The R&D philosophy of Hitachi is that of the company's founder, Namihei Odaira, "Though we cannot live one hundred years, we should be concerned about one thousand years hence." Hitachi's stated research goal is to perform "long-term, continuous research to meet social needs and corporate policy in the next decades through development of original science and/or significant patents." Therefore, Hitachi's advanced and central research laboratories are devoted to the long-term development of new fields of science and technology. The following are some examples of Hitachi's ongoing research programs, with their development time frames:
Three to five years
Five to ten years
Ten to twenty years
More than 20 years
Hitachi's allocation of R&D funds is broken down according to general categories in Figure 3.8.
Figure 3.8. Hitachi's distribution of R&D funds.
Over the years Hitachi has built a strong portfolio of intellectual property assets that it has used to gain strategic positioning in high-technology markets. Hitachi ranks fourth in total number of U.S. patents granted since 1963, right after IBM, GE, and AT&T. Since 1985, the company has earned more income from licenses than it has paid out; in 1991 it reported a net profit on technology licensing activities of 24.5 billion yen ($200 million), about 20% of its operating profits before taxes. Hitachi has twenty patent lawyers on payroll. The company's recent patenting strategy has been to develop a smaller number of patents strong enough to provide negotiating power for cross-licensing arrangements. It does not want to be left out of new product areas because of patent restriction, and it therefore attempts to obtain basic patents in areas of potential competition. As a result of its change in strategy, the number of patents filed per year by Hitachi declined from 22,000 in 1981 to 15,000 in 1991. When the company perceives no external threat to a technology it has newly developed, it keeps the technology as a trade secret and makes no attempt to patent.
Hitachi's Corporate Research Laboratories
In August 1993, Hitachi had over 18,000 employees in 38 research laboratories and factories, including 1,180 researchers with Ph.D. degrees. Hitachi Limited employed about 13,500 people, including 4,500 in its nine corporate research laboratories and 9,000 in its factory development laboratories. There were 935 employees with Ph.D. degrees. According to Y. Sonoyama, now Senior Advisor of Hitachi's corporate laboratories, "We see them [Ph.D.s], increasingly, as strategic assets."
At the time of the JTEC panel's visit, the corporate research laboratories reported to Y. Takeda, now Senior Executive Managing Director, who reported to Mr. Sonoyama. The nine corporate research laboratories are described in Table 3.2
Hitachi Limited's Corporate Research Laboratories (August 1993)
The three biggest and most important Hitachi labs are the Central Research Laboratory (CRL) with 1,300 researchers, which focuses on electronics research; the Hitachi Research Laboratory, the oldest lab, with 1,300 researchers, which does research on macro systems such as traffic and power systems and also on media electronics and new materials; and the Mechanical Engineering Laboratory, with 700 researchers, which was established in 1966 to do research into mechatronics, energy equipment, and related systems. Hitachi's Energy Research Lab does research for nuclear power generation and computational science that requires large-scale simulations. The Production Engineering Research Lab, located near the consumer products factory, decides what kind of system or robots to use for production of new products such as video tape recorders (VTRs). The Systems Development Lab does research on computers and software. The Image and Media Systems Laboratory works on audiovisual and multimedia systems development. The Design Center concentrates on product design. The last laboratory, the Advanced Research Laboratory (ARL), does fundamental or basic research.
Hitachi's nine corporate research laboratories account for 24% of its R&D expenditures. Research is funded in three different ways, two of which are shown in Table 3.3. First, corporate headquarters funds research expected to take over five years to get to the market; second, the business divisions or subsidiaries pay for commissioned research of under five years, usually two to three years out; third, research that is likely to make it to market within two years is mostly conducted in the business divisions' product development laboratories. Of total research and development funds, about 30% is either paid for by corporate headquarters or commissioned by one of the business divisions; 70% is funded by the business divisions and subsidiaries for their own short-term product developments.
Hitachi Corporate Research Funding
The two laboratories that receive the greatest proportion of funding from corporate headquarters are CRL and ARL. CRL receives about 45% of its funding from corporate headquarters; ARL gets 100% of its funding from corporate headquarters. Hitachi's president reviews all projects funded by headquarters and authorized by the general manager of the laboratory. Commissioned projects are authorized by the sponsoring business division or subsidiary. For technology or product developments expected to reach the market within one to two years, each business group has its own product development laboratory. For example, the computer group develops its own products and pays 100% of the cost for current product development.
