Oral-History:Takashi Yamanaka
About Takashi Yamanaka
In this oral history, Takashi Yamanaka, an executive with the Yokogawa companies, presents a detailed account of the Yokogawa Electric Corporation’s operational policies. The mandates encompass innovation, contributions to society, and good citizenship; the creeds stem from the company’s founder, Dr. Tamisuke Yokogawa. Yamanaka does not spend much of the interview sharing his own history and roles within the company, but rather relays an in-depth story about Yokogawa’s corporate strategies, from vision and management to joint ventures and technology policies. The result is a comprehensive overview, in combination with the other oral histories from the Yokogawa executives’ series, of the business and technology methodologies of this Japanese corporation and its subsidiaries.
About the Interview
TAKASHI YAMANAKA: An interview conducted by William Aspray, IEEE History Center, February 18, 1993
Interview # 149 for the IEEE History Center, The Institute of Electrical and Electronics Engineers, Inc. and Rutgers, The State University of New Jersey
Copyright Statement
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It is recommended that this oral history be cited as follows:
Takashi Yamanaka, an oral history conducted in 1993 by William Aspray, IEEE History Center, Rutgers University, New Brunswick, NJ, USA.
Interview
Interview: Takashi Yamanaka Interviewer: William Aspray Place: Tokyo, Japan Date: February 18, 1993
[Note: Mr. Yamanaka speaks in Japanese, and then some of his words are interpreted by Mr. Eiju Matsumoto, Curator of the Yokogawa Technology Museum Office.]
Yokagawa Background and Philosophy
Aspray:
I would like to begin by discussing why it's important to have an engineering background in order to manage a company. I'm not, however, a business-type person. I don't come out of a management school or a business school. I'm professionally a historian. So I believe that one can learn lessons from past episodes in a company's history. And I hope that in the interview today that we can talk about general issues that are important in the management of a company, but tell them in the context of past episodes in the company, particular examples from which you learned in some aspect or another.
Yamanaka:
First let me talk about the inauguration of Yokagawa. Yokogawa was established by a person named Dr. Tamisuke Yokogawa, who had been a famous architect in Japan. That was about 78 years ago. He had built many big and famous buildings here at that time, and he was the chairman of the Architecture Society. He had succeeded not only as a scholar, but also as a businessman. He was very much interested in the fundamentals of those technical things, including the electrical power supply, and the construction of the buildings in which iron frames and steel bars were used in concrete. He couldn't find any kind of instruments in Japan, so he decided it is important to learn these techniques from European countries.
Dr. Yokogawa made several companies. One of them was Yokogawa Electric Company, and it started from the domestic production of instruments. At that time almost all these instruments were imported, and we couldn't find any kind of things for production.
Aspray:
Were there other instrument companies that were competitors at the time?
Yamanaka:
At that time there weren't any competitors in Japan. Almost all of these instruments were imported from General Electric, Siemens, or Westinghouse.
Aspray:
I see.
Yamanaka:
Dr. Yokogawa employed four people and started Yokogawa Electric Meter Research Laboratory.
I must mention the importance of the philosophy of the establishment that Dr. Yokogawa made. It included three items: One is quality first. They second is the pioneering spirit. Third is the contribution to society.
Nowadays, as you know, especially after the World War, quality management and quality control are important. That is something every person can acknowledge. However, at that time, especially in the small enterprises such as the Yokogawa Electric Meter Research Laboratory, putting quality first was a very remarkable and epoch-making thing.
Aspray:
Indeed.
Yamanaka:
Dr. Yokogawa insisted not to plan only on profits, but for supply and high quality products for society.
His second philosophy was to have a pioneer spirit. He intended to produce creative instruments, which were not merely a modification of competitors' instruments, nor a modification of the imported instruments.
The third item was his contribution to society. At that time Japan was in a growth period for capitalism. The main employers at that time insisted that their employees simply be good employees. But there were few employers who educated employees to have a sense of contribution to society through supplying quality instruments.
All three philosophies remain in the vision of Yokogawa, among all employees. For example, the contribution to society means that all the employees have to be good citizens before becoming good employees. They serve the philosophy by contributing to the regional areas.
