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Firsthand View of the Competition on Japanese Study Tour

(This article appeared in Stanford Business School's alumni magazine in the Summer 1987.)

During my two years as an MBA student at the Stanford Business School, hardly a day has passed without some reference to the formidable strength and extraordinary capabilities of Japanese manufacturers. This fact became even more apparent to me and more than 50 other Stanford students and several professors who saw firsthand what the United States is up against. In March we took part in a 10-day study tour of some of Japan's best manufacturing facilities. The tour was organized by the Business School's Manufacturing Club, one of the most active student-run organizations on campus. It was partially sponsored by seven American manufacturers (including General Electric, Honeywell, Inc., McKinsey & Co., Otis Elevator, and Owens-Illinois) and the 10 Japanese companies that we visited.

For me, and I believe for most of the other students—representatives of the next generation of U.S. managers—the trip had a profound effect on our perceptions of manufacturing and the competitive position of the United States vis-a-vis Japan. My feelings during our trip varied from a sense of despair that American manufacturers would ever be able to meet the Japanese challenge to a sense of astonishment at the simple and "unsophisticated" lessons that the Japanese can teach us about manufacturing. Without a doubt, the lessons I learned in Japan will have a significant impact on my management style in the years to come.

Through opportunities presented at Stanford and my own experiences, I have visited some of the most highly regarded examples of automation in the United States. Inevitably I compared what I saw at American factories to what I saw in Japan. The companies on our tour included NEC Corp., Sony Corp., Honda Motor Co., Fuji-Xerox Co., Nippon Steel Corp., Murata Machinery, Ltd., Toshiba Corp., and Mitsubishi Heavy Industries, Ltd.

I was particularly struck by Japanese competitive strengths in three broad areas: the management of people, the automation of factories, and the meticulous attention to detail.

Engineers on the Assembly Line
First, I repeatedly heard Japanese managers—from university-trained engineers to top executives—state that the individual working on the assembly line is the "true engineer." The Japanese believe in and utilize a system that encourages employees, even at the lowest levels, to suggest improvements in the factory's performance. That's quite different from the perfunctory suggestion systems found in many U.S. companies.

Everyone, from the assembly line worker to the top executive, is involved in the manufacturing process. Communication among the various parts of Japanese firms is greater than in U.S. firms because all of the functional areas focus on a single company-wide goal: the manufacture of quality products that "fulfill the needs of the customer." With such a clearly articulated, output-oriented goal, Japanese companies can operate with far fewer people in staff positions.

Second, we found a major difference between how American and Japanese executives view automation. Americans consider automation to be a project with a beginning and an end, while the Japanese see it as a process with a beginning but no end—a simple but powerful concept of constant improvement by incremental change. The Japanese concentrate their attention on a distant goal and begin to take small steps in that direction, continually shifting the goal further out into the future. American manufacturers have a tendency to shoot directly at a target that is achievable today. However, they often end up behind the real target because it has moved and they haven't adjusted their aim. U.S. firms rely on achieving a major breakthrough rather than making steady progress bit by bit.

Another aspect of Japan's automation strategy is the extent to which Japanese firms rely on in-house improvement to their processes and machinery. Just as there is a learning curve for a single production process, there is one for the learning process itself. If the specifications for new or improved machinery are sent out to be handled by an "expert," who then gets the advantage of that learning? Obviously, it's not the employees of the factory, who could learn by doing it themselves. I would argue that firms should keep the learning in-house—it is a competitive weapon!

No Detail Too Small
Third, we found that the Japanese are meticulous in their attention to detail, a characteristic that enhances their powerful strategies of managing people and the automation process. For example, although I expected to be impressed by the good "housekeeping" in Japanese factories, I found myself overwhelmed. Even though the floor space of Japanese factories is more tightly packed than their American counterparts, the sense of order was astounding. The shops were neat. I saw very little extra inventory; no rusting castings piled in a corner. No detail was too small for consideration. Take one alone, and it may not have much of an effect, but take thousands of small details together, and you have powerful medicine.

During the trip, we saw one company that particularly exemplified these points. Fifteen years ago, the firm plunged into a joint venture with a U.S. company to produce analog electronic devices, a radically different market from its core business. Later, the Japanese company decided to move into digital devices. When its American partner balked, fearing the move was too risky, the Japanese firm decided to develop the technology itself.

Although the Japanese company lost money for 10 years, it never fired the project manager. Instead, it continued its development efforts and patiently awaited the payoff, which finally came. Over the past four years the firm has made more money than it had lost in the previous ten; it is now one of the world leaders in manufacturing these devices. What about its former American partner? It lost all of its market share to the new digital units and is now an original equipment manufacturer (OEM) for the Japanese firm.

I learned that the Japanese trust their people and believe strongly that mistakes are part of the learning process. If you fire or reassign a person because of a mistake, you lose the value of that learning. The Japanese believe in the maxim: "Mistakes are gems to be cherished and studied." People are the key to retaining the value from these gems.

Although there is much to learn from the Japanese, there are some lessons I would reject. For instance, some of the assembly lines were running faster than I think is reasonable. As Japan becomes more affluent and the priorities of the labor force change toward greater leisure, manufacturing firms may find it more difficult to continue those high speeds on the line.

Women Undervalued
The condescending attitude toward women in Japan is a major disadvantage for the Japanese and a potential benefit for Americans. The Japanese executives we met, all of whom were men, believe women have no contribution to make in positions of responsibility in business. American companies that want to do business in Japan have a built-in edge if they take advantage of this overlooked resource by hiring and promoting Japanese women into high-level positions.

The idea of American MBA students coming to learn in Japan was so unusual that our group was televised as a feature on Japanese national television. Our hosts, who treated us warmly and graciously, also seemed somewhat bewildered about our reasons for being there. Business schools in Japan are mainly trade schools, not places to educate future business leaders as they are in the United States.

I hope the trip helped to break the stereotype that MBA students are exclusively interested in choosing careers in investment banking and consulting. There is a sizable and energetic group at Stanford oriented toward manufacturing, and I suspect this is equally true at other business schools. In fact, the success of our tour has encouraged MBA students at other business schools to consider taking similar trips. This interest could start a grass-roots trend in which American MBA students adapt the most successful Japanese techniques to American manufacturing.

I don't consider myself cynical and pessimistic about U.S. skills and companies; on the contrary, many of them are excellent. I am concerned, though, that the United States will remain complacent about its position in the global economy and about the decline in its ability to compete in manufacturing. U.S. business and business schools must take stock of the situation and act positively to learn from our successful competitors.

—by Peter Francis

Editor's note: Peter Francis is a second-year MBA student at the Stanford Business School and copresident of the school's Manufacturing Club, which organized a 10-day trip in March to view some of Japan's best manufacturing facilities. A 1974 graduate of Middlebury College, Francis has been interested and involved in manufacturing for a number of years. After graduation, Francis plans to start his own manufacturing company in the Seattle area.