The Central Research Laboratory, considered the lead laboratory for Hitachi applied research, is located on a 51-acre campus west of Tokyo. Since 1988, the company's R&D objectives have been to invest 20% of total R&D funds in long-term research (beyond the next ten years), 40% in intermediate-range microelectronics and digital systems research (from five to ten years in the future), and 40% in near-term microelectronics and digital systems research (with results expected within the next five years).
The Advanced Research Laboratory was established in 1985 to focus on basic research in pursuit of scientific breakthroughs. Its scientists are not driven by costs or results in the marketplace ( its $33 million budget comes directly from headquarters. The general manager, Shojiro Asai, is hoping the lab will generate breakthroughs like the transistor. He encourages young scientists to present papers at international symposiums. According to Asai, "It's critical for people to go out and get feedback from the world's top scientists."
Growing Concern for Technology Commercialization - Hitachi's SPROT Projects
Hitachi continues to view research and development as essential to future growth of the company and is attempting to increase the effectiveness of its R&D activities through careful selection of themes, smooth execution of projects, and efficient use of limited resources. In 1992, Hitachi introduced the Strategic Business Projects (SPROT) system that aims to more closely link the results of R&D efforts with the company's operations and to put attention on major projects. More specifically, the SPROT system, shown in Figure 3.9, was introduced to shift Hitachi's R&D focus to one that is market-driven.
Figure 3.9. Hitachi's Strategic Business Projects system.
Prior to this change, corporate "Tokken" projects had been the center of Hitachi's research efforts. The Tokken system, short for tokubetsu kenkyu (special research projects), started about thirty years ago. In the past, this was a "heavyweight" team system with corporate-level support for urgent or important R&D projects. At Hitachi, proposals always originated from lower levels and were reviewed by upper levels. In the past, Tokken was used for mainframe, VTR, and similar developments. Tokken projects led to development of Hitachi products such as supercomputers, semiconductors, magnetic disks, displays, power plants, and AI robots. Tokken results helped create the image of Hitachi's excellence in technology. The Tokken system was quite popular in Japan, and even some foreign firms adopted the system. But Tokken had nothing to do with market development.
Hitachi's new SPROT system was intended to improve the market focus of R&D projects. It was recognized that it would take time to move away from the current bottom-up approach that drove the Tokken system, with its own corporate culture and egalitarian and individualistic style. Y. Takeda, executive managing director of Hitachi's corporate laboratories, told the panel that the SPROT goal was to improve overall synergy:
In the past, all research activities were based on a bottom-up system. But unless someone takes the leadership, there will be no synergistic affect. The problem is that researchers have no outside contacts and, therefore, are unable to generate any synergy within the company. So we are changing our thrust to put these projects under the corporate business planning division, not under the laboratories. The aim of strategic projects is to bring together people from accounting, sales, marketing and R&D. The general manager of the division is going to have strong responsibility for decision-making of the project.
Tokken was converted into a subsystem of the SPROT system, no longer an independent project system. Instead, SPROT is to be the center of R&D projects. It was also subdivided into Tokken and Tokkai (tokubetsu kaihatsu, special development) projects. Projects are classified Tokken if commercialization will be over five years or Tokkai if commercialization will be within three years. According to Takeda, projects are classified by the time it takes for commercialization so that researchers will think about the market. "Innovation criteria requires that strategic projects be successful in the market. This means that we must do R&D for the market, not only for the product."
As it is now understood, since SPROT projects are to be directed at product commercialization, they are to involve personnel from accounting, finance, advertising and marketing, as well as from R&D. The decision-making person is to be a division manager - a business person rather than a researcher. The planner for Hitachi's computer business was appointed to head the new R&D Promotion Headquarters. Each new project is to be initiated at a thrust meeting, chaired by the senior R&D executive, Mr. Sonoyama, including high-level managers from sales, control, planning, etc. While Hitachi typically had thirty to forty Tokken projects underway at any one time, at the time of the JTEC visit only three strategic business projects had been designated. It was expected that every division should be able to develop a project for its business areas.
It is clear that Hitachi is constantly working to refine its market orientation and thereby the efficiency and long-term viability of its operations: It expects to be around "one thousand years hence." However, despite the company's successful development of new technology, this has not been adequate to compete with technologically applied companies like Sony, Sharp, or Matsushita. To stay competitive, Hitachi, like many U.S. firms, is also having to learn how to commercialize its technologies more rapidly.