We all know about the Kodak moment. To find the underlying reason, Prof. Clayton Christensen pursued his curiosity about why highly successful firms fail. His research endeavor led to the finding of the seeding of failure by success. Like him, many other investigators in finding the root cause of the rise and fall of firms encountered the painful reality: “seeds of failure are usually sown at the heights of greatness.” The underlying reason has been Clayton’s finding of decision-making dilemma to reinvent by successful firms. But Japanese firms offer a lesson of sustaining success through self reinvention. Instead of being content at the height of success, they get desperate for self reinvention.
Ironically, although Intel’s past CEO Andy Grove became famous for writing a book titled “Only the Paranoid Survive,” Japanese firms have made that lesson part of the corporate culture. Hence, at the height of success, Japanese firms get busy finding impending crisis and exploiting it. Let’s take a look at a few examples.
Sony in Television: pursuing both reinvention and self reinvention
In the 1950s and 1960s, American firms like RCA and GE were at the height of global success in television set making. Hence, they overlooked the opportunity of self reinvention by taking advantage of the emerging transistor technology core. Thus, they sowed the seed of failure at the height of greatness. But tiny Japanese Sony took advantage of it. Sony entered the television set market by the reinvention of television by changing the vacuum technology core with the transistor. In addition to inside electronic circuits, Sony also focused on perfecting the cathode ray tube (CRT) display. Subsequently, Sony became a global icon in Television set making with its famous Trinitron brand. It was the name of its line of aperture-grille-based CRTs used in television sets and computer monitors. The continued advancement of the CRT display led to the apparent flat-screen WEGA model.
But unlike many other American firms, Sony did not feel content to keep exploiting its great success in high-quality CRT displays. It could have been another perfect example for Sony to prove again that the greatness of success sows the seed of failure. Instead, Sony focused on emerging liquid crystal displays. Despite its high success, after 100 years of birth, LCD became suitable for the seven-segment displays of wristwatches only. But Sony saw the seed of success or failure in it. Hence, instead of keep refining CRT and extracting value from it, Sony embarked on advancing LCD. Subsequently, Sony succeeded in self reinvention by replacing its great CRT success with LCD for television and computer monitors.
Sony’s reinvention and self reinvention journey in image sensors:
In 1969, Sony came to know about the invention of the electronic image sensor by America’s Bell Labs. It came out as a charged coupled device for capturing photons as electrons. But its birth as an 8×8 pixels matrix was far from making a camera. Although Kodak did not see merits in pursuing it, while enjoying the greatness of perfection of film-based imaging, Sony embarked on it. Over time, Sony succeeded to keep improving, making both still and video cameras a creative destruction force to film, creating the infamous Kodak Moment. Hence, due to the failure of self reinvention, Kodak suffered the burn from the success of Sony’s reinvention of the camera.
By the mid-1990s, Sony’s profit reached a record level, primarily due to the success of digital imaging products. But it did not last long. At the dawn of the 21st century, the market started shifting towards the possibility of mobile handset-based digital cameras. It all began with the release of the Kyocera Visual Phone VP-210 in May 1999 in Japan. It was a “mobile videophone” and had a 110,000-pixel front-facing camera. In the course of time, with the growing popularity of mobile handsets based on still and video imaging, Sony lost its digital camera products business. Hence, Sony became the victim of the creative destruction force formed by the reinvention of the mobile phone handset.
Sony saw the latent potential in it. It responded by joining hands with Ericson in releasing the camera phone. But it failed to face the competition. Hence, Sony pursued self reinvention in its business model. Instead of competing with handset makers, it focused on becoming a preferred image sensor supplier. This self reinvention journey has sustained Sony’s success in digital imaging, making its image sensor business unit large and highly profitable.
Toshiba in Data Storage:
In 1957, IBM gave birth to the hard disk industry by rolling out a 5MB hard disk drive weighing 1 ton. After 20 years, Japanese Toshiba entered the market. But due to superior performance in incremental advancement in data density, Toshiba started gaining market share. Its continued upward performance forced many hard disk makers, including IBM, to exit. Consequentially, the race reduced the number of HD makers from 75 in 1984 to three at the dawn of the 21st century. Surviving manufacturers are Seagate, Toshiba, and Western Digital (WD).
But instead of getting busy exploiting the great success in the hard disk race, Toshiba focused on self reinvention. It has been a journey for Toshiba to destroy its highly successful hard disk business with solid state data storage (NAND). It started at Toshiba’s lab by one of its engineers– Fujio Masuoka. In the beginning, Toshiba management did not pay much attention to this alternative data storage technology. But it did not follow the path of Kodak. Instead, without wasting much time, Toshiba started focusing on developing it as a creative destruction force for its highly successful hard disk business. Hence, this self reinvention journey has made Toshiba the global leader in the NAND flash memory business. And Solid State Drive (SSD) is on its way to gaining momentum to cause destruction to the market of hard disk drives.
Toyota in Automobiles:
Toyota has a long history of perfecting gasoline vehicles. Since its founding in 1937, Toyota engineers have been improving the efficiency and reducing the emissions of internal combustion engines (ICEs). But California’s stringent emission regulation created concerns among Toyota management. After a long journey of incremental advancement, not much was left for further improvement to meet emission regulations. Hence, Toyota set up the electric vehicle (EV) division in 1992.
In the past, many attempts of EV ended up in failure. Due to performance indicators like charging time, range, and cost, in the beginning, EVs failed to be a better alternative to gasoline vehicles. But this time, Toyota had no option other than to pursue EVs. But as the reinvention of the automobile by changing the polluting ICEs was not a profitable option, Toyota management faced a daunting challenge. Hence, unlike America’s Tesla pursuing EVs by burning investors’ money, Toyota focused on batteries’ progressive, profitable exploitation.
Therefore, Toyota approached the problem with the gradual erosion of the ICE’s role so that a profitable self reinvention path could be crafted. This approach led to hybrid cars, offering higher efficiency and less emission at a bit higher cost too. But Toyota has succeeded in making marginal efficiency gain higher than an additional cost. Hence, it has been a less risky path than Tesla’s to meet the zero-emission target. Hence, Toyota this journey of self reinvention in the automobile has been a remarkable example of sustaining business success through reinvention.
Self reinvention lessons from Japanese firms for sustaining the success
There have been numerous examples of remarkable rise and fall of firms. In many cases, the underlying cause has been the failure of the reinvention of matured products by incumbents. Instead of pursuing the risk path of reinvention, in most cases, managers of successful firms remain busy exploiting the benefit. Consequentially, they leave reinvention opportunities to new entrants, leading to the migration of inventions across the boundaries of firms and nations. But such a reality could be prevented, sustaining the success for an extended period of time. As explained, a few Japanese firms offer valuable lessons. Instead of remaining busy with the achievements, the focus should be on finding and exploiting self reinvention opportunities.