Through a recent corporate identity project, Yokogawa established two company spirits and the company gained. First, Yokogawa has to develop products concerning the fields of measurement, control, and information. Second, Yokogawa has to be a good citizen and play the role of pioneer spirit. Inaugural company philosophies developed into today's company spirit. From these company spirits, we established a company vision. We have long-term economic prospects. And after the long-term prospects, we establish medium-term prospects. In one or two years our activities show how we are making progress. On the basis of these three prospects — long, medium, and short term — we usually make some estimation of the next fiscal year and made necessary adjustments. This is the internal organ called "Executive Form." (Yamanaka explains using a company organ.) This is restricted or limited to all the Yokogawa internal, top management.
Aspray:
I see.
Yamanaka:
The corporate philosophy and the corporate vision, together with the structured business plan, make up Yokogawa's management core. This is supported by employees' expectations, top management's philosophies, and the inherited characteristics and history. I already explained the foundation and history of Yokogawa.
We have to keep this fundamental spirit of the foundation and it changes in the 'nineties. The 'nineties are very, very difficult years, and the many changes are so rapid. The company wonders if we should follow the big global change. That is our Vector 21. This is a long-term management concept which provides direction to our year 2000 market portfolio. It also outlines the aims and the duty of each segment and division. I explained these directions not only to the domestic company, but also to the global-based affiliates and factories worldwide. Yokogawa has about 7,000 employees in Japan and another 3,000 employees outside of Japan. So about 10,000 employees of the enterprise are global-based in Yokogawa. We have mapped our direction to the year 2000. The management philosophy of today is based on the Yokogawa Vector vision and also the long-term management vision. I'd like to talk about how to manage an overseas company and overseas employees.
Aspray:
Very good.
Yamanaka:
Many people think in managing overseas subsidiaries they should send the dividends from the interest of the subsidiaries to the parent company. But Yokogawa focuses on other priorities in their subsidiaries all over the world. First, we advise them to seek successful business in their countries. Do not produce only the designs by Yokogawa but also the individual designs by the people in the area, and make those products in their own countries. Then enlarge the employment. From the interest they earn in their countries, they invest in their own countries. And last, send your interest to Yokogawa.
As I mentioned before, all of our employees have to be good citizens in their respective countries before they are employees of the company. Our philosophy is based, as I mentioned before, on the inauguration spirit of the company. For instance, in the overseas subsidiaries, the necessary thing is to be acknowledged in their domestic countries and so contribute to their countries first. Their company also has to be a good citizen in the home countries.
Hewlett-Packard and General Electric
Yamanaka:
Next I have to mention the relation that we have with the Hewlett-Packard Company and also with General Electric. We established a joint venture with the Hewlett-Packard Company called the Yokogawa-Hewlett Packard Company. The Yokogawa-Hewlett Packard Company contributed not only to Yokogawa but also to Hewlett Packard. They contributed to the interests of the United States.
Before we established a joint venture with the Hewlett-Packard Company, Hewlett-Packard was the biggest manufacturer of electronic measuring instruments. However, at that time, their sales amount in Japan was only 200 million yen. However, after we established the joint venture with them, we transferred many employees to the joint venture. Now Yokogawa-Hewlett Packard has sales that amount to more than 16 billion yen. The company has the top priority for engineering and the top share of electrical measuring instruments.
Aspray:
When the joint venture was first established, what did each company hope to gain from the joint venture? And in practice, over time, did they actually gain those things they hoped to gain?
Yamanaka:
Especially at that time in Japan, Yokogawa wanted to employ high-frequency measuring techniques. Yokogawa wanted those kinds of technology and wanted to get some market share in the field. On the other hand, Hewlett-Packard had a very low market share and wanted to increase its sales in Japan. They expected Yokogawa to assist in the field of measuring instruments, and to provide strong sales and service facilities. So the two companies could teach each other; they had complementary strengths to offer one another. After the establishment of the company, which happened more than thirty years ago, they have attained the position of top manufacturer and supplier in Japan in their market area. In other words, the joint venture contributed to both of the parent companies, and the joint YHP is the typical example of success.
