The following four examples provide unique insights into how Japanese companies successfully bring products to the marketplace.
Murata Manufacturing Company
Murata is a world leader in ceramic capacitors, ceramic filters, and other electronic components. Murata's central technology-driven strategy, shown in Figure 7.5, includes integrating ceramic materials technology, electronic machinery design technology, and production process technology to develop downstream products. Its R&D organization has been set up to carry out this strategy.
Under the corporate-level technical administration division are (1) the fundamental research laboratory for materials, new processes, and HF components, (2) the module and application development laboratory for next-generation communications and sensing devices, and (3) the machinery and production engineering laboratory for production line and semiconductor equipment development. Within the product divisions are materials, functional devices, and components laboratories responsible for both product and process developments.
Figure 7.5. Murata's integrated technology strategy.
Murata's R&D management approach combines technology roadmaps with technology programs targeted at strategic themes. Technology roadmaps identify opportunities for early involvement in new areas of technology that have long-term potential. To gain a position in such technologies requires a strategic technology program that will build a core competence in the company. The commitment to such technology programs requires a long-term vision that fits within the overall direction or business theme for the company. R&D themes require approval by Murata's board of directors in order that appropriate resources can be allocated. Murata currently has 27 strategic technology programs under development. Each program is reviewed at each phase of its development, starting with surveys, moving through research, development, application design, and preproduction, and finishing with mass production.
Sony has had a balanced strategy for product realization. Its strategy has included the development of product "sets" that use the company's own components (CCDs), devices (semiconductors), and advanced materials. As demonstrated in Figure 7.6, Sony takes concurrency to the most comprehensive level to ensure that the entire product component set offering and infrastructure are being developed in phase. Sony's product-oriented strategy is coordinated by corporate R&D and includes three critical activities:
Figure 7.6. Sony's concurrent development model.
1. Deciding on major product targets. This corporate-level function is assigned to the R&D Corporate Planning Group. Large corporations need multiple projects in parallel. Moving from consumer products to systems that include voice/data/video/graphics makes identification of targets difficult. Such targets include personal communication products, multimedia components, ISDN systems, and next-generation displays.
2. Identifying the mid- and long-term strategic technologies required to achieve product targets. These decisions affect budget allocation and other resource allocation decisions.
3. Establishing an R&D organization to effectively develop required technologies. This includes clarifying the mission of corporate and divisional laboratories and setting time schedules for project assignments.
The divisional laboratories of Sony's 19 business units are responsible for developing new products in their markets within three-year time frames. Sony has development laboratories for audio, consumer video, displays, business and professional, computer and memory, high-definition recording, components, ULSI, and production technology applications. The semiconductor and production technology groups have in-house support responsibility for product divisions in addition to their business responsibilities. Corporate R&D funds are used for mid- and long-term R&D projects.
In January 1993, Sony reorganized its corporate laboratories: The Yokohama Research Center has materials responsibilities; the Corporate Research Laboratory has device development responsibility; the Telecommunication and Information Research Laboratory has networking responsibilities; and a new Development Laboratory has responsibility for new products that do not fall within current divisional domains. All corporate laboratories are responsible for activities with development time frames beyond three years.
With the continuing recession in Japan, most companies were attempting at the time of the JTEC panel's visit to improve their R&D efficiencies. Sony was more discriminating in the selection and weighting of research themes. It was also reevaluating its R&D funding system with a view to reducing corporate funding to 50% of the total and shifting more of the funding burden to the business divisions. The company had also established a requirement for laboratories to market their technologies in order to more effectively disburse them into the divisions. The corporate development laboratory was set up to help in technology commercialization, especially for new types of products that were outside the domain of current business groups. Finally, R&D activities were being centralized within specific locations in order to increase the concentration of effort and know-how.
There is no question that Sony is a product-driven company. By focusing R&D activities at product targets, it is easier to transfer technologies quickly to the divisions. The critical technologies include materials and semiconductors, key devices like the CCD, and automation technologies for packaging technologies that are too small for human assembly. Sony Chemical is also working on advanced printed circuit boards (PCBs) and has developed five-layer boards. Semiconductor developments have a goal of single-chip deployment in order to reduce package size and increase package density. For example, Sony's 1992 TR1 camcorder achieved packaging densities of 20 components per square centimeter, about twice the density of the 1989 TR5 model. The component density target for future products is 30 components per square centimeter.
Sony holds monthly meetings between R&D and business groups to share information and results. There are also general meetings between groups, and two-day internal electronics fairs are held semiannually. Companies like NEC and Sharp also hold similar exhibitions in an effort to make divisional personnel aware of potential solutions to their customers' problems and to stimulate new product ideas. Sony has a less structured system than NEC, but at the time of the JTEC visit was considering ways to improve its effectiveness.
