‘The 20th Century’s Most Remarkable Entrepreneur’ – I

Am back on Marketer’s Kaleidoscope – after 67 days. No blogger worth his salt (keyboard ?) likes to miss posting regularly. No excuses to offer really. To make up, dear reader, here’s a long but inspiring piece, in two parts :

I recently read a couple of biographies of business people that I found stimulating. The first is ‘McDonalds Beneath the Arches’, a 1994 account of McDonalds. 16 years after it was first written, it still ranks on Amazon.com as the best-selling business history of McDonalds, ahead of about half dozen other histories. More on this in subsequent posts.

The other book I have just read, not strictly a biography though, is Matsushita Leadership by John Kotter, a long-time HBS Professor on Leadership, and probably better known for his work on change management. The book’s full title ‘Matsushita Leadership : Lessons from the 20^th century’s most Remarkable Entrepreneur’, says it all.

Konsuke Matsushita (KM) created a corporation (Matsushita Electric Industries or MEI) that we best know for it’s brands National, Panasonic and Matsushita; in some ways it was Japan’s GE. When I was growing up, our family’s first-ever VCR, DVD player, heating iron, camera and music system were more often than not a National or a Panasonic; these were more affordable than a Sony.

When Kotter wrote this book, in 1997, MEI was a $ 65 billion corporation. Today, it’s known as Panasonic Corporation.

In his own country, KM is rated more highly than all other Japan entrepreneurs, as this survey by Time magazine in Japan in 2006 seems to indicate.

Succeeding against all odds

Matsushita was born in 1895 in a village near Osaka. His family was at first well-to-do but his father became bankrupt when KM was four. Penury i.e. extreme poverty caused a halt to KM’s studies: he eventually never studied beyond the 4^th Grade. His parents sent him to a neighbouring town to work on a bicycle shop when he was just nine, here, here he put in 16 hours a day.

Disease claimed much of his family. By the time he was 25, he had lost all seven of his siblings , he lost his parents too at an early age. Later, he lost his only son, while only a toddler. KM himself had a sickly constitution for many years – with high BP, insomnia and other ailments.

Electricity was being rolled out in Japan, as it was in many parts of the world, in the early part of the 20th century. Drawn in by this new technology, at age 15, KM went to work as a wiring technician for a company that was doing the electrification of Osaka city.

And by 22, he had wired thousands of homes and businesses and was an electrification expert! Hard work and performance duly led to his promotion to inspector. This role, unlike his technician job, however, did not require him to work hard. He also designed an improved bulb socket but his boss was not impressed. These matters frustrated him, so much so that he fell ill and quit.

“The same pattern was to repeat itself for three decades. With too much success, he seemed to fall ill. When a difficult challenge or problem emerged, however, he would recover”.

Along with his wife, his 14 year old brother-in-law and two ex-colleagues, he now set up a workshop in his home to make a better bulb socket. None of these five people had even completed high school, they were ordinary folk with no ‘contacts’ and none knew how to make the socket! The starting capital was just 100 yen. They worked round the clock. After initial market rejection, the product got some  acceptance. Within a year, the business grew to eight people and four products.

Incidentally, this same brother-in-law, Toshio Iue, after WW II branched out to found Sanyo Corporation. Sanyo became a subsidiary of MEI.

KM’s first mass success was with a bullet shaped bicycle lamp that had thirty to fifty hours battery life as against the usual two or three hours.

Entrepreneurship & unconventional strategies

In 1929, Japan got hit by the global economic depression, the same one which rose in the U.S. MEI had to consider whether it should lay off workers. Instead, KM called a meeting, said no one will be laid off, but “will you please help us sell the unsold stock”? Hundreds of factory workers set off on cycle for different locations to sell. Within a few weeks, the finished goods were cleared.

Clever entrepreneurship is what led to his success in the early part of his career. MEI pioneered mass production and mass marketing, decades ahead of other Japanese companies. Advertising and savvy sales promotions were used as early as the 1920s, to create the National brand. At a time when distribution was exclusively in the hands of wholesalers, the company set up it’s own distribution; this was unusual among Japanese companies at that time.

MEI was one of the first corporations worldwide to deploy divisional management; doing so enabled it develop a leadership pipeline (General Motors was the first company to ever do so – in 1921 but MEI this so independently in 1933). Customer focus, speedy product development of low priced products and good employee practices were hallmarks of these early years.

An idealistic mission statement

By 1932, a full 15 years and 1000 employees later, MEI was now at a stage where clever entrepreneurship was no longer enough. New approaches were required for it to scale. That year, some soul-searching later, KM formulated a mission statement. That statement, many years later, still inspires some incredulity.  Coming from him, it was believed, as KM always stood by what he said.

He said: “The mission of a manufacturer (like us) should be to overcome poverty, to relieve society as a whole from misery, and to bring it wealth”. (There was a more detailed value statement too.) This he said meant making products that are valued, plentiful and yet cheap, like, he said, tap water. And this was a goal that could take a very, very long time. He said, let’s give it 250 years !

In other words, MEI would make profits only by making products which people could afford. This far-reaching humanitarian goal, says author Kotter, helped anchor MEI and prevented MEI from becoming arrogant; too many companies grow arrogant as they become successful. It made work a calling. Mission statements still have a pride of place in this organization; there is a long one in 3 chapters in place now. Here’s my favourite extract.

