mojo@flab.flab.fujitsu.co.jp (mojo) (07/10/90)
Recently, a document called the "Red Paper" has been
making quite a hit in Tokyo on CompuServe, and on the Japanese
PC Network, NiftyServe. The "Red Paper" was written by Bill
Totten, the President of K.K. Ashisuto, the largest distributor
of independent software products in Japan. It discusses his
reasons for believing that US software companies are about to
lose their competitiveness in the Japanese software market, and
perhaps, eventually, in the world market.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
RED PAPER$@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!(J
ARE WE ABANDONING OUR COMPUTER INDUSTRY TO JAPAN? $@!!!!!!(J
$@!!!!!!!!!!!!!!!!!!(J
I call this a "red" paper because red is the color I most
associate with danger. I believe that the United States is in
danger of abandoning another vital industry to Japan. This is
its computer industry, both computer hardware and computer
software. Abandon. Surrender. Thrown away, not taken away.
Not stolen. Not elbowed aside by artificial means, simply
surrendered.
I see the same pattern of abandonment and surrender now
beginning in computers that has occurred before in such
industries as motorcycles, automobiles, consumer electronics,
office equipment and semiconductors. The first products
American companies let go to competition are the low-end,
inexpensive products. The first markets they let go are foreign
markets. But surrendering the inexpensive products and foreign
markets usually are their first steps down the relentless path
toward losing the more lucrative products and their own home
market. $@!!!!!!!!!!!!!!!!(J
The danger to our computer industry is particularly life
threatening, because computers are critically vital to U.S.
industry in general. We are not talking about "Toys-R-Us"; we
are talking about a critical, strategic industry.
The danger comes from the way American computer
manufacturers and software houses are running their businesses
and treating their customers, not from any "targeting" of their
industry or other conspiracy by the Japanese. This danger can
be avoided only if American computer companies perceive the need
to correct the way they are running their businesses and
treating their customers. And, act on that life saving
perception. Now, while there still is time. Blaming or bashing
the Japanese will not help. Clyde Prestowitz, Jr., put it
clearly in twelve words: "The U.S. doesn't have a Japan problem.
It has a U.S. problem."
I am an American citizen, and a permanent resident of
Japan. I have lived in Japan for twenty-one years, since 1969.
I co-founded and am the president of K.K. Ashisuto, a Japanese
company that publishes computer software products and
distributes them in Japan. We have 625 employees. Our revenues
last year were nine billion yen, 95% from software products we
imported from the United States. Our products range from the
least expensive for the smallest personal computers to the most
expensive for the largest corporate computers. From products
selling for less than $100 to products selling for most of a
million dollars.
I see this danger because it affects my business,
increasingly, every day. I am worried about it. As a
businessman, I want to see a strong and competitive American
economy. As an American citizen, I want to see a strong and
competitive American economy. As a resident of Japan, I want to
see a strong and competitive American economy. So does the
world. $@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!(J
This "red" paper is intended as a warning. It is organized
as follows:$@!!!!!!!!!!!!!!!!!!!!!!!!(J $@!!!!!!!!!!!!!!!!!!!!!!!!!!!!(J
$@!!(J
1. It begins with some comments on "Japan bashing",
because I believe there is too much of this. I also see too
much "America bashing". To what useful end are either except to
win elections and sell books and newspapers? They prevent us
from seeing the real problems we need to talk about and solve,
and they are poisoning our vital relationship with our most
important ally. Terms like tilted and level "playing fields"
presume opposing teams. The U.S. and Japan compete but are we
not really on the same team? $@!!!!!!!!!!!!!!!!!!(J $@!!!!!!!!!!!!!!!!(J
$@!!!!!!!!!!!!!!!!!!(J
2. It discusses why I believe, from my own twenty years of
business experience here, that Japan's market is an open market.
$@!!!!(J 3. It describes monumental changes taking place in Japan
that are forcing Japanese business executives and policy leaders
to look more critically at the computer industry and demand more
from it.$@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!(J
$@!!!!!!!!(J
4. It discusses how the American-dominated computer
industry has failed to satisfy crucial needs of its customers in
particular and society in general.$@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!(J
$@!!!!!!!!(J
5. It describes a Japanese computer industry that is $@!!!!(J
emerging to satisfy crucial needs not being satisfied by the $@!!(J
American-dominated computer industry.