Sharp's market-driven strategy for R&D began by identifying a group of consumers called "sense leaders" to help the company define customers' needs. Company officials explained
We began to define the market according to the role that people played. For example, we consider the most sophisticated people in a market to be the professionals. The next level of consumer is the sense leader, then comes the sense follower. At the bottom of the market is the no-sense consumer or the mass market. Matsushita and Sanyo are after the mass market. Sony and JVC are after the professional. Sharp is looking for the sense leaders, those that influence others to buy new products (Sharp 1993).
From the sense leaders, Sharp began to understand the needs of customers. The video camera provides one example of Sharp's use of sense leaders. In 1991, video camera sales fell 15% to 1.44 million units, far below still camera sales of 4 million units per year. To understand the reason for this decline, Sharp went back to basics:
We took a sample of ten users of video cameras to find out who was buying, how they were using it, how often they were using it, and for what. From our research, we found two important findings. One major finding was that the time spent using this product was very small. For people paying 150,000 to 200,000 yen for the video camera, they were only using it thirty hours per year. That was awfully little for such an expensive product. Color TVs were viewed 1,200 hours per year, refrigerators throughout a year. Video disc and VTRs, which people didn't use much, were used 500 hours per year. Even air conditioners, which are only used during the summer, are used 900 hours per year. Thirty hours per year for such an expensive product seemed awfully small (Sharp 1993).
The research found that the number one usage of the video camera was to tape the first born child until kindergarten. That limited the age of purchasers to the latter half of the 20s age group and then only to those who felt obliged to record their child's growth. To expand sales, customer usage had to be changed:
We identified three kinds of pain associated with this product. One is the pain of having to carry it to the destination where you intend to use it. The second is the difficulty of taking pictures. You are out of the picture and it is difficult to use. The third is the difficulty of seeing the pictures you took. Even if you are tired when you get home, you have to see the pictures. You cannot wait until next week. Our conclusion was that we had to reduce these pains and make the video camera fun to use (Sharp 1993).
Sharp's new concept of the video camera, the ViewCam, incorporated its LCD technology. That required overcoming three technical problems: First was to reduce the weight of the camera, which became too heavy with the addition of the LCD. Second was to increase the brightness of the LCD, because it was hard to see the LCD screen in bright light. Third was to reduce the price, because adding the LCD made an already expensive product even more expensive. That required overcoming both technology and cost problems. With the problems identified, a special corporate project was given the challenge of developing the new product in 18 months. The successful results raised the average use of Sharp's ViewCam to over 300 hours per year, compared to 30 hours for the traditional viewfinder-type camera, and Sharp's market share moved from fourth to second in one year. Sharp's newest ViewCam can be used as a portable TV display and allows viewing of instant replays, thereby revolutionizing the camcorder market.
In planning for future product development activities, Sharp's president has encouraged business managers to develop other new products that utilize LCD components. The company's long-term product development will continue to use its competitive advantage in LCD components, as shown in Figure 7.7.
Figure 7.7. Sharp's expanding LCD applications.
Technologically oriented organizations require sophisticated management techniques. As with Murata, Sony, and Sharp, superlative management is a key to NEC's success. NEC's "core technology program," as explained to one JTEC panelist, provides top-down guidance to tell its people what kind of technology is needed. This is renewed every three to five years by determining what core products will be needed in ten years. Technologies that will provide the seeds for growth are also identified. NEC has thirty to forty core technologies that are company secrets. Each core technology includes many subordinate technologies.
For NEC, success requires that its technologies be effectively utilized in products to meet customer needs. For example, NEC has worked since 1965 to develop advanced ceramics technologies. In 1970, a low dielectric material allowed NEC to produce small, high-capacitance ceramic capacitors. By the mid-1970s, a semiconductor ceramic material led to the introduction of ballistors for protecting computers from electric power surges. NEC also introduced new process technology for materials used in packaging, called green sheet technology. This process was applied in 1980 to make a multilayer substrate used in high-performance and high-speed large computer systems. In 1985, NEC introduced a multilayer ceramic substrate for increasing circuit density by four times. It reduced media delay by one-half, for improved computer performance.