Aspray:
Over time, the ownership of the two companies in this venture changed. Is there some significance in that?
Yamanaka:
Originally, Yokogawa held 51 percent of the shares, and Hewlett-Packard held 49 percent. However, about several years ago, the ratio changed to 75 and 25 percent, (75 is Hewlett Packard Company). There were many reasons. One was from the standpoint of Hewlett Packard Company. They did not have any other joint ventures except Yokogawa-Hewlett Packard in Japan. All the other factories in the world belonged to Hewlett-Packard. So the Hewlett Packard Company wanted Yokogawa-Hewlett Packard to become the center of its Asian activities. And to become the company to contribute more to the rest of the world. With Hewlett-Packard as the major partner, they can inject more resources than before.
Aspray:
How would you describe relations between Japanese and American companies in general?
Yamanaka:
As you know, between Japan and the United States, there is some dispute. A particular example: Japan has been introducing technology from the United States, and they improve it on the basis of production techniques and quality. Japan intends to make many instruments and many products for the United States, and does not want to import any products from the United States. As I mentioned, the Yokogawa-Hewlett Packard Company is a good example because it contributed not only to Yokogawa, but also to Hewlett Packard. Finally, they can sell more than $10 billion dollars of instruments in Japan. From the global standpoint, that is an example of good success in a joint venture.
On the other hand, Hewlett-Packard Company has provided very good management concerning a Japanese company. They respected the Japanese management philosophy and management ways. For example, the president and the vice president working in the Yokogawa-Hewlett Packard Company have always been Japanese. The director and the board have representation from the Hewlett-Packard Company. But there are only two persons from Hewlett-Packard who attend the Yokogawa-Hewlett Packard stock-holders meetings twice a year. They are not exclusively working for the YHP. So that even though the capital ratio is 75 to 25 percent, Hewlett-Packard decided all the management will be done the Japanese way.
Another example is the relation with General Electric Company, especially in the medical division. Up until now, General Electric had the intention to sell these medical products in Japan. However, it was very hard to become successful. They concentrated their efforts on imaging equipment and established a joint venture with Yokogawa.
In regard to the equipment, I refer to computer topography and magnetic resonance imaging equipment. Within five years of the joint venture, the joint venture company had one of the top shares of the computer topography field. There are other companies — for example, Toshiba and Hitachi — that are into those kinds of equipment businesses. Even in the case of General Electric, they have different business. However, they didn't succeed in a relatively short period, nor did they gain a top share of the market. The famous Jack Welch, chairman of the General Electric Company, used to say that there is a lot of friction between Japan and the United States. One of the examples is trade friction. However, we don't have any friction between General Electric Company and Yokogawa because we are tied with mutual reliability and mutual interest.
Aspray:
From what I've read about this joint venture, Yokogawa's role has been far more than simply marketing and manufacturing locally. They were thoroughly involved in product development and product enhancement, and there was a technology transfer back to the United States that was very important in the American market. Could you talk to that?
Yamanaka:
This is my opinion: America is traditionally good in the field of innovative new technologies. On the other hand, the Japanese are used to being good in the field of production engineering and quality management. So at Yokogawa medical system, we imported American technology at first to be the computer topography. However, as a result of our joint endeavor, focusing particularly on the field of production engineering, we were able to develop low-cost equipment, and also provide quality management. We built a Japanese version of the computer topography system. Now we and General Electric can export to the rest of the world. This describes the relation today.
One of the relations between Yokogawa and overseas countries is based partly on the philosophy of Shozo Yokogawa. He is one of the children of the founder and now he is the chairman of Yokogawa. His idea was based on the global view and three items from inauguration spirits I described earlier. Yokogawa has to be and think not only Yokogawa, but also the counterparts all over the world. So the good relations with Hewlett-Packard and with General Electric Company are typical examples based on his idea and others of the company's inaugural spirits.
Another example is the relation between Yokogawa and China. We have two joint ventures with the Chinese government, and in a licensing agreement for technology we have seven licenses. One joint venture is focused on the process control industry, which manufactures from analog type control systems to distributed control system. The company, located in Xian, has the top share in the field of industrial process instruments in China. Another company, located in Suzhou, focuses on the field of indicating meters. The company produces one million units a year. All of the units are exported to Japan and the United States. They also get the standard certificate from Japan.
