In the Wall Street Journal today (March 23, 2012) there was a op-ed on the demise of Japanese companys' innovative drive, using Sony as anexample of a company that has lost its way.  The article states that the reason is that Sony, and other Japanese companies, stayed to focused on being the low-cost producer of products and services, but because of the natural evolution of its economic maturity, that model was no longer workable.  There was no way Japan could out low-cost South Korea and then China.  Possibly, but I believe there is another reason.  Go back to the 1980's and early 1990's, the business literature was full of books and articles about the Japanese economic miracle, and spelled-out how, I think, the real reason Japanese companies were so successful:  They understood their Value Chain, were able to identify the "Most Important Customer" in their Value Chain and truly understood the latend, unmet needs of their Most Important Customer.  The result was a plethoria of new products form cars, super tankers and electronics that put Japan at the head of the class.  For whatever reason, this deep understanding of latent customer needs appears to have been lost by the wayside.

But the South Koreans and Chinese were taking careful notes of the Japanese business model - not the low cost one, but the understanding customer needs one.  It will be interesting to see if as the economic maturity of these two countries progresses, they too will focus on low cost to keep production from going to less expensive Southeast Asian countries or the developing countries of Africa and South America or continue to focus on what's really important:  Understanding customer latent needs and executing on those needs.

H. R. (Pent) Penton

2012-March-23