NEC's most advanced green sheet technology application was in a high-performance MCM (multichip module) used in its 3900 series large, high-speed computer. The green sheet technology used polymer, binder, ceramic glass, and powder. The sintered substrate then used I/O PGA with 11,540 pins and 40 layers. This included the 14 conductive layers; the remainders were used as grounds to reduce noise. The total number of connection alternatives was the 40 layers times the 11,540 holes per layer (461,600 alternatives, total). NEC had worked on this technology for about fifteen years and finally completed its development in 1991. The development of this material and process technology has been applied to NEC's fiberoptic interconnect. The new, moderate-priced application allowed NEC to reduce the size of the new component by 70% and reduce the power consumption by 30%. Future applications will be in NEC's consumer products.
Managing NEC's distributed R&D system requires the matching of market needs with technology developments. Contact between central R&D and production R&D is considered essential if technology is to be introduced in a timely fashion. Market-oriented business units take the lead in responding to market needs. To facilitate rapid technology commercialization, NEC uses exhibitions, contract research, and technology strategy meetings. An Exhibition Fair is held yearly to give over 5,000 business unit personnel exposure to NEC's technical capabilities. The exhibitions last for a week and include over 2,000 participants. After such exhibitions, R&D personnel contract with the business group to carry out product-related development. At NEC, 30% of the R&D budget is paid for from such contracts, thereby providing an incentive for cooperation.
According to NEC's former Executive Vice President, Yasuo Kato (1993), NEC limits the amount of research work it contracts out in order to keep the pace of internal technology transfer high:
We have found that contract research works best at about 30 percent of the budget. We lose flexibility if the percent of contracts goes up. Bellcore said 100 percent of their research was supported by operating companies. If customers lose interest, you lose research people and can't maintain your research efforts. Thirty percent is a good number to keep up your research flexibility. I am pressured to increase the percent, but I resist. This is not for money, it is for the spirit of accelerating technology transfer and engineering. It makes for more effective R&D activities.
NEC holds technology and strategy meetings each year. Senior people from technology and business areas meet to discuss the technology strategy for the next four to five years or even ten years out. They establish the long-term business plans, outline technology trends, discuss the types of technology that will be critical in the future, and decide what actions to take. This sets a framework for starting the internal contracting process. The procedure is repeated in smaller discussions with specific businesses and product managers. To overcome the complexity of managing so many technologies, NEC has developed a special technology management organization. Kato continued:
To help in tracking and communicating these technologies, we have grouped them into six strategic technology domains or STDs. Currently we use materials/ devices, semiconductor materials/devices, functional devices, communication systems, knowledge/information systems, and software to show where these core technologies will have the greatest impact. We then show where each of the core technologies have the greatest impact in each of these six domains. We communicate these with a matrix like this:
For each STD, we identify the core technologies and the laboratories that have responsibilities for technology developments....Each lab has its own responsibility for technologies in specific areas. Individual researchers learn what projects there are and what people are doing as a way to get new ideas. Individual researchers can then propose their own research projects.
NEC's R&D Planning Process. NEC's planning system for technologies is made up of top-down guidelines and bottom-up proposals, as shown in Figure 7.8. Management makes a clear distinction between the setting of policy guidelines and the initiatives of individuals to come up with programs to achieve the company's objectives. These two perspectives are brought together through joint planning meetings between R&D and operating groups. Yasuo Kato explained:
We have a research proposal system with a history of over 25 years of execution. In October, we have strategy meetings between the top managements of the R&D groups and each operating group. During these meetings, each group explains their long range plan for their business, makes predictions about their markets, and discusses the technologies and R&D requirements that will be needed. R&D will explain the new technologies and R&D trends and the competition coming from other companies. At these meetings, group and R&D managers will attempt to gain a consensus on what projects are needed, the size of those projects, and the amount of resources needed. An internal contract system is then available so that product groups can contract R&D with the central labs. The average central laboratory has 30 percent of its budget paid for by contract R&D. In the C&C labs, 40 percent of the budget is paid for by contract research (1993).
Figure 7.8. NEC's technology planning process.
Once the basic strategies have been decided, the implementation begins with actual development of research contracts between the R&D and operating managers, as shown in Figure 7.9. According to Kato there is a clear framework:
In December, the R&D proposals are made and screened through the end of December. They are read and refined during this time, priorities are set, and the proposals are then linked to the budget. Within this process, we have both continuing project proposals and new project proposals.
Once projects are determined, contracts are negotiated and signed between the R&D organization and the operating groups. Kato further explained:
The internal contract system forces operating groups to be serious about the research they want done. It is economical for the operating groups to use the central labs. They pay only a part of the R&D costs, but they pay a negotiated amount. This expenditure gives an operating group stronger motivation for use of the research results. The number of them and the amount of requests from the operating groups are increasing each year.
Figure 7.9. NEC's contract and budget process.