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Appreciate this thread on innovation and will add some observations about agency:  you all ask and I wonder—what’s a Honda (or SONY) to do?  Amazon, Apple and probably Tesla (going private!) are successfully getting their components outside to repackage.  Yet in the Japanese corporate environment, Richard Katz returns to METI at the end of his entry and notes the government’s roles as the Japanese agencies stage events and encourage corporate behaviors. I did wonder if the concept of open innovation has specific sources in NEDO at METI or in citations in Japanese.

From where I sit in Southeast Asia, the reach of METI is less effective and more aspirational than NEDO. I have seen some attempts to “stipulate” behaviors and poll corporate actors.  Here more than METI, it is apparent that other agencies receive the attention (and budgets) as JETRO, JBIC and JICA do effective work in asking and polling Japanese business about their regional plans and innovations.

Tech gurus on Japan Forum may rightly ask whether these emerging markets matter, and it will remain to be seen what innovations take hold in ASEAN markets.  Sector by sector, I do see the impact and interests of key businesses in deciding technology strategies for automotive, aviation and fintech sectors for example.  Standards in particular are being set, and often coordinated with involvement of key firms and business associations in the process.

Note of disclosure:  we work energetically with the private sector to gain insights on regional trends.  I won’t whine too much about METI, JETRO and JICA budgets (although we have none for such research). The pace of innovation is rapidly increasing, and often appears to outpace their abilities to ask the key questions.

Stephen Anderson 
U.S. Commercial Service

Sent from Stephen’s iPad

On Aug 7, 2018, at 8:30 PM, Richard Katz <[log in to unmask]> wrote:

Thanks to Lance, Roger and Mike for their info.

 

May I suggest that the developments at Honda reflect a broader change in corporate strategy around the world to something called “open innovation.” This is the opposite of the formerly dominant “Not Invented Here Syndrome,” in which companies wanted to originate all of their innovations by themselves and reject anything “not invented here.”

 

That attitude has changed in many (but hardly all) firms due to two big changes in the sources of competitive advantage:

 

1) Modularity. In some industries, e.g., electronics, a product can be made better and more cheaply if its innards consist of parts sourced from other firms. But, for a long time, Japanese firms rejected this notion, and may still do. SONY argued that, if its products contained the same parts that its competitors could procure, then what made it a SONY worthy of a premium price? It would be reduced to a commodity producer. By contrast, a firm like Apple or Amazon (Kindle) saw the value in being the firm that created a must-have product. It’s not the parts per se that create competitiveness; it’s the product in which they are embedded.  In the end, it’s been a long-time since SONY, the creators of so many innovative products in the past, has created a must-have product. Where is the SONY tablet, or smartphone, or e-reader, etc. in the global marketplace?

2) Reduced economies of scale in R&D. It used to be the case that it took a giant firm to create fruitful R&D projects. Now, because of changes in the technologies underlying R&D, that is much less the case. Back in 1981, 71% of all R&D conducted by US firms was carried out in firms with at least 25,000 employees. Their share halved to just 36% by 2014. Conversely, in 1981, only 4% of R&D was carried out in firms with less than 1,000 staffers. By 2014, this had risen to 20%. By 2008, firms with less than two dozen employees were conducting 3% of all business R&D in the US, almost as much as all the firms with as many as 1,000 employees back in 1981. The same trend is true in Europe.

 

As a result, giant firms are collaborating with partners, both big and small. Pharmaceuticals is the classic case, but the pattern can be seen in all sorts of product areas. For example. In 2000, Procter & Gamble (household cleaning and other products) finally faced the reality that its traditional, closed, in-house product development system was running out of steam. Only 35% of its new products were achieving their financial targets. And so, P&G created a new strategy called “Connect and Develop” with a radical goal: that a stunning half of its new innovations would come out of collaboration between P&G and external partners. It achieved that goal in a mere five years. It then set a new goal: that $30 billion of its revenue (an amount equal to 40% of its total revenue in 2015) stem from such collaborations. Firms ranging from Johnson & Johnson to IMB are following the same trend.

 

Japan lags this trend, in part because of the attitudes expressed by former Honda execs in the WSJ piece that they wanted to do everything on their own; otherwise, they would “lose their soul.” In Japan, there has been no increase in the share of R&D being conducted by firms with fewer than 1,000 employees in the past 15 years. It was around 16% in 2001 and the same in 2014 On the contrary, 37% of all business R&D is undertaken by the top 20 firms, compared to 23% in the US. In fact, Japan’s top five firms alone do 18% of the nation’s R&D, compared to 10% in the US.

