Japanese culture views technology as a tool for making marketable products. Production technology is central to such a view and has become a clear force in developing competitive advantage for Japan's industrial giants, as shown in Figure 3.1. An effective vision of next-generation products combined with continuous product improvements provide the vision for "upstream" developments. Japan's focus on production equipment and process improvements is directed towards designing for cost and manufacturability: that is, Japan's focus is on designing processes to improve productivity, increase quality, and decrease cost; designing concurrent engineering methods to speed product introductions; developing software to implement and improve factory automation; and devising effective management methods related to all of the above. The following are some of the JTEC panel's findings regarding technology R&D in Japan:

Figure 3.1. Japan's successful production development strategy.

• Japan uses its patent system to facilitate the transfer of intellectual property rather than to protect it. The Japanese patent system is meant to educate, as opposed to protect an invention as in the U.S. system. Japanese patent applications are made public and open to rebuttal by competitors. As a result, it is difficult for a firm to exploit its own technology. There are many examples of Japanese firms flooding a market with trivial patents around a basic patent for the purpose of forcing the basic patent owner to cross-license its core technology, in order to gain access to that market. A second strategy is to develop a portfolio of related or similar patents that likewise make it difficult for a firm to exploit its core technology alone.

• Japanese firms appoint a greater number of technically trained managers to head up their companies. Past studies show that as many as 75% of the CEOs of manufacturing firms have engineering degrees.

• Japanese firms invest heavily in the development of production automation technology. Japanese firms concentrate on developing in-house process and equipment technologies that provide competitive capabilities.

• Japanese firms have separate R&D organizations for production technologies. R&D for such activities can account for as much as two-thirds of R&D investments; most of the remaining one-third is for product development. U.S. ratios are reversed.

• Japanese firms seek to identify customer needs as the basis for developing new products and setting roadmaps for technological development. In Japan it is product requirements that drive advanced technology development activities (product pull rather than technology push as in the United States). To keep costs down, Japanese firms utilize proven technologies that have been tested and can be incrementally improved. New technologies are used only when other alternatives will not work.

• Japanese firms make long-term commitments to the development of new products, components, equipment, and technologies. There are numerous examples of Japanese commitments to long-term developments, such as Sony's 13-year program to introduce charge-coupled device (CCD) image pickup components for the camcorder. One JTEC panelist saw the same presentation he had seen three years earlier, updated to show the progress that had been made. Development of batteries and ceramics for automobiles has continued since the 1960s and has yet to see a payback. Sharp licensed RCA's liquid crystal display (LCD) technology and spent nearly a billion dollars over a decade before its development efforts were brought to market.

  

• Japanese firms use teams with a common vision as the basis for concurrent engineering activities. A dedicated and skilled team approach is standard operating procedure in Japan, in contrast to one centered on highly educated individualists as in the United States. Japanese team members understand the entire systems view of the product vision, which results in products that look and function as though they were designed by a single person. This team approach is found throughout the industry "food chain." It involves hundreds of vendors, many of which are small family operations, and many large parent companies or customers. It is often said that the strength of Japan's industrial system comes from this "small family" approach.

  

• Japanese firms have limited research relationships with universities. There are only a few examples of strong research relationships between Japanese universities and industry. Large companies conduct their own basic research or license it from outside Japan. The dean at Sophia University recently complained that Japanese firms were spending more in U.S. universities than in Japanese universities. In contrast, U.S. universities have contributed heavily to the basic research required by U.S. industry.

  

• Local government supports industrial research activities. To support development activities within local communities, nearly 160 municipal industrial research institutes (MIRIs) have been established through local industry and municipal government cooperation. Their facilities are impressive, with well-equipped research laboratories and libraries. One Nagoya MIRI has a staff of 100, including 25 engineering Ph.D.s. They provide consulting, testing, analysis, research, technical information, seminars, and courses for local industry. No comparable facilities exist in the United States.

  

• Japanese firms conduct parallel development programs for both long- and short-term product improvements. Departments often pursue two to five technologies simultaneously in order to ensure that they can be ready to introduce next-generation products in a timely manner. Corporate research centers typically conduct development work on efforts requiring over five years. Often, research centers are heavily involved in the development of next-generation products, while divisions make incremental product improvements on an annual basis. In contrast, U.S. research organizations seek freedom to do independent research without direct application objectives; as a result, U.S. product developments are delayed, and technology transfer is typically difficult. Figure 3.2 illustrates the Japanese parallel development strategies.

  As Figure 3.2 shows, Japanese firms have developed a systematic approach to long-term product development. Business units are responsible for ongoing operations and the competitive improvement required to maintain current market positions. For most products, minor changes are made annually; for products like the Sony Walkman, such changes are made every six months or less. Corporate-level product teams are responsible for development of substantive product improvements before the competition. (For Sony, that has meant smaller and smaller camcorders.) Ability to provide new product innovations depends on a company's development of new component technologies like LCDs or CCDs, which is dependent upon long-term research. Corporate level technology research teams are responsible for long-term technological developments. The JTEC panel found that most large firms work at all three levels to maintain their market positions and to develop products, such as multimedia products, to meet future market demands.

Figure 3.2. Parallel product development strategies in Japan.

• Japanese companies have a clear vision and philosophy for their product development activities. Japanese managers set lofty goals for their companies. Murata's management is committed to improving "worldwide development of industry and culture" by pursuing "total quality and customer satisfaction, while continuously introducing innovative products in integrated and interrelated technologies which will allow our company, our employees, customers and other partners, and our communities to grow and prosper with an appreciative feeling of mutual pride and trust." As shown in Figure 3.3, TDK's product development strategy begins with recognizing market needs, and moves through developing a product vision, initiating the R&D concept, and specifying quality and cost targets, to designing the product, process, and factory automation system and equipment. The results are quality products. Product size, shape, cost, and function are clearly specified to meet target markets. Such vision is typically derived from detailed customer and competitive product analysis that reveals the critical elements for product ( and thus technology ( development.

Japan has created a major competitive advantage from its development of low-cost, high-volume consumer products. This advantage is based on the effective integration of materials, production, and design technologies, as shown by Murata's model in Figure 3.4.

Figure 3.3. TDK's product development strategy.

Figure 3.4. Japanese passive component strategy (Murata).

The technological imperative of Japan's integration strategy is "cost comes first." While Japan is developing competitive technologies for high-performance products like supercomputers, it also has the leadership in low-cost, high-volume consumer products like camcorders, televisions, and stereos. That provides Japanese firms with the unique advantage of having technological capabilities in both high-performance and low-cost technologies. Low-cost, high-volume products provide the impetus to develop mass production technologies that reduce production costs while also raising production quality and volume. Increased demand for product variety has provided further incentives for Japanese firms to develop flexible assembly systems that allow development of lower-volume products at mass-production costs and quality. These systems can now be applied to a variety of lower-volume, intermediate-cost industrial products. U.S. firms have lacked adequate product volumes to invest in equivalent manufacturing technologies and are now finding it difficult to compete in higher-priced and intermediate-priced industrial markets.