BS-TBS News Interviews Me On Japan's EV Problem
BS-TBS News Interviews Me On Japan's EV Problem
Why Japanese Automakers Are Acting Like Detroit in the 1970s
The BS-TBS Hodo 1930 (News Report at 7:30 PM) interviewed me on May 23, BS-TBS is part of the Tokyo Broadcasting System.
It was about my blog post on Japanese automakers losing sales due to their resistance to Electric Vehicles (EVs). As I reported, Japan is about to be surpassed by China as the world’s largest exporter. The focus was on my view that Japan today is acting like the Detroit Big Three did in the 1970-80s. II made the point that, “The more successful you are along a certain business model, the harder it is for you to recognize that times have changed.” It is not a problem just of Japanese companies, but of most successful companies.
The segment on EVs begins around minute 15:55, Comments by me begin around 29:10 and go on a few times over the next 10 minutes, and then experts discuss my view and other matters related to Japan and EVs for the rest of the program. The latter part began with a discussion of this poster:
It reads:
When fuel-efficient Japanese cars showed up, the Big Three thought it was a temporary danger.
Companies that are too successful may not notice changes
Maybe Japanese carmakers will suffer the same fate as the Big Three.
The person who interviewed me provided this gist of the conversation:
The anchor, Koji Matsubara, a former TBS New York Bureau Chief, said my analysis reminded him of the famous book, The Innovator's Dilemma by Clayton Christensen. That book describes how very successful innovators can taken by surprise by a new innovation that they dismiss.
Economic analyst Keiichi Kaya, who, among other things, consults with government agencies, said Japan does seem to be caught in this Innovator's Dilemma. It’s also similar in some ways to the shift from sailboats to steamboats: Sailboats had good workmanship and well-refined technologies while steamboat makers could only produce small ships at first. But, once the shift to steam happened, the sailboat makers were too late to realize the need to change and all but disappeared. You can see a similar pattern across many industries, including autos. The move from internal combustion to EV and hardware to software emphasis is a huge paradigm shift and is already well underway.
Toshiyuki Shiga, a former Nissan Chief Operating Officer (2005-2013) added: There tends to be an emphasis on Japan falling behind in EV development, but there is an even bigger problem in how the fundamental manufacturing and usage of cars is shifting, such as using software updates to improve functionality even after purchase. Japan's industrial structure itself is not adapting to these changes quickly enough. It's not as simple as internal combustion engines being replaced with EV motors or gas tanks being replaced with batteries. The latest EV automobiles worldwide are Software-Defined Vehicles (SDVs), which allow continuous updates to the car's functionality and performance through software. Japan's automakers need to employ more software engineers and alter the pyramid-structured manufacturing process to create hardware that can better incorporate software updates.
Auto analyst Takaki Nakanishi, the CEO of the Nakanishi Research Institute, added: It’s not necessarily a problem that Japanese automakers are exploring many options. However, treating this search as an end goal in itself rather than merely part of the process in the quest for the best carbon-neutral option is a mistake. [He was referring to the strategy of Toyota to pursue EVs, Hybrids, Plug-In Hybrids, and Hydrogen Fuel cell cars all at the same time on the grounds that different markets want different kinds of autos.] Furthermore, this process has many steps, and the first step is succeeding in the EV market. Carbon-neutral fuel and perhaps hydrogen may be options in the long run, but those will take time and major infrastructure development. Even if Japan wants to keep pursuing its multi-faceted approach, it must first compete successfully in the EV market. Seeming to skip out on the EV market and putting too much emphasis on hydrogen was a mistake. Even two to three years of this approach has created a huge gap in competitiveness for Japanese automakers. Pursuing other options on top of EV is fine, but EV has to be prioritized first.
I am not so surethis makes much of a point in the end. The whole Japanese revolution in tech organization from kanban to just in time was seen as a huge blow to the US but nevertheless most USA firms failed to change substantially for a considerable time. When in the late 19th century, soda manufacturing went under revolution in Europe, in UK leading etreptreneurs refused chnage in their core technology but won out in ancillary tech and market development that weilded a substaially different tech outcome and led to their continued reasonable success. In mid 19th the UK could just not copy or adapt tothe American System of Manufactures, but they hardly sunk under, adopting management and other changes to cope with failure at the level of actual machine changes.
The thing is, there are often a host of other, more organisational or market factors, seemingly distant from tech decision making, that serve to keep an established system from innovating towards a brash new tech based innovation trajectory. This may be at work here, it is difficult to forestall the style orntactic that could result in Japan from the China challenge here. I myself own a fine Japanese electric car and presume that it and its industry will survive. China can often move quicker because of its very differeing mix of factors of production, labout styles, rewards and skills and so on.. In the end what matters is the return to the entire system from a welfare economics point of view and/or the attitude helf on innovation by the big investment players in that industry, both of these hard to second guess, as the earlier historical examples suggest.
Prof Ian Inkster, SOAS, London University, UK.
Christensen's Innovator's Dilemma very much applies here. Those with less to loose - and fewer switching costs - can more wholeheartedly invest in electrification.
Collis and Montgomery's Resource Based View framework of tangible assets, intangible assets, and capabilities also apply, and that highlights some potential strengths - including cash flow, access to capital, manufacturing and distribution and support - that incumbents can bring to bear. (as you might guess, I use both in leading a Ford Motor case with undergrad and MBA students.)