by Akio Morita
VII
The popularity of the Tokyo and New York Sony showrooms convinced me that we needed a real permanent presence in Tokyo’s central district, because our offices and factories were far from where crowds of people move. So we bought a corner in the Ginza district, at one of the busiest intersections in the city, and we put up an eight-story building, which was as high as we were allowed to go under the building code. Although we couldn’t go up any higher, there was no hindrance to going down six stories, which we did. We built a shopping center and utility floors, and with all that space I decided we could make some special use of a couple of those basement floors. We were getting a lot of visitors in Tokyo, and it struck me that having our own restaurant in the building to entertain these guests would be impressive, and we also might make some money at it because of the way Japanese like to eat out and entertain in restaurants. It took quite a while to decide just what kind of restaurant we should have.
I ruled out a Japanese-style restaurant, although that might have seemed logical. I had just taken a trip to Korea and was treated to Korean food night after night, and I realized that a traveling person might like the local food occasionally, but not every night. Besides, it would be difficult to compete with the really great old Japanese restaurants. Chinese was also not such a good idea, I thought, since there were so many other Chinese restaurants in Tokyo and the chefs change jobs too often. There were very few French-style restaurants then, and none of them was really authentic.
I had traveled to France frequently and I knew Maxim’s de Paris and its owner, Louis Vaudable, and I also knew that he catered the first-class meals for Pan Am in those days, so he might be interested in doing something innovative. I approached him with the idea of opening a replica of Maxim’s in Tokyo, with authentic decor, French chefs, and the same menu, wines, table service, and style as in Paris. He thought it was a fine idea, and so I sent my architect to Paris, and we took two basement-level floors of the Sony building and re-created Maxim’s, which remains as popular today as when we opened it. I like to think we stimulated the high interest in French food among restaurateurs in Tokyo by showing it can be done. In 1984 La Tour d’Argent opened a branch in a Tokyo hotel, and the number of French restaurants and small bistros in Tokyo is great and growing. Visitors from France are amazed to find such good French cuisine here. There is even a Japanese bakery that has a branch in Paris, selling French bread to the French.
I decided we needed a showroom in Paris, and to my mind it had to be on the Champs Elysees, which I think is probably the most famous street in the world, even better known, and even busier at night, than Fifth Avenue. Late at night Fifth Avenue is deserted except for a few bookshops. But the Champs Elysees seems to be full of strollers at almost any hour.
We had established Sony Overseas, S.A. (SOSA, we call it) the year after we founded Sony America, and we based it in Zug, Switzerland, on the advice of a friend who pointed out that the tax situation in Zug was very favorable. We became the first Japanese company based in Zug at a time when quite a number of American firms were already there. In London and Paris we had local agents to handle our goods, but with the confidence we gained doing our own sales and marketing in the United States we decided we should do the same in Europe. Easier said than done. Negotiating ourselves out of those agreements was very time-consuming and difficult. Changing the arrangement with our London agent was relatively easy, although we lost money there for a long time. My colleague at one point jokingly suggested we might make some money by starting a Japanese bathhouse for tourists, because we were getting free hot water and doing little business. But when we got to France, I began to realize that Japan Inc., as many Americans and Europeans call our government-business relationship, is second-rate compared to the French government-business relationship, or the English one for that matter.
For one thing, I have never heard a Japanese head of state or head of government try to sell foreign companies on moving there or doing business, as Prime Minister Margaret Thatcher did. Whenever she had a chance, even during summit meetings, she would promote England, asking when Nissan Motors or some other company was going to build a factory in Britain. In our case, even the Prince of Wales was involved in the promotion. He came to Expo ’70, and I had been asked by the British ambassador to put Sony TV sets in the living room of his suite at the British embassy in Tokyo. Later, when I was introduced to the prince at a reception in the embassy residence, he thanked me for providing the TV sets and then asked me if we had any intention of building a plant in the United Kingdom. We didn’t have any such plans yet, I told him, and he said with a smile, “Well, if you should decide to put a plant in the U.K., don’t forget my territory.”
When we did go into the U.K., it seemed reasonable to take a look at Wales, but we looked at many other areas as well, covering all the possibilities. We finally did decide on Wales on the basis of our needs for location, convenience, environment, and so forth, and we set up a manufacturing operation at Bridgend. And when we were ready for the dedication in 1974, I contacted the ambassador, who was then back in Britain, and asked him to approach the Prince of Wales to see if he would accept an invitation to be present at the opening.
The prince accepted and came, so we put a big plaque at the entrance of our factory to commemorate the occasion, in English and Welsh, but not Japanese. In my remarks at the opening ceremony, I reminded him of our conversation at Expo ’70. “This factory represents a major step in the international policy that our company has followed since its inception,” I said. “Sony’s ideal is to be of service internationally through its unique technology and through internationally shared efforts, such as this one, where the work force, engineers, and suppliers in this locality can work together with us to turn out products of high quality for an exacting market.” I went on to say that I hoped the factory would eventually become a supplier not only to the British market but also to continental Europe, which it indeed has. The prince later gave an interview to The South Wales Echo and told of our meeting in Tokyo. “Nobody could be more surprised than myself,” the paper quoted him as saying, “when two years later the smile on the face of the inscrutable Japanese chairman turned into an actual factory in South Wales.” I never thought I was inscrutable, but I wouldn’t dispute it with a prince.