6. It warns of the threat that this newly-emerging $@!!!!!!(J
Japanese computer industry poses to the established, entrenched
American-dominated computer industry.
7. Finally, it recommends actions that American computer
manufacturers and software suppliers must take if they want to
maintain their leading position in the world's markets. $@!!!!!!!!(J
$@!!!!!!!!!!!!!!!!!!!!!!!!!!(JJAPAN BASHING$@!!!!!!!!!!(J
The cover story of the April 2nd issue of Newsweek said
that Japan thinks of America as a "Nation of Crybabies". In
many ways, so do I. $@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!(J
$@!!!!!!!!!!(J
I think most American complaints about trade with Japan
are wrong. Most complaints are from those who have failed here
because they have not tried hard enough or smart enough. For
example, Donald Kendall, the creator of today's Pepsico,
complains that Japan's market is closed. Meanwhile Coca Cola $@!!(J
sells 60% of all carbonated soft drinks sold in Japan. If Coca
Cola does so well, why does Mr. Kendall blame Japan for Pepsi's
lack of success there? $@!!!!!!!!!!!!(J
Other complaints are from persons like Lee Iacocca of $@!!!!(J
Chrysler whose real aim appears to be to reduce competition $@!!!!(J
within the United States from Japanese companies. If Iacocca $@!!(J
really wants to sell Chryslers in Japan, why does he not produce
right-hand-drive vehicles? Japanese auto makers produce the $@!!(J
cars they want to sell in Japan with right-hand steering wheels
and the cars they want to sell in the United States with left-$@!!(J
hand wheels. European auto makers, which sell 90% of the $@!!!!!!(J
automobiles imported into Japan, make similar efforts. But
Chrysler does not. And those successful European auto makers $@!!(J
have built nationwide distribution and service networks in
Japan, while Chrysler has not. That is part of the reason why
Volkswagen-Audi, BMW and Mercedes Benz each sold more twice as
many automobiles in Japan last year as our entire "Big Three" $@!!(J
automakers combined. They each also sold more than thirty times
as many cars in Japan as Chrysler last year. Even though $@!!!!!!(J
Chrysler increased exports to Japan by 119.6% last year, twelve
other companies each exported more than four times as many cars
to Japan. Chrysler's playing field must be tilted by its own
mirrors. $@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!(J
$@!!!!!!(J
Other complaints are from politicians who seem to see $@!!!!(J
bashing of Japan as a good ploy to win elections. They seldom
mention that Japan consistently buys more U.S. products than any
other foreign nation save Canada. When they complain about $@!!!!(J
agricultural trade, they usually do not mention that Japan buys
nearly 70% of all the beef exported by the United States. Or $@!!(J
that Japan is, by far, the biggest foreign market for American
citrus fruit. $@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!(J
$@!!!!!!!!(J
And then there are the well-meaning bureaucrats and
scholars who seem to believe, sincerely, that most American
citizens are idiots not capable making their own decisions.
These elitists want the government to decide what its citizens
should buy from whom.$@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!(J
$@!!!!!!!!!!!!!!!!!!!!!!(J
Not all American complaints about trade with Japan are $@!!!!(J
wrong. Some are accurate. Japan has its share of business $@!!!!(J
persons who blame their own failures on others, or who try to
use their government to prevent competition from abroad. Japan
also has its share of politicians who are far more interested in
winning elections than in truly serving their constituents. And
it has its own elitist government officials who sincerely do not
trust Japanese citizens to make their own decisions. These $@!!!!(J
Japanese elitists, for example, once did not trust their
baseball players to choose safe baseball bats. Nor trust
Japanese snow to accept foreign skiis. And even today they do
not trust housewives to choose between foreign and domestic
rice.
I believe much of the ugly talk about trade problems
between the Japan and United States is irrelevant, because it
will not help American companies sell their products in Japan or
compete with Japanese companies outside Japan. And most of this
"Japan bashing" is dangerous, because it deflects attention away
from the real issues and problems that must be addressed and
solved to sell successfully in Japan and to compete successfully
with Japanese companies outside Japan.