 

Some sections of METI are pushing for Japan Inc. to adopt elements of “open innovation.” In fact, the guru of open innovation, Berkeley Professor Henry Chesbrough, was brought in by a METI affiliate (known as NEDO) to help run a series of seminars for the Japan Silicon Valley Innovation Forum (JSVIF). The latter was set up by a couple dozen Japanese multinationals that had set up labs and other resources in Silicon Valley, but felt they were not getting the benefits for which they had hoped. This past September, METI provided support for the third annual Innovation Leaders Summit (ISL), a “fair” to bring together corporate giants and new startups in order to develop plans for collaboration. ISL acted as a “marriage broker” to arrange 2,100 negotiation meetings between 500 venture companies and 100 leading companies. Half of these meetings were said to lead to further discussion of forms of cooperation, ranging from M&A to capital cooperation to joint research.

 

Richard Katz

 

 

From: Smitka, Mike [mailto:[log in to unmask]]
Sent: Monday, August 06, 2018 9:34 PM
To: [log in to unmask]
Subject: Re: [NBR's_Japan_Forum] Honda seeks outside help for Engineering talent

 

Further to Lance Gatling and Roger Schreffler.

 

Companies do indeed license technology from one another, Chrysler from Ford and so on. (More generally, patent pools are common in many industries.) An NDA keeps me from providing an explicit example, an issue Lance mentions. Quite public is the joint development of an automatic transmission by Ford and GM – they are brutally expensive to develop, but the core design can be tweaked to provide a different feel. But then there’s also ZF, an independent transmission maker with a long customer list. 

 

That’s another way in which a car company can spread costs, by buying from a supplier who can offer the same thing (perhaps with packaging variations, bolt holes and the like). Indeed more and more technology is now developed by suppliers, or jointly by suppliers and their customers. The hardware and core software is likely to be the supplier’s, while the sometimes the packaging and much of the time the user the interface are handled primarily by the car company. Even that remains joint, as the supplier must ultimately manufacture the item, so needs to keep the car company engineers from creating a mission impossible scenario of a part that can’t be made and no time to tweak it.

 

When things are co-developed, it’s not infrequent that there is a period of “exclusive use.” In my modest experience that tends to be one year from start of production, before which competitors can’t get their hands on a car to get a detailed look at what’s new. Suppliers are very careful not to start calling on other companies until that year ends, even when one of those firms has their hands on a sample part and wants to put it on a vehicle under development. I’ve met engineers frustrated because they missed the launch window by only a couple weeks, but once a car company has ordered tooling from another firm, well, the window is closed.

 

I know of joint projects for things hidden from vehicle users, but it’s more or less expected that there will be jointness when it’s something the driver or a passenger sees or manipulates. Seat makers will offer a car company a design, knowing in general how a particular company approaches doing seats, but the stylists always want a tweak, including a new fabric for the cover that has just the right feel. There may be a couple millimeters less door clearance than normal. But when it comes to a piston, it’s very much a Federal Mogul (now part of Tenneco) or Mahle showing a design to their customers, and the team developing the engines must work with it - it can easily take 5 years of R&D with new thermal management and friction strategies to come up with a new design, and then (that missing the window thing) 8 years in the market before sales take off, as engine programs are infrequent.

 

The engineering labor market is something I know less about, except that the firms I visit all worry endlessly about it. Global suppliers have R&D centers around the globe, not centralized. One reason is because that lets them draw upon different labor pools to staff their needs, and having a credible engineering presence helps with local government relations. It’s not just sales engineering, Cebu in the Philippines is the center for Lear’s wire harness engineering, much of Delphi’s are still in Warren OH with some functions now based in Shanghai, while Scania splits R&D projects between Sweden and Sao Paulo. The extreme is a Japanese supplier that I visited last year, whose Detroit-area engineering center handled all of the electrical components of the parent company, and hence is today a big operation. I met not a single Japanese the entire day I was there. (The finance guy on their organization chart had a Japanese name, but I didn’t meet him.) That was unusual - normally there are people from 3 or 4 continents in the room when I visit a supplier for an engineering presentation.