Cooperation and team spirit

We will pool our abilities to accomplish our shared goals. No matter how talented we are as individuals, without cooperation and team spirit we will be a company in name only.

Don’t remember seeing such mission statements for American or Indian companies.   

There were other actions by which KM expressed his character and individuality. In doing so, he went against Japanese culture.

Rising from the ashes of Second World War

In World War II, MEI manufactured ships and many other products for the Japanese military. When Japan surrendered, MEI had 26,000 employees across 67 plants. The Allied Forces did not take kindly to MEI’s role:  it now paid a price, as did other big firms that were involved. They were subjected to strict production quotas, many plants were seized. Eventually, in 1947, KM and his Directors were themselves purged from the company. MEI as well as KM personally went into deep debt. The company was now down to about 8,000 people.

Paternalism

The Allied Forces who ran Japan w.e.f. 1945 also encouraged labour to form unions, a first for the country. Most company presidents kept their distance from these entities because they tended to be anti-company. Matsushita was the only one, it is said, who acted otherwise. He gatecrashed the inaugural union meeting of 4,000 workers and asked to speak. He spoke for three minutes and said he thought management and union could actually work together, and apparently made the right impression .

For later – in 1947 – when he was purged (see above) from his own company by the Allied Forces, this labor union gathered fifteen thousand signatures and asked the authorities that he be reinstated. Once again, the unusual thing here was that other company unions were asking for their business leaders be purged. This was the only case where the workers wanted the leader back.

The company lost full five years post the war before things went back to normal.

Opening up to the world

The war taught Japanese businessmen that the U.S. & Europe were technologically more advanced. KM himself emerged from the war a stronger person. In 1951, at the age of 56, he traveled abroad for the first time (to New York). This started his worldwide expansion of MEI.

As it grew overseas, the company faced bigger, stronger competitors. While many factors helped MEI compete, the biggest were a couple of attitudes viz. the openness and willingness of the company’s management to absorb new technology, keenness to learn from others and humility before the customer. There was never a trace of hubris or the ‘NIH syndrome’ (hubris = overbearing pride; NIH = not invented here ).

What emerged instead was a very adaptive corporate culture.

Raising the bar : global practices & benchmarks

In 1956, KM set the goal of quadrupling sales in five years. He said there is nothing called impossible, let us use ‘collective wisdom’ from within and outside the corporation. He also tied such big goals to compelling ideals, in this case .

In 1960, he asked for the company to become the first in Japan to shift to a 5-day week and do so while keeping wages at the same level (in effect increasing costs by 20%). In workaholic Japan, this was met with incredulity.

It took them five years, but by 1965, they increased productivity sufficiently to make the 5 day week happen. MEI employees become the envy of all in Japan.

In 1967, he felt time had come for Japanese companies to shed their low wage advantage. He initiated steep wage rises; by 1972, MEI’s wages equaled the average U.S. wage. Like the 5-day week, this also led to MEI successfully finding significant productivity methods to maintain profitability.

In 1977, again going against existing traditions of corporate Japan, he appointed someone who was 25^th in seniority and the second least senior of 26 director-level executives, as the next President.

The golden years

In his sixties, seventies and eighties, he took on totally new careers. His goals became increasingly social and humanistic over time.

He wrote books (he authored forty six in all from ’53 to ‘90) on nation-building, on human nature and on management. He worked actively on a non-profit institute called PHP (Peace Happiness & Prosperity for all). He set up a School of Governance to try to reform Japan’s governance and politics. He spent hugely on philanthropy projects, especially for children. He donated a large part of his wealth. He founded the Japan Prize, possibly the world’s second most prestigious honour for technological achievement (after the Nobel).

He was up and about till 1989, till he was 94.

What made him so successful ?

While extremely hardworking, Konsuke Matsushita was not particularly talented, says Kotter (quoting KM’s own brother-in-law Iue, the guy who founded Sanyo). Nor did he have connections, formal education (4th grade, remember!) or a striking personality. He never grew taller than five feet five inches nor weighed more than 135 pounds. He didn’t excel at public speaking, and in later years his voice grew increasingly frail. He rarely displayed speed-of-light intellectual skills or warmed an audience with hilarious anecdotes. He suffered ill-health for the greater part of his working life. He was prone to flashes of anger. (And while on his frailties, yes, like many Jap businessmen of his time, he did keep a mistress).

How then did such a person of such an ‘average’ background generate such vast accomplishments over his lifetime, as a businessman and a leader, and later on as an author, educator, philanthropist and management innovator ? In author Kotter’s opinion, these accomplishments in totality outshine those of other leading 20th century entrepreneurs like Honda, J.C. Penny, Sam Walton and Henry Ford, thereby qualifying Konsuke Matsushita for the title of  “the 20^th century’s greatest entrepreneur”.

Answers to the above question and more in the next post..

P.S. : I found the book out of stock in Mumbai bookstores, I got my copy courtesy Amazon.com and a sister visiting from the U.S.

Tagged as: entrepreneurship, Japanese management, Konsuke Matsushita, leadership, Matsushita, MEI, Panasonic