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Sunday, March 1, 2009

Importance of being a top middleweight


THE RISE OF THE JAPANESE SPECIALIST MANUFACTURER by Ferguson Evans. Palgrave Macmillan, 2008, 241 pp., £60 (cloth)

Reviewed by Anthony Fensom Striking with a magnitude of 6.8, the severe earthquake that struck Niigata Prefecture and its surrounds on July 16, 2007, left a trail of destruction in its wake, killing seven people, injuring over 830 and destroying 500 homes.

But for Japan's powerful auto sector, the main damage came from the brief closure of a single factory in Kashiwazaki, Niigata Prefecture. For over a week, the entire industry was virtually shut down while piston ring maker Riken Corp. worked to resume operations at its key plant.

While they may not be household names, Japan's specialist manufacturers like Riken have come to occupy such key quasi-monopoly positions that their economic well-being is now vital to the national — and international — industry structure. Their achievement of this privileged status and growth as "leading medium-size enterprises" (LMEs) is the study of Ferguson Evans in his wide-ranging debut book, "The Rise of the Japanese Specialist Manufacturer."

Similar to the innovative American companies exalted by Bo Burlingham in his 2005 work "Small Giants," Evans' LMEs are all "utterly determined to be the best at what they do." Although lacking Burlingham's storytelling ability, Evans provides a detailed guide to the development of Japan's own "small giants," from the Meiji Era to the present day.

Drawing upon the work of scholar Hideichiro Nakamura, who developed the term chuken kigyo (literally, medium-strong enterprise), Evans describes the LMEs as leaders in their fields but with typically only 200 to 2,000 employees in Japan. Examples include bicycle component maker Shimano Inc., paint maker Nippon Paint Co. and ceramics maker Koransha. All are said focused on their core competence, with an overriding philosophy of quality and ability to shape their environments.

The bulk of the LMEs are from four industries — chemicals, general machinery, electrical machinery and transport equipment — with many based in regional clusters, such as Higashi-Osaka's byora (fastener) industry. While lacking the worldwide reach of heavyweights like Toyota Motor Corp., they have gained global leadership in fields such as machine tools due to their "accumulated skills and experience of state-of-the-art solutions which few if any can match."

Their importance is due to manufacturing's position as the linchpin of Japan's economy, employing around 20 percent of the workforce and generating much of the nation's exports, productivity growth and value-added.

The impact on the national psyche is seen in the expansion of the monozukuri mentality, the description of which has broadened from the artisan's love of making things into a national consensus worthy of its own university and ministry white papers.

Monozukuri's long tradition and recent political elevation was highlighted in 2005, when the inaugural winner of the prime minister's Monozukuri Nippon Grand Award was none other than the venerable Fukuda Metal Foil & Powder Co., an LME founded in 1700.

Like Fukuda Metal, other LMEs have played their role in Japan's industrialization and are now benefiting from globalization, which Evans describes as a "natural ally" due to the improved speed of information and pathways to market. Yet those seeking to follow their lead will find only clues in this work, which elucidates the LMEs' philosophy without betraying the secrets of their business success.

And all is not rosy for them, with new threats arriving in the form of a declining labor force at home and the growing intrusion of foreign investors, who are said to favor short-term profits at the expense of long-term development and pose the added threat of hostile takeover.

But having withstood the business temblors of the past few centuries, Japan's LMEs appear strong enough to emerge from these new challenges relatively unscathed, testifying to the enduring power of monozukuri.



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