On Aug 6, 2018, at 3:11 PM, Roger Schreffler <[log in to unmask]> wrote:

 

<<So, much as more and more countries pool resources to advance the
state of the art of fighter technology in the form of the F35, I'd
expect more and more car makers to pool resources.>>

 

There are other factors including the need to be closer to the market. More than 80% of Japanese cars are

now sold outside Japan. In Honda's case: more than 90%. 

 

Secondly, who wants to live in parts of Japan during summer? Lastly, I just attended an automotive conference 

last week in northern Michigan which featured some of the best and brightest in the industry. Rightly or wrongly, 

everybody spoke English.

 

Of course, pooling resources is critical as the industry advances into the fields of autonomous driving and various

forms of electrification, but there is also a huge pool of young wannabe engineers from around the world coming 

out of schools like the University of Michigan, MIT and others who can step right in to product and technological

development jobs upon graduation.

 

They were out in force networking.

 

Roger Schreffler

 

 

 

 

 

 

 

 




-----Original Message-----
From: Lance Gatling <[log in to unmask]>
To: LIST <[log in to unmask]>
Sent: Mon, Aug 6, 2018 12:46 pm
Subject: Re: [NBR's_Japan_Forum] Honda seeks outside help for Engineering talent

RE: Mr. Curran's comment about 'going it alone'.

My (very limited) understanding is that for perhaps decades some of
the most advanced companies in automotive and internal combustion
technology have quietly - and under strict NDAs - bought and sold
technology across what would normally be considered competitive lines.
One famous example is Porsche selling intake and combustion chamber
design to Japanese car makers. Motorcycle giant Yamaha has done a lot
of work with various makers, as car engine designs evolved to resemble
more high revving motorcycle engines, with their inherent heat,
friction, combustion, valve and ignition timing challenges, but that
has been more public as Yamaha is not a direct automotive competitor
to X.

So, much as more and more countries pool resources to advance the
state of the art of fighter technology in the form of the F35, I'd
expect more and more car makers to pool resources.

The obvious others areas include the sensors and smarts for assisted
drive, etc. LIDAR, motion sensors, you name it, the costs of
development versus the costs of getting it wrong are pretty stark.

Lance Gatling
Nexial Research, Inc.
Tokyo, Japan



On Mon, Aug 6, 2018 at 10:29 PM, Tim Curran <[log in to unmask]> wrote:
> A very interesting article in the WSJ today about Honda’s struggle to keep
> pace with the rapid evolution of technology. The article behind a paywall is
> copied below:
>
> https://www.wsj.com/articles/honda-took-pride-in-doing-everything-itself-the-cost-of-technology-made-that-impossible-1533484840?mod=hp_lead_pos5
>
>
>
> “Honda’s decision to go shopping points to a radical culture change at one
> of Japan’s proudest companies, where founder Soichiro Honda in the 1960’s
> said, “We refuse to depend on anyone else.” The struggle at the
> entrepreneurial success story cuts deep into Japan’s sense of itself as a
> global leader in technology. Honda once used staff technicians to design new
> technologies ranging from engines to the shape of the suspension arms.
> Today, Honda believes rapid shifts in technology mean it can no longer
> afford to keep pace working solely on its own.”
>
>
>
>
>
> Tim Curran
>
> CEO
>
> Global Technology Distribution Council
>
> 727-823-4285
>
> 727-421-1033 (cell)
>
> [log in to unmask]
>
>
>
> From: Fred Uleman <[log in to unmask]>
> Sent: Thursday, August 2, 2018 8:20 PM
> To: [log in to unmask]
> Subject: Re: [NBR's_Japan_Forum] Education and language: Paper publication
>
>
>
> Apologies if this is inappropriate, but
>
> With regard to the comment that using translators only works if the original
> Japanese is grammatically, syntactically and semantically correct, I was
> talking about good translators. One of the marks of a good translator is
> that s/he will have specialist knowledge in the field and will be able to
> understand the material even if it is not grammatically, syntactically, and
> semantically perfect. Very few people write to perfection in any language.
> Natural language assumes the other side can make the connections and fill in
> the blanks. A good translator can.
>
>
>
> At the same time, the author should be available to fill in blanks that are
> beyond the translator. That is part of the "cherish" part of my suggestion.
>
>
>
> - -- --- ---- ----- ---- --- -- -
> Fred Uleman
>
>
>
> To unsubscribe from the list, send an email to:
> LIST-signoff-[log in to unmask]
>
>
>
> To unsubscribe from the list, send an email to:
> LIST-signoff-[log in to unmask]

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