There are few companies that produce technological products on the basis of the recent technologies exported from the United States as well as Japan. Just to give one example: It is said that China doesn't have any high technologies. However, after we thought and transferred lots of the know-how to the joint venture company, they become able to make their own instruments. The company has contributed to the Chinese government and was honored with an award as one of the top export companies in China.
The Boomerang Effect
Yamanaka:
I have mentioned examples of companies in the United States and China. Some people are now worried about the boomerang effect. Do you know the boomerang effect?
Aspray:
No.
Yamanaka:
The boomerang effect is experienced when a company which has high technology exports or transfers the know-how to the not-advanced country, such as China. Eventually, the flow will go back "by the boomerang." This is what we called the boomerang effect. There are people who warn about the boomerang effect, and they do not want to export or transfer technology. However, Yokogawa doesn't think of those worries, and we always exchange the know-how, even in China. We believe those companies should be good and should contribute to their own countries.
Contribution to society is the idea of Dr. Tamisuke Yokogawa. Dr. Yokogawa, who founded Yokogawa, was famous as a collector of china — old Chinese china. His collection was equivalent to the collection of Mr. David in England, who collected more than a few thousand items. After he collected the china, he donated his collection to the National Museum of Japan. It is said, the price was more than 20 billion yen. Now, if you visited there you could see his collection. His donation to the National Museum symbolizes his company policy. When he inaugurated Yokogawa Electric, he had an idea, he had a philosophy: He didn't want to have company shares. He believed the company belongs to the public. Now his China collection is also available for the public to enjoy.
Aspray:
I hope to see the collection.
Yokogawa and Process Automation
Yamanaka:
I mentioned the history of Yokogawa and its philosophy. Yokogawa has a philosophy about the field of technology and about products. First, we don't want to modify an existing model of the other competitors for our other products. We don't want to only modify. We want to create.
Aspray:
I see. You don't want to simply take and copy other people's products.
Yamanaka:
That's right.
Aspray:
You want to create your own.
Yamanaka:
Yes. One of the examples in the field of process automation emerged when Yokogawa first announced the idea of the distributed control system, which is sold to the factory. At that time, the only competitor was Honeywell. After Yokogawa announced this system in the works, Honeywell announced a similar kind of instrument, but five months later.
Aspray:
What year was this approximately?
Yamanaka:
The announcement was made in 1973, and we started to sell the system in 1975. However, when you have a chance to visit Honeywell and ask the same thing they might say Honeywell was first and Yokogawa followed after five months. Yokogawa has top the share in Japan in the market as well as in South Asia. We intend to expand our share of the instruments in Europe as well as in the U.S.
There is an example. This is a copy of a magazine named Control. There is an article which describes the result of a questionnaire in the U.S. The question is "How do you feel about the company or how do you feel about the level of the companies which reacted to the process industry?"
Yokogawa has a joint venture with Johnson Control in the U.S. called J.Y.C. We gained much knowledge from the questionnaire. There are only limited products listed. However the top Voltex Flow Meter is from J.Y.C., which gains 57%. Second is Foxboro Company with 26%. We got third in Magnetic Flow Meters. The other transmitter is the most popular in the field of liquid flow rate measurement and uses the principle of differential pressure detector. First is Rosemount with 55%, second is Honeywell, and third is J.Y.C. and Foxboro with only 5%. I remember twenty years ago Foxboro had a top share at 65%. Concerning small-scale distributed control systems Johnson-Yokogawa has a top priority. However, in full scale distributed control Yokogawa didn't deliver until now.
Aspray:
I see. Are these market shares from the world wide market or from American?
Yamanaka:
We can get a market share report from Frost & Sullivan in world-wide categories. This is the U.S. We expect large marketing in the U.S. recorder business. Recorders are traditionally Yokogawa's strong techniques and strong market area.
Aspray:
In the postwar period, there have been many technical changes — increase in digitalization, increase in the use of electronics, increase in the use of computers in your measuring fields. How has the company managed all of the change? What were your underlying philosophies? How did it cause problems for you, and how did you take advantage of it?
