of publishing. He was running the publications group.

Aspray:

So your publications business began to expand over the first few years of the company's operation? How did you decide to move beyond publications and get into other lines of business?

Nishi:

I went forward with the publishing business.

Aspray:

What were your first moves outside of publishing?

Nishi:

Software. After software was semiconductors. Then telecomputing. Then audio-video — movies.

Microsoft, Radio Shack, Nintendo

Aspray:

I understand that you had a close business relationship with Microsoft.

Nishi:

Yes.

Aspray:

Could you tell me something about that?

Nishi:

From '77 to '85 we were just representing Asian Microsoft, selling their software before it went public in the United States.

Aspray:

That terminated at some point in 1986?

Nishi:

1985.

Aspray:

Why was that?

Nishi:

They wanted to start their own Japanese operation.

Aspray:

So they wanted to control?

Nishi:

They didn't like us being in a lot of other different businesses. They want a company that just did software.

Aspray:

I have read that you were involved in one of the early laptop processors.

Nishi:

Yes, the Modem 100.

Aspray:

Can you tell me the history of that? How did that come about?

Nishi:

We created the product together with the gentleman in Radio Shack who later became president of Microsoft, John Sherry. They really refined the product.

Aspray:

There was no such product on the market at that time?

Nishi:

No. It was 1982. Ten years ago.

Aspray:

Can you tell me about your relations with Radio Shack? How did this come about? Who had the idea for it?

Nishi:

We designed a product together with a company called Kyocera. It was one of the top companies in ceramics. We created our product together with our chairman, Kozumo Morii. His engineers worked hard to produce a product and went to Radio Shack for possible distribution.

Aspray:

Is it because they had such a strong distribution network?

Nishi:

Yes.

Aspray:

Did you distribute the product in Japan?

Nishi:

No. Japan was being distributed by NEC, and Europe was distributed by Olivetti. It was a very successful product.

Aspray:

Did you have a personal involvement in the product design?

Nishi:

Yes.

Aspray:

Looking back over the history of the company, what would you say were the few key events?

Nishi:

There are two key events: Starting the company and the present. My feeling is that you always focus on now. An accumulation of "now" is really what you are today. The trees in Southeast Asia, because of the temperatures, are always very flat. They have no rings because the temperature's always flat. In Japan it's hot in summer, cold in winter so the trees have rings. So the company itself has a lot of good times and bad times. The accumulation of good times and bad times made the company very strong. In that sense the first step was to change its relationship with Microsoft. The second was the departure of the ex-partners. The third critical time is probably today. We need to decide how the company's going to get financed for the next few years to come.

Aspray:

What do you look back on as your most successful products? It may not be that they were most successful financially. They may have helped the company move in a direction you wanted it to move.

Nishi:

Publishing magazines, and our joystick, we developed for a whole family of computers.

Aspray:

I see. It was in the development of your company?

Nishi:

Yes.

Aspray:

I didn't know that ASCII developed the joystick.

Nishi:

Nintendo's joystick is our product. It has sold almost 2 million units in the United States for Nintendo. So the Nintendo joystick is ours. We invested the profit into the company called Chips & Technologies, and the company called Ephonics, a relational database. We had very high visibility working with Microsoft, but we really didn't make a big profit out of that business. They made a lot of profit. So it was very lucky that we had experience of getting into the software business through Microsoft activities. Our own software is really the software creating a lot of profit.

History of Media Development

Aspray:

Very good. Are there any other things that you'd like to say to me today?

Nishi:

Just about history.

Aspray:

Yes. Go ahead.

Nishi:

I like to read, I like history. My expertise in college teaching is media systems engineering. The media system's definition is not just a computer, but telephone, radio, television, cassette tape, records, video disk, video cassette, that kind of packaged media and communications — broadcasting media — as I explained.

Aspray:

The way that it's defined by the MIT Media Laboratory?

Nishi:

In the sense that media is a pipe to convey the content, and we have a big interest in that. But when we look back in the history of this media development, which is my interest, many people ask if we have done this, if we had lots of luck. If the product has been finished on time. But I think that's wrong. We have to go back and review the history by asking "why?" You need to really look back at the history and find out why certain decisions worked. In that sense we find out the true reason, the true factors, for how things have happened. Then we should apply "if" for the future. What if we do this? What if we do that? Because we do a lot more future stuff, my personal inclination is to go back and study the history. I read many history books about how the personal computer was born and similar topics. But in many history books, about 90% of the description is wrong. It doesn't describe the truth. People only write about the bright part of the history.

Aspray:

What kinds of things do you think are being left out?

Nishi:

The dark part of the history is missing. Mistakes should be included. I personally study the life of Napoleon. I have an original collection of his drawings and writings translated into Japanese. They are very interesting. A lot of Napoleon's biographies contradict each other. Historically, it's fine. But the funny thing is that if you read Napoleon's very close subordinate's diaries, or subordinate's books, writings about Napoleon are all consistent. I am always wondering when reading the history books what is really the truth and what is really the black part.

I started reading my old friend [Bill] Gates's books. I stopped reading after a few pages, because that book is just full of the bright part. Of course many historians have to assess what is really the truth because of these books. It also takes about a hundred years or two hundred years after the death of an important person to really assess that person's actions. I don't really intend to be the person who puts his name and future on the whole of something. I just want to see the history and let readers know what is really the truth. Also I'd like to make my personal assessment about why so-and-so happened and use that information to help me make the best decisions for my life and for my company's life — for my own activities.

I have a huge, ten-page poster covering the past hundred years, which was drawn by Raoul Dufy, of the "Spirit of Electronics." It is my favorite poster and painting. It contains one hundred inventors of the last one hundred years. It was written almost fifty years ago, so it covers a period up to 150 years ago. By looking back...I discovered one very interesting thing: engineering and technology are really magic. Engineering technology is the methodology of making the impossible possible. It hasn't changed for almost a thousand years. I think it's probably human instinct that we create something new. That's the emotion, or the instinct, that I really would like to make much of. I think that's probably a very important part of the energy of this company.

Aspray:

Today I haven't tried to ask any historical questions. It would be possible to try to understand the development and reception of the laptop or the publishing business and such. Some day I think somebody should do that. But I think you're right, that we can't get the perspective yet. We're too close to things.

Nishi:

Just simply repeating "what" for the past is not an enjoyable thing. We developed the laptop first. Now we have the best-selling laptop. I have done some important things. I was a member of the MS-DOS development team with IBM. I developed the laptop. But your next steps start when you deny what you have done. To totally deny and destroy what you have done is the beginning of your new activities. By knowing is one thing. By practicing and exercising that is another thing. One time somebody, some newspaper or magazine, gave me an award for the man of the year. I received that, and then came back with that award and put it into the shredder. [Chuckling]

Aspray:

I see.

Nishi:

This is a secret. It was too rude for them.

Aspray:

Of course.

Nishi:

I was feeling very pained about doing that. I tested my thesis as a practice by doing that. I have successfully diminished my feeling of arrogance. That's really arrogant and senseless. These are two dangers when I say I'm a big shot and that the company is Number 1. That kind of feeling is very dangerous. My opinion about new technologies or innovations centers around the quick action, but also experiencing a business vision and setting it into policy. This is very important. That's my opinion, and I always want to be very sensitive. I always want to be active. That's my goal.