Afterward, Queen Elizabeth made an official visit to Japan and I had the honor of being presented to her at the reception at the British embassy. She asked me whether the story about Prince Charles’s recommendation for the plant’s site was true. I said it was a true story and she was very pleased. When I visited London for the official opening of the Japan Style exhibition at the Victoria and Albert Museum a few years later, I met the queen again and had a chance to report on our progress. We later were given the Queen’s Award for our work. We were exporting about half of our U.K. production to the Continent and Africa, and it represented about 30 percent of total British color TV exports.
In 1981, when we expanded our plant at Bridgend to add a picture tube factory, we invited the prince again. He said his schedule was too full, but he would send Diana, the Princess of Wales. She was then pregnant with Prince William, and we were thrilled that she would come. Since the factory had glass under pressure, everyone who visits is required to wear a hard hat and protective eyeglasses. We even sent the hat and glasses to London for approval, and when the princess arrived she toured the plant wearing this hat with Sony on it in big letters, while all the photographers took pictures of her. I admit I was a little embarrassed by the commercial look of it, but nobody else seemed to be, least of all Diana. She was charming, good-natured, cooperative, friendly,.and very warm. Of course, we put up another plaque to commemorate the occasion.
I am not complaining that the royal family of Britain is interested in the progress of my company, far from it. I am extremely pleased and flattered. I cite this experience to make the point that it is natural and healthy for a government to be interested in business and in helping
a nation increase its employment situation. The idea that seems to linger in the United States is that somehow people in government should be the enemies of business, or at least neutral. But I like the sense of involvement of the British.
The British have been very good to me in many ways. In 1982 I went to London to receive the Albert Medal of the Royal Society of Arts “for outstanding contributions to technological and industrial innovation and management, industrial design, industrial relations and video systems, and the growth of world trade relations.” I was humbled to realize that the Albert Medal had been given to such renowned scientists as Thomas Alva Edison, Madame Marie Curie, and Louis Pasteur. In a lighter vein, the members of the society even gave me a certificate for my English-speaking ability, which may set a new record for generosity. It happened this way: after the Albert Medal ceremony at the Royal Society, I gave a reception for my hosts. When I welcomed them, I said that Sony and I have always been innovators and that I have not only innovated products but even made innovations in the English language. As proof of this contention, I reminded them of the name “Walkman” and our unique corporate name. They gave me a big round of applause, and the officers wrote out an Honorary Certificate in Advanced Spoken English and presented it to me.
Our experience with France Inc. was quite different. It took several years of negotiating to cancel our contract with our agent in France so that we could establish Sony France. As it turned out, our agent was both a close friend of the minister of finance and an avid hunter who had his own airplane. He would often take the minister off on hunting trips. When we tried to cancel our agreement with the agent and establish a wholly owned subsidiary, the ministry of finance would not give us approval. We worked on it for a long time through our lawyers, and finally the government reluctantly gave us approval, but only to establish a fifty-fifty joint venture. We accepted it and chose a bank, Banque de Suez, to be our partner until we could eventually get permission to buy out the partner. But we still keep a representative of the bank on our board.
Our German subsidiary was easy to establish, compared to the French saga, but since I didn’t want our company and its employees to be involved in the Japanese community, which was concentrated in Dusseldorf, we set up our company, Sony GmbH., in Cologne, within easy reach by the autobahn, but far enough away that the staff would be spending most of its time with Germans, not expatriate Japanese. I have always stressed that our people should concentrate their time and effort on the people of the host country. I made the same rule in my family when we moved to the United States. We went there to learn about America and Americans. I told Yoshiko that she must avoid the Japanese community; she already knew all about Japan. So while it would be easy to move in the home country circles, I have insisted that our company and our family must become truly internationalized.
We opened our Sony showroom in Paris finally in 1971, on the Champs Elysees, where I wanted it, and by then we had also established Sony Hawaii, Sony Panama, Sony U.K. We also negotiated and set up CBS-Sony Records and established a new research center in Japan. I was invited to become a member of the international council of the Morgan Guaranty Trust Company in 1969, which was the depository of our ADR shares in the United States.
When we decided that it was time for us to open a factory in the U.S., it was not a move to be taken lightly. Back in 1963, when I moved to the United States, a Japanese chemical company had decided to open a factory in the U.S., and I had a recorded dialogue with the president of that company that was published in an influential monthly magazine in Tokyo, Bungei Shunju. My contention in that interview was that it was a mistake to open a factory overseas without first having a sales and marketing system established and knowing the market very well. My view was that you must first learn the market, learn how to sell to it, and build up your corporate confidence before you commit yourself. And when you have confidence, you should commit yourself wholeheartedly. In a few years the chemical company, Sekisu, withdrew from the U.S. They couldn’t sell their product satisfactorily and found the competition severe. They were premature.