Yamanaka:
In the field of process information, I remember that until the 1950s more than half of the instruments were pneumatic signal systems. However, all the techniques were changed to use vacuum tubes. Because of the lifetime of the vacuum tube devices the technology and components then changed to semiconductors. At the beginning germanium, and later silicon. That was about 1960. We employed integrated circuits including large-scale integrated circuits, LIS. Then in the 1970s we changed to digital techniques which were employed in DCS, Distributor Control System.
The most important thing for management is how quick the response is to the changes to the next imputative technology. For example, in the 1960s, more than half of the instruments, if not all of the instruments, were operated by pneumatic systems. At that time we had the license. We got the license from the Foxboro Company in Massachusetts. Yokogawa had the top share in the Japanese market. In addition seventy percent of the sales profit was gained from pneumatic systems. However, the most important issue for the decision making in management was to change those technologies from pneumatic to electronic. In the first stage, we expected to get red figures from electronic techniques. How management decides was a serious matter for us.
At that time Yokogawa delivered DCS in 1973. Almost all instruments were analog control instruments. Most of the profits were gained from those kinds of systems. But we have to change analog techniques to digital to develop DCS. We decided to put all the engineering forces in digital techniques. That was a very significant decision, however, and as a result we reached the status of Yokogawa now.
Education of Engineers
Aspray:
Did that require either hiring a new set of engineers with different training or undertaking a series of continuing education program for your older engineers?
Yamanka:
As you know in Japanese society it is impossible to fire employees. We had many engineers who majored in mechanical engineering at the time of pneumatic systems. In other words it is not possible to hire electrical engineers without using mechanical engineers. The same thing happened when we wanted to change analog techniques to digital techniques. We carried out re-education, continuing education of old engineers. In addition we hired new employees, particularly new graduate engineers.
Research and Development
Aspray:
Did this also require an increase in the amount of money the company spent on research and development? I know that today your percentage is very high — over 9%.
Yamanaka:
Before I became the president, investment in research was under 6.5 percent. Recently, after I was promoted to president, I wanted to increase it to 10 percent. Now I think in the previous year the ratio was 9.4 percent. That is a very good figure considering the business recession. The research and development expense has increased a lot, and at the same time we lost a fair amount of the profit. The necessary thing for me is to decide on the expenses for the future.
Aspray:
What are the basic costs of developing new products? Is that one of the driving reasons to expand internationally, so that you can have larger markets to amortize your development costs?
Yamanaka:
Are you asking if our increased R&D costs from developing instruments are recovered by exporting to the rest of the world?
Aspray:
The degree to which your R&D costs increase, does that mean that those costs have to be passed onto the cost of your product? I would assume you have to have a larger market to spread them over. Is that one of the driving reasons for opening new markets in different countries?
Yamanaka:
It is also said of General Electric products that especially in the field of measurements the change in technological innovations are rapid. On the other hand the quantity to be sold is relatively small. So the investment costs are high. When we want to develop some new product, it would often cost so much that it would be impossible to sell it in Japan only. So we have to see the conditions in the rest of the world. As a result, we do not have any kind of product that is exclusively developed for the Japanese market.
Aspray:
Earlier you mentioned the example of establishing Yokogawa in Singapore. You talked about the hopes that they would not only develop marketing and manufacturing capability but also eventually be able to establish their company in that market place. This is a kind of decentralized strategy. Are there some aspects of the company that you think should remain centralized? For example, should R&D or legal concerns remain centralized in the company?
Yamanaka:
The field of fundamental research I think, should be regarded at Yokogawa as a common factor. However, individual instrument design, especially relating to regulations of a particular country, should be done in each of the subsidiaries. Sometimes those companies have to adapt or change on the basis of domestic request. There are many examples. For instance, the products we produce for the U.S. or for Germany have to have some differences in their dimensions. Another matter concerns safety. Since industrial instruments are used in factories they should meet not only human physical safety standards but also must be explosion-proof. There are so many kinds of explosion regulations. I have heard there is a difference between Canadian, U.S., and German regulations. Therefore products should be redesigned in individual countries.
