The Yokogawa story
For Japanese industrial electronics maker Yokogawa [1], it was the need for survival in a highly competitive environment that spurred it to go global. While a leader in technology, albeit in a business-to-business industry, Yokogawa needed to climb upstream into the information and business management space, and position itself as a global manufacturer in line with its competitors ABB, Honeywell, Emerson, Invensys, and Siemens.
Yokogawa’s core business is in the manufacturing of industrial automation and systems that are used to precisely measure and control operations at mission-critical plants in order to optimise production.
The challenge of going global was immense for Yokogawa as it was not a strong contender in the market due to poor product visibility. The lack of awareness resulted in Yokogawa hitting roadblocks in the acquisition of key global clients. For Yokogawa, the wake up call came when it submitted tenders on competitive projects and was told by one of its prospects, “Your products are really good, but your marketing does not do justice to them.”
Understanding the challenge
Japan indeed appears to be losing its competitive edge. In the early 1990s, top global business school IMD placed Japan first in its annual World Competitiveness Yearbook. In the following decade, Japan still occupied a top 10 position. However in 2012, Japan had dropped to 27th position, behind its neighbours South Korea and China, which were ranked 22nd and 23rd respectively.
Japanese business leaders recognise the problem. At a news conference in June 2012, Kazuhiro Tsuga, CEO of Panasonic Corporation, claimed Japanese firms to be overconfident about their technology and manufacturing prowess, and in being so have forgotten about the customer’s point of view.
Today, the electronics players in the US and South Korea – such as Apple, Samsung and LG – have emerged as industry leaders while their peers in Japan struggle to achieve the successes of days gone by.
The new players understand the concept of ‘emotional quality’ (i.e. whether the brand presents a smart image that appeals to the heart, something that is still elusive for their Japanese counterparts).
According to data from a Japanese survey conducted by Hakuhodo in the world’s major cities, top Japanese electric firms still lead the industry in terms of functional quality. However, Apple and Samsung far exceed their Japanese counterparts with regards to emotional quality.
But, the rules of the game have changed. Before the turn of the millennium, technology-driven innovation that delivered greater functional quality drove business growth. Today, experience-driven innovation, which requires a balance between functional quality and emotional quality, has become a key driver of business. In addition to this, affordable pricing is crucial to attract mass consumers in both emerging and advanced markets. Current industry leaders, such as Apple and Samsung, invest in products with mass appeal, offering them at an attractive price point and not by increasing functional value.
Samsung, for example, was founded on appealing to users’ emotional aspect through product designs and marketing campaigns that helped elevate the brand. The company established its first design centre in Seoul over a decade ago, and has since added six more such facilities around the world. In addition, Samsung invests generously in making itself a global brand through international marketing activities – such as sponsoring world-class sporting events – in order to showcase its excellent designs and attract the mass international market.
The need to play by new rules
Japanese companies, on the other hand, typically do not give aesthetics and design the same level of importance as they do technological sophistication and quality. They leverage internal technological competence to develop costly, top-quality products, but these are largely inapplicable to the mass market and Japanese electronic firms have tended to price themselves out of the competition.
Consequently, Japanese companies do not give the majority of users what they want, and do not produce products that meet the emotional needs of consumers. Therefore, in order to thrive in today’s emerging market, Japanese firms need to strike a fine balance between technology and marketing. The good news is that the game is not over yet for Japanese companies.
Path to success
Understanding the changing market scenario and the growing competition, Yokogawa took a cue from its global competitors.
One such example was Emerson, a manufacturing and technological multinational company and a competitor to Yokogawa that had launched its ‘Plant Web’ solution, which uses the power of predictive intelligence to improve plant performance. The PlantWeb brand strategy worked particularly well for fragmented low-middle class markets where customers were unlikely to have enough knowledge about industrial automation solutions. The strategy greatly accelerated Emerson’s revenue growth.
Taking a cue from Emerson’s success, Yokogawa went through a comprehensive rebranding exercise, where its management analysed the company’s operations and products and tried to gauge public perception through the eyes of the market. Eventually, Yokogawa developed its own brand, entitled VigilantPlant.
Yokogawa’s rebranding exercise improved external communications regarding its product and service offerings, as well as enabled proactive engagement with its customers. However, the company did not entirely dispose of its original strategy. It stayed true to the Japanese manufacturing philosophy of offering paramount product quality. Yokogawa thus retained its ‘craftsmen’ roots. The difference was that company tailored the ‘silent’ aspect of it to a more ‘proactive’ approach and the VigilantPlant brand played up Yokogawa’s unique personality as a ‘proactive craftsmen’. Yokogawa no longer assumed that its technological superiority would speak for itself.
As a result of this repositioning, Yokogawa started to win the businesses of major global clients, including the likes of Shell and Chevron. Today, it has established its place in the global industrial automation space. Internally, the rebranding exercise also helped unite the company’s workforce by creating greater brand loyalty and higher employee satisfaction.
The way forward
A 2011 study conducted by the nation’s Ministry of Economy, Trade and Industry found that most Japanese companies viewed their sales and marketing efforts as being substandard. However, to date, many companies have been slow to take action. Japanese companies must therefore make the all-important leap from knowing to doing.
Below are three ways Japanese companies can improve how their products and services are viewed.
1. Believe, adapt, and thrive
Japanese companies must believe that they can adapt and grow new areas of expertise – the Yokogawa story is a positive example. During the 1960s, Japanese companies achieved significant growth by offering low-priced, low-quality products. Yet, they subsequently developed technologically superior products. Adaptation is not foreign to the Japanese culture and there is no reason why Japanese companies cannot evolve again.
2. Unlearn but stay authentic
Japanese businesses need to realise that past successes do not guarantee future prosperity. They need to unlearn certain aspects of their past successes. Indeed, the call between adaptation and authenticity depends on market conditions and the company’s target market. As a guiding principle, businesses whose customers are in niche markets will do well to focus on technological leadership and process innovation, while companies that are selling to the emerging or mass markets must invest in holistic leadership that considers marketing, sales, and pricing. In the Yokogawa story, the company stayed authentic to its ‘craftsmen’ roots, but adapted the ‘silent’ aspect of it to a ‘proactive’ approach.
3. Stimulate the entrepreneurial spirit once again
In the past, the founding CEOs of successful Japanese companies, such as Sony and Panasonic, were typically entrepreneurial. However, succeeding leaders were typically groomed through a culture of corporate success. Such leaders are risk averse and demonstrate less entrepreneurial spirit and marketing sensitivity than those who drove their companies’ earlier breakthroughs. Japanese companies that recognise this as a problem should aggressively employ entrepreneurial talents and put them in sub-businesses that are relatively free of restrictions and which are risk averse to their core businesses. By doing this, these leaders will have the flexibility to exercise entrepreneurial-style leadership and explore new and innovative ways of working.
It is clear that times have changed. It is no longer sufficient in today’s business climate for Japanese companies solely to lead in technological innovation. They also need marketing leadership and products of emotional quality. Japanese companies need to change, and that change must come now before losing opportunities to catch up with the intense global competition.
[1] This is cited from the article "A leap of Yokogawa’s Industrial Automation Business", published at Japan Marketing Journal in 2009, which was authored by Kayoko Honjo of Hakuhodo Consulting.
This article was first published in HQ Asia (Print) Issue 05 (2013).