Inward looking Renesas needs to spin outward

4/19/2012 1:30 PM EDT

I agree with you on the part that if you stay complacent, you won't survive.

But that said, the point of my story here is more about how the Japanese companies should think outside the box. Inward consolidations will not work. It's time to spin off, spin out and sell off some of the teams.

Although it's not a perfect example, I think for Renesas to spin out Renesas Mobile was a smart move. Last time when I met with their representativeis in Europe, I was impressed with the autonomy of that operation. Why was I impressed? Renesas Mobile makes all the pricing decisions of their products -- even those for customers in Japan like NTT Docomo -- in Europe. That was a breath of fresh air, at a time when too many Japanese companies' subsidiaries or spin-offs continue to worry about what Tokyo thinks.

4/19/2012 6:11 PM EDT

Renesas Electronics is likened a dynasty. Unless a significant portion of the current management are replaced, so that the lack of accountability (exemplified by the nuclear power station fiasco in Mar2012) are replaced by new thoughts & processes, Renesas will simply not be truly world-class competitive vs its peers in US/Taiwanese/Korean. I often wonder why didn't the shameful management of Renesas (and others like Sony/Panasonic/...) practice the Samurai Spirit which equates to honor and doing things properly.

4/20/2012 11:46 PM EDT

Renesas already had problems since the merging of Hitachi and Mitshubitshi. There are so many overlapping products. Resources are not spent on making a few good products but still maintaining so many product lines. Any new merging will just make it worse.

4/20/2012 6:09 PM EDT

"Many problems Japanese corporations are facing today are more fundamental, structural and even cultural."

Agreed, but what *can* address them? Any possible solutions start with management.

One issue I can see on a cultural level is the concensus management style common in Japanese companies. I don't think Cheng's notion that "Japanese companies don't really make decisions" is exactly accurate: my feeling is that they do, but their "Bottom up, let's get everyone to agree a change is needed" style makes it impossible to make decisions *quickly*. Once a decision *has* been made, Japanese companies can implement blindingly fast, but reaching that point may simply take more time than a company in the current tech environment *has* to make it.

Another issue is perceptions of the underlying problem. The proposed merger essentially asks "Can several sick companies be combined into one strong one?" Well, maybe, but the resulting strong company is going to be a lot smaller, with a lot fewer people, and focused on fewer areas. This is both a structural and a cultural problem. If underlying motives for proposing this are face saving and preserving employment, the move will founder on unpleasant realities, because the business simply isn't there to support anything like the current unmerged operations, and merging them won't magically make it appear.

It may well make sense to look at spinning off various parts to focus on particular solutions for particular markets, but regardless of whether the end result is one smaller big company, or an assortment of much smaller companies, there will still be a lot less of it than there was at the beginning.

So the biggest question might be a cultural one: given the above, can Japan accept the fact that the result will be smaller and employ less people, and what will it do for the ones left out of whatever remains when the dust settles?

4/20/2012 6:35 PM EDT

You wrote:
So the biggest question might be a cultural one: given the above, can Japan accept the fact that the result will be smaller and employ less people, and what will it do for the ones left out of whatever remains when the dust settles?

That's an interesting question. Culturally, and I should say, traditionally, Japanese employees in general have always preferred working for big corporations. But I believe that things are changing -- at a time when a number of "big" corporations are actually failing.

Wouldn't it be logical to think it's better to find potentially a bigger and exciting opportunity at a smaller company?

But would Japanese management accept that?
Spinning off and/or selling off different parts of its own company require bold thinking and bold steps -- most Japanese companies have never gone there before.

But I truly believe it's time.

4/20/2012 10:22 PM EDT

"Wouldn't it be logical to think it's better to find potentially a bigger and exciting opportunity at a smaller company?"

Sure would, if the opportunities existed. But the ones I spoke of are the ones *not* retained by the new ventures when the dust settles. What opportunities *exist* for them?

My concern is actually broader and deeper. The single biggest difference I can think of in Japanese culture from the US is that Japanese are members of *groups*. They derive nearly everything from their group membership. This goes far back in Japanese history. Think of the samurai portayed in Kurozawa films like "The Seven Samurai" set in the Edo period. Tha samurai were at the top of the social order, but they derived their status from their service to a lord. They were part of a group defined by being subjects of that lord. If a samurai's lord was killed, he became ronin - masterless - and if he couldn't find another lord to take him into service his propects were bleak. He was no longer part of a group.

In current Japan, the *company* a worker works for defines the group he belongs to. When the tradition of lifetime employment began to erode and Japanese workers faced layoffs for the first time, it was traumatic in a much deeper manner than it is here. They were not simply losing their job, they were being tossed out of their *group*. Reports of suicides by laid off salarymen come as no surprise.

Japan has not evolved the mechanisms to cope with numbers of people who are *not* part of a group. There was no need, as it was an infrequent occurrence. It is far more frequent now, as changes in the underlying economy mean you may not be able to count on lifetime employment, and you may change groups more than once. But you have to have another group to join, and defined mechanisms for making the transition. I think Japan needs to develop both.

"But would Japanese management accept that?"

They may not have a choice.