In the future I believe even part of R&D should be redistributed. One example would be environmental measuring instruments detecting chlorofluorocarbons, which destroy the ozone layer in the atmosphere. I have heard the regulations concerning chlorofluorocarbons are stricter in the U.S. than in other countries, including European countries and Japan. I believe those special instruments should be designed in the U.S. in the future.
Aspray:
I noticed when I was taking a tour of your research facility this morning, that the company had a policy of designing some semiconductor components that were proprietary. Can you talk to me about the strategy or the reasons behind that decision?
Yamanaka:
As I mentioned before, Yokogawa Electric is not a major player in the computer field of technology. We are major in the field of measurements and control as well as information. So it is necessary for us to have measuring techniques for physical phenomena and to develop sensor technology. I believe those technologies should be done on the basis of these new electro device technologies and micro-machine technology. The classical design techniques are not enough. It is necessary for us to adopt the advanced techniques. That is the reason why Yokogawa has a fair amount of semiconductor facilities as well as a research and development program facility. We want to develop fundamental devices as well as sensing devices. We don't want to make D-Ram, which are used for computers.
I want to mention examples. One is pressure sensors. We don't want to buy sensors from other companies, other suppliers. So we use a silicon diaphragm as a sensor, and deposit the necessary process on the basis of silicon. Another example is high speed A/D converters. When we purchase conventional A/D converters from outside suppliers, the result will be the same measuring instruments coming from another company. So we decided to develop them by our own technologies.
Basic vs. Manufacturing Research
Aspray:
Is there some effort to choose areas for basic research that will have application across many different businesses, that somehow you would want to get economies of scale for value? Most of the basic research that I was shown this morning in my tour had to do with fundamental technology that went into products themselves. Is there also research work on manufacturing technology for the company to improve all your economies?
Yamanaka:
We have a different organization. Manufacturing technologies are done at the manufacturing engineering section and research group.
Aspray:
It's thought in the United States — I don't know how true this is, and I'm sure it varies from company to company — that one of the great virtues of Japanese companies is that they have made very fundamental advances in manufacturing technology that have a great deal to do with profitability and reliability. Has that been the case at Yokogawa?
Yamanaka:
Manufacturing technology is very important. We also have a mechanism called NYPS, New Yokogawa Production System. Most companies, as well as YMS, employ the production system which is based on Toyota's manufacturing method, "Just in time." This production system is one of the features of the Yokogawa group.
Aspray:
How long have you used the system?
Yamanaka:
About 10 years.
Product Strategies
Aspray:
I have a question that is more general about product strategies. To a certain degree instruments are general purpose. They can be used in many different applications. But there is also a need in some cases for specialized or customized equipment. In which direction is the company's main interest? Is it in producing general-purpose instruments or in advancing that customized business? Or in no particular direction?
Yamanaka:
Let me give some examples. As you say, with the general-purpose instruments, we can expect a fair amount of instruments to be sold. However, the specialized and the focused instruments that could be used in a particular instance, by a particular customer, can't be expected to have a large sales quantity. So in some cases we can sell maybe one or two units a month. That means in an ordinary case a decision will be made on the basis of whether it is profitable or not.
However, Yokogawa has been working in the field of measurement and control for a long time. I believe we have a great responsibility to supply standard instruments to be used in the areas of temperature, pressure, current, and electric power standards — even if the number we sell is small. Sometimes these kinds of instruments are employed as national standards in several countries in the world.
Relationship with Japanese Government
Aspray:
We haven't really spoken about interactions that the company has with the government. In what way does the government play a role in the operation of the company, in determining the company's business? Whether it's standards, joint ventures, national products, military markets or whatever?
Yamanaka:
I would like to mention a few examples involving Yokogawa. Some company agreed to build developing projects. At that time we joined the national project. Recently the Japanese government started the "Key Technology Promotion Center." The investment in this key technology was partly supplied from MIT and from private sectors for the rest. Yokogawa joined another kind of project, "Optical Measurement Technology called OMTEC, "High Frequency Technology called TERATEC" and "Micro-Machine Project." The last one is the "Super Conductive Material Project" to be used in medical materials.
