Monday, October 1, 2007

Mini review. How Canon got its flash back

Published in 2004, this book is not new. However, it was published by John Wiley Asia in Singapore, so if unlike me you do not periodically check out a Kinokunia book store, you probably never came across it.

How Canon got its flash backHow Canon got its flash back was written by the editorial team of NIKKEI, which stands for Nihon Keizai Shimbun, Inc. and is the Japanese equivalent of Dow Jones here in the U.S.

In my opinion, the title promises more than the book holds, because it is not a critical business review of Canon, as we are used to get when we read similar American books about high-tech companies. In fact, the subtitle The innovative turnaround tactics of Fujio Mitarai would have been a much more appropriate title, because the book is a laudation of Fujio Mitarai.

Indeed, we learn about the positive changes Fujio Mitarai has introduced, like a better integration of the hundreds of companies that make up Canon, the introduction of a consolidated balance sheet, accountability, the ability to get an up-to-date status of the company, and the restoration of lifetime employment.

Here and there the book relates to the reader Fujio Mitarai's thoughts on various corporate governance topics, like the appointment of external directors, the role of auditors, and how you implement meritocracy in a traditional Japanese company.

Regarding manufacturing—which is a key Canon competency—the book explains in detail how cell method and ma-jime (closing the gap) was introduced and how it paid off (Chapter 2).

What we are never told in this book is what happened before Fujio Mitarai. On page 155 we learn that "The rapid appreciation of the yen in 1986 led to a sharp drop in the company's profitability. When this was then compounded by the deflating of the bubble in the Japanese domestic economy, the period from the mid 1980 to the mid 1990s turned into something of a 'lost decade' for Canon."

This concept of the lost decade comes up several times in the book, but we are never given a satisfactory explanation. In fact, the bubble did burst in 1993 and Canon had very rough time, with layoffs and abysmal employee morale. However, this cannot be the whole story.

Reading the book we are left with the impression that the lost decade was more akin to the Warrying States period in Japan, also known as Sengoku period. The book should have a chapter on this lost decade, which should answer the many questions the book leaves open. Indeed, while the book covers in detail the period of Canon's first president Takeshi Mitarai, it is completely silent about the presidents between the founder and Fujio Mitarai: Takeo Maeda (1974-), Ryuzaburo Kaku (1977-), Keizo Yamaji (1998-), and Hajime Mitarai (1993-).

Did they screw up? Where they unable to control the "war lords"? If so, who were these? During the lost decade, when I was asking Canon Inc. employees why something happened, the standard answer was to watch Ran (Chaos) and then I would understand. I got an idea, but I did not really understand who King Lear was and who Hidetora's sons were.

So the book has these strange voids, such as the Central Research Lab being like a magic castle that suddenly disappeared from Atsugi only to reappear in remote Susono in Shizuoka province, beyond Hakone. Was there a carnage like when in 1571 Oda Nobunaga destroyed the Enryaku-ji monastery.

Why was the Central Research Lab not moved to the Shimomaruko campus, like Yamaji did with the Headquarters? From the book we get that the scientists must have been more unruly than Enryaku-ji's sôhei (warrior monks), because there is a whole section entitled "Discipline paramount." Why did Canon have to implement the rule of the Five Ss: proper arrangement (seiri), cleanliness (seiso), orderliness (seiton), neatliness (seiketsu), and discipline (shitsuke), as well as Communal Possession and Functional Beauty?

When the authors write on page 78 that of these shitsuke is the most important, and on page 81 that a dress code had to be drawn up, which forced researchers to wear a prescribed jacked and forbade the wearing of jeans, one must think that these researcher must have been quite an unruly pack. This is difficult to understand when Canon historically had the tradition of cultivating their staff as heros and still continues to do so as evident from their Web site The Minds Behind Magic Special Interview.

Indeed, historically Canon has excelled in virtue of its principle of strategy being a top down process and tactics being a bottom up process. For Canon science and technology have never been intangible assets, but always brains attached to bodies that are nurtured. Today this is exemplified by their Canon Academy of Technology as depicted in the Web site Specialists Cultivating Technology.

Comparing to HP Labs, where the emphasis is on alignment with the Divisions, in Canon's Central Research Lab the emphasis is on the creation of new Divisions (page 156). Thus, one would expect their researchers to be disruptive revolutionaries or sôhei, not disciplined soldiers. Indeed, it contradicts Canon's Thee Selfs concept (page 110): self-motivation, self-management, and self-awareness.

Finally, there is the mystery of the prologue, which chronicles the exit of the PC business. This is described as the divestiture of FirePower. The FirePower system was not a business or consumer PC, it was a workstation. Its architecture with two PowerPC processors and a signal processor made it one of the best imaging systems available at that time, that would have been the ideal platform for embedded systems for a high-end printer and copier architecture.

Equally mysterious is the complete lack of any reference to Canon's competitors, such as Ricoh, Fuji Xerox, Nikon, Epson etc. Without having an idea of the ecosystem in which Canon operates, it is hard to form an overall appreciation of Fujio Mitarai's merits.