I always had an eye on producing in the United States, but I felt that we should do it only when we had a really big market, knew how to sell in it, and could service what we sold. When all that was in hand, we could then benefit from having a source of supply close to home. That time came in 1971. Our sales volume was high, and we were now shipping bigger sets to the U.S. It dawned on me that you pay by volume in shipping and that the biggest part of a TV set is the picture tube, which is a glass envelope containing a vacuum. So we were paying good money to ship vacuums across the Pacific, which, if you looked at it that way, didn’t make sense.
Besides, the other advantages of being onshore in a big market are pretty obvious: we could fine-tune production depending on the market trends, and we could more easily adapt our designs to market needs in a hurry. At that time, my brother-in-law Kazuo Iwama was promoting the idea. He was then president of Sony America, living in New York, and he had scouted out locations, including the one we finally chose, in Rancho Bernardo, an industrial park in San Diego. We started out with an assembly operation of components shipped from our factories in Japan, but now just about the only things we send from Japan are the electron gun and some special integrated circuits. To get maximum U.S. input into our sets, we have always bought as much as possible in the U.S., and as a result our sets are more completely American than some famous U.S. brand sets that are actually built in the Far East by American companies and their subcontractors and shipped to the United States. One of the ironies of the situation today is that almost any “American” television set is about 80 percent Japanese inside, but ours is more truly American than theirs.
ON MANAGEMENT: It’s All in the Family
I
There is no secret ingredient or hidden formula responsible for the success of the best Japanese companies. No theory or plan or government policy will make a business a success; that can only be done by people. The most important mission for a Japanese manager is to develop a healthy relationship with his employees, to create a family-like feeling within the corporation, a feeling that employees and managers share the same fate. Those companies that are most successful in Japan are those that have managed to create a shared sense of fate among all employees, what Americans call labor and management, and the shareholders.
I have not found this simple management system applied anywhere else in the world, and yet we have demonstrated convincingly, I believe, that it works. For others to adopt the Japanese system may not be possible because they may be too tradition-bound, or too timid. The emphasis on people must be genuine and sometimes very bold and daring, and it can even be quite risky. But in the long run—and I emphasize this—no matter how good or successful you are or how clever or crafty, your business and its future are in the hands of the people you hire. To put it a bit more dramatically, the fate of your business is actually in the hands of the youngest recruit on the staff.
That is why I make it a point personally to address all of our incoming college graduates each year. The Japanese school year ends in March, and companies recruit employees in their last semester, so that before the end of the school year they know where they are going. They take up their new jobs in April. I always gather these new recruits together at headquarters in Tokyo, where we have an introductory or orientation ceremony. This year I looked out at more than seven hundred young, eager faces and gave them a lecture, as I have been doing for almost forty years.
“First,” I told them, “you should understand the difference between the school and a company. When you go to school, you pay tuition to the school, but now this company is paying tuition to you, and while you are learning your job you are a burden and a load on the company.
“Second, in school if you do well on an exam and score one hundred percent, that is fine, but if you don’t write anything at all on your examination paper, you get a zero. In the world of business, you face an examin
ation each day, and you can gain not one hundred points but thousands of points, or only fifty points. But in business, if you make a mistake you do not get a simple zero. If you make a mistake, it is always minus something, and there is no limit to how far down you can go, so this could be a danger to the company.”
The new employees are getting their first direct and sobering view of what it will be like in the business world. I tell them what I think is important for them to know about the company and about themselves. I put it this way to the last class of entering employees:
“We did not draft you. This is not the army, so that means you have voluntarily chosen Sony. This is your responsibility, and normally if you join this company we expect that you will stay for the next twenty or thirty years.
“Nobody can live twice, and the next twenty or thirty years is the brightest period of your life. You only get it once.
“When you leave the company thirty years from now or when your life is finished, I do not want you to regret that you spent all those years here. That would be a tragedy. I cannot stress the point too much that this is your responsibility to yourself. So I say to you, the most important thing in the next few months is for you to decide whether you will be happy or unhappy here. So even though we recruited you, we cannot, as management, or a third party, make other people happy; happiness must be created yourself.”
The idea of an employee spending all of his working life with a single company is not a Japanese invention. It was, ironically, forced upon us. To give a simplified view of history the Japanese system of so-called lifetime employment, or at least long-term employment, was actually imposed on us by the labor laws instituted by the Occupation, when a lot of liberal, left-wing economic technicians were sent from the United States to Japan with the goal of demilitarizing the country and making it a democracy. One of the first targets was the basic structure of what was left of the industrial complex. In prewar Japan, a handful of giant holding companies virtually controlled the Japanese economy. Together, the four biggest of these groups held as much as 25 percent of the paid-up capital of the entire nation. Family-owned conglomerates such as Mitsui, Sumitomo, and Mitsubishi each had as many as three hundred companies in their control.