Technical and Business Decisions
Aspray:
This is the most fundamental question that I had for you: what importance is there in having an engineering background in being able to manage this company? There must be differences between running a technological business and running some other business that doesn't have to do with technology. How does having that experience in engineering affect the way you are able to manage a technological business?
Yamanaka:
As I mentioned before, Yokogawa is a technology-oriented company, one that is based on the innovation philosophy made by Dr. Yokogawa. He intended to make a product, a new innovative product, which hadn't been seen in other markets. He made a word, "pioneer spirit." But on the other hand, from the managerial point, and from my experience, I believe the important characteristic for the manager is to have wider vision in the future. Another is to have the facility to decide the content of the information. I used to say: "To raise your antenna higher."
On the other hand, there are many engineers who don't have any sensitivity to the information. I think the person who doesn't major in the engineering field is sometimes more suitable than narrow-minded engineers. One of the features most engineers tend to hold is a lack of the wider views, as well as some particular thinking as demonstrated by the phrase NIH, not invented here. I don't want to use something because it's not invented here. That is a kind of narrow-mindedness.
Aspray:
Let me give an example. One company I know of used to be a great technological company. But the management of that company decided that the technology didn't matter any more. What really mattered was the short-term return on investment. So they would go wherever they could to get a good short-term return. That meant that they let their research operations drop off, that they diversified out from their strengths and technology because they were treating it like an ordinary business, not like a technological business. That seems to be one kind of extreme example.
There are many fundamental questions that have to be decided, issues that have to be decided, that involve technology. You have to decide whether you're going to start up a major research activity in a technical area. You have to decide what the future market is going to be for certain kinds of uses of technology and products. What is the role of the leader of a company in making these decisions? A person at this other company I just mentioned might say, "I don't have to care about the technology. I just look at my accounting statements and make a decision based on them." At the other extreme, e.g. Dr. Kobayashi of NEC would say the most important thing I can do is have a technical vision of where the company should go. Where in that spectrum of alternatives do you think you are in your vision?
Yamanaka:
Generally speaking, in Japanese society, shareholders evaluate the company over relatively long intervals of time. So even in a company that occasionally produces a deficit and has to reduce dividends, the top management are usually not forced to retire. As you know, in the United States in most of the companies who lose their profit and produce red figures the management are forced to retire. They have generally placed the priority on profit. I heard there are many instances of American companies who sell their own business to another company, and then go into a totally new business, changing from their traditional and conventional business. However, in Japanese society, those cases are quite rare. The difference between Mr. Kobayashi and the other company you mention is an example of the difference between the United States and Japan.
As I mentioned before, the Japanese circumstances tend to be oriented toward technological development. Even the technology for the government's military activities are operated by the research activities of private companies. Also the evaluation is made on the basis of your categories. I heard in the United States there are many venture business companies such as the companies in Silicon Valley. These have very challenging subjects. They are pursuing lots of new technologies as well as innovative seeds. On the other hand, those venture businesses are really supported by their different venture capitals. So I understand their opposite direction and opposite idea in the management of the big enterprises in the United States.
Aspray:
Suppose your company is facing a major decision that involves some significant technical issue whether to fundamentally get involved in a particular new technology or new research program. I assume that the details of running the whole operation of the business don't allow you to keep completely up to date with the newest technologies. You have to rely on technical experts in your company. When there's a fundamental decision of that sort to be made, though, do you think it's important for you to take the time to really learn the ins and outs of the technical matters so that you can personally make the technical decision for the company? Or do you rely upon the director of the research and other technical officers?
Yamanaka:
In ordinary cases, because we have lots of staff such as corporate R&D and marketing people we don't have any kind of problem making decisions. On the other hand when we face a big problem like entering a new business, a decision by top management become necessary. We have had examples of this in the past. Yokogawa has been working on meters and measuring instruments for a long time. We got a chance to enter the industrial process instruments area. Another one was at a time of technological change from analog control system to digital control system. In both cases we had to think seriously. Because most of the company's profits were gained from previous products, there were a possibility of losing a fair amount of profits.
Aspray:
Thank you very much.
Yamanaka:
You are welcome.
