BreakThrough Study Idea

Identify new values: Transform latent value into concrete value to create profitsYotaro Hatamura

<Series 3 / complete>

2018.11.01

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That completes Part 2, covering the current state of technological innovation in Japan and “What do engineers really need?” Next, Part 3 covers “Manufacturing & Value” with discussion of Hatamura’s views about new values.


How to Create New Values

“New values” could refer to the transformation of latent value into concrete value within society, or maybe even the persistence of hope in the world. To put it more directly, it is a clear manifestation of hope. Products are a reflection of the world - will they become widespread?
I have an anecdote about “value.” In 2012 I did a visit to a factory in India that works with Japanese companies, and I had an opportunity to talk with the factory boss. He said, “We already know that Japanese companies are great at deciding how to take an existing design and make it real. But, they have no clue about out treasured culture and customs. If I have to guess why, I would say that maybe Japanese companies haven’t really discussed what value means to them.” When I heard this, I just thought, “Yeah, that sounds right.” The battles between Japanese companies and rival companies around the world is intensifying, and the lack of deep thinking about the meaning of value might be part of the problem.

Manufacturing companies have a tendency to think that creating new value means the results of developing new technology. However, Hatamura’s experience in India made him realize that new values are linked to localization strategies to adapt to the local culture and customs when Japanese companies are expanding into international markets.

International Examples Of Manufacturing & Value

When you’re talking about international examples, there is one photo that always grabs my heart. It was taken in Hanoi, the capital of Vietnam. It’s a family of 4, the dad, the mom, and 2 kids, riding together on a single motor scooter like a group of acrobats. Scooters are the main form of personal transportation in Vietnam so it’s just an average photo of an average family.

Hanoi, Vietnam: A family of 4 rides a scooter together
※Source: Traveling the Tech Highway (Iwanami)

You can learn a lot from this single photo. First, that motor scooters are an essential mode of transportation in Vietnam. This leads you to assume that Vietnam’s economy is still a work in progress. If you follow through on this information, you will find that Honda currently has a 70% market share for motor scooters in Vietnam.
At first, Honda was fighting Chinese imports for the market. Then in 2000, Chinese imitations of Honda’s scooters were imported to Vietnam in massive quantities, and they rapidly dominated the market. Of course, Honda scooters disappeared quickly.

So, Honda made a plan, and proposed a completely unique breakthrough policy. Honda noticed that the Chinese imitation scooters were low-quality, broke easily, and were often in need of repair. Instead of competing directly with the Chinese scooters, Honda decided to try recapturing the market by offering genuine Honda parts to replace the broken parts in the Chinese scooters. This breakthrough strategy to sell genuine parts individually was a success. People soon learned that Japanese parts didn’t break easily, and together with new sales of low-cost components, the market reversed by 2014. Shares rose to 70%.

Vietnamese market shares of Honda scooters vs Chinese scooters
※Source: Traveling the Tech Highway (Iwanami)

There’s a lot more to this story than just regaining a lost market. Honda managed to address an existing need of people in Vietnam by creating a new category of segmented sales to offer individual sales of genuine parts. New value was created within regular motor scooter sales. I think this could be a big indicator of the future for Japanese companies.

“New value” doesn’t just mean the development of new technology, it also means adapting and customizing products, technology and services to fulfill the particular needs of consumers in each region. Time will tell how this is expressed in manufacturing industries.

What Needs To Change In Manufacturing?

Like I just said, the business world is going to identify new value by transforming latent value into concrete products that will start earning money. No matter how the economic situation of Japan evolves, the fact will remain the same that Japan needs foreign buyers to create profits. Yet, the current model of “great products” is losing the ability to create value and make a profit. Big changes are needed in the flow of manufacturing.

There is a diagram that I also used in “Traveling the Tech Highway.” It compares the contribution to profits through every step from product conception and planning, through design and development, through production, to marketing and sales. There is a clear case of “back loading” profits on the right side of the graph. We can see from this that business culture in Japan is rooted in placing importance on the last stage of this process, and it has become so common that no one ever questions it.
However, things are currently shifting towards “front loading,” which places more importance on the earlier stages like product concept and planning.

In this new era, I don’t think you will be able to increase profits no matter how much effort you put into improving manufacturing, sales or service methods. First you need to accept this new way of thinking, and if you want to break through your present circumstances, you should transition to front loading. In order to make a profit, it will be increasingly important to approach manufacturing while searching for what society is asking for and to prioritize the quest for finding new values.

The source of profit is transitioning towards concept and planning.
※Source: Traveling the Tech Highway (Iwanami)
 

Series

Japan Cannot Move Past Its Previous Successful Experiences in Technology Development

Engineers need to accept that failure is part of the development process

Identify new values: Transform latent value into concrete value to create profits

Engineers must be capable of independent thinking and connecting with the outside world


Yotaro Hatamura

Born in 1941 in Tokyo. BS and Master’s degrees from the Department of Mechanical Engineering at the University of Tokyo. After working for Hitachi, he returned to the University of Tokyo as a professor. Retired in 2001, but retains status as an honorary professor. Specialties include failure studies, danger studies, creative design theory, intelligent processing and nano/micro processing. Runs the Hatamura Institute for the Advancement of Technology since 2001. Founded the NPO Association for the Study of Failure in 2002, and the Danger Studies Project in 2007. Participated as investigator and committee chair of the Investigation Committee on the Accident at the Fukushima Nuclear Power Stations of Tokyo Electric Power Company since June 2011. Hatamura has written many books, but his 2000 release “Recommendations in Failure Studies” has sold over 400,000 copies. “Traveling the Tech Highway” is his latest.

■Best-Known Books
Recommendations in Failure Studies (Kodansha) 2000/11
Creating & Planning Technology (Iwanami) 2006/11
Unprecedented & Unexpected: Lessons From the Great East Japan Disaster (Kodansha) 2011/7
Getting Real in Japan: The Tech Superpower Fantasy is Over (Kodansha) 2015/6
Traveling the Tech Highway (Iwanami) 2018/1

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