JAPAN'S MARKET IS OPEN. WIDE OPEN$@!!(J $@!!!!!!!!!!!!!!!!!!(J
$@!!!!!!!!!!!!!!!!(J
Again, I am an American. I have lived in Japan since 1969.
I co-founded K.K. Ashisuto, a Japanese corporation, in 1972 to
publish and distribute software products in Japan. We do not $@!!(J
write software. Rather, we publish and distribute software that
others have written. We have done well. $@!!!!!!!!!!!!!!!!!!!!!!(J
$@!!!!!!!!!!!!!!!!(J
We are, by far, the largest distributor of independent $@!!!!(J
software products in Japan. By "independent" I mean independent
of the hardware makers; products that run on various brands and
sizes and models of computers. By "software products" I mean $@!!(J
ready-made software that has been packaged for sale and use "as
is" off the shelf. Like books and records. We sell about one-
half of the independent software products sold for use on large
computers in Japan. That is about 15% of all software products
used on large computers in Japan. We have done so consistently
for many years. Nearly all of Japan's major corporations use
one or more of our products. So do numerous universities,
government agencies and other large organizations.
$@!!!!(J We began selling software products for personal computers
only a few months ago, in September 1989. Our five products $@!!(J
already are the 1st, 3rd, 7th, 9th and 10th leading sellers in
Japan. Each is the unit sales leader in its category. The
latest survey by The Computer magazine shows that we already
have captured 24.1% of the market for PC software products.
That is, nearly one out of every four units of personal computer
software products sold in Japan is one we publish and
distribute. Less than a year after entering this market! There
was no genius, magic or mirror involved. We published, priced
and offered products to fit this market. We did not thrust a
take-it-or-leave-it product or exorbitant prices on the market,
and we have not tried to extract excessive royalties from our
dealers.
Altogether, we sold over nine billion yen of software
products in 1989. We imported 95% of those products from the $@!!(J
United States. We currently have 625 employees. I have found
Japan to be a wonderful place to live and a great place to sell
American products. $@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!(J
$@!!!!!!!!(J Japan is a difficult place to do business only if you
do not want to bother learning its language. Or if you do not
want to bother learning and adapting to its social and business
customs. Or if you do not genuinely like the persons you deal
with. Your customers, employees and suppliers. Or if you are
unwilling to adapt your products to the market. Or provide the
level of quality or service Japanese expect and demand and get.
Or if you overcharge for your products. Or if you expect
results before you have established your credibility. $@!!!!!!!!(J
$@!!!!!!!!(J But so is any market in any country difficult under
those self-created circumstances. $@!!!!!!!!(J
We are selling American products successfully in Japan
because I have mastered the Japanese language; we sell to our $@!!(J
customers in the way they are accustomed; those customers are $@!!(J
genuine friends; we adapt the products we import to the needs of
the Japanese market; we provide the quality and service expected
in Japan; and we price our products fairly. $@!!!!!!!!!!!!!!!!!!(J
Our success began to come only after we invested nearly
ten years establishing personal credibility and well over five
years establishing the company's credibility. But the success
has been well worth the investment. And the harvest continues.
I think most others who have been successful in Japan
have done the same things we have done. Both foreign and
Japanese. $@!!(JThose who have failed in Japan have not done these
things. There are Japanese losers as well foreign losers. We
hear more from the losers because they cry and scream so loud.
Or get their politicians to cry and scream for them. The
winners usually are quiet because they have nothing to gain by
telling their competitors about the great opportunities in Japan
or teaching their competitors how to realize those
opportunities. Does Macy tell Gimbel? Why should Coke tell
Pepsi? What has BMW to gain by instructing Chrysler? $@!!!!!!!!(J
Our experience is, by no means, unique. Robert C. $@!!!!(J
Christopher's book entitled, "Second To None", provides an $@!!!!(J
excellent compendium of many American business successes in
Japan about which we hear too little. $@!!!!!!!!!!!!!!!!!!!!!!!!(J
$@!!!!!!!!!!!!!!!!(JCATACLYSMIC CHANGES$@!!!!!!!!!!!!!!!!!!!!!!!!!!!!(J
But Japan now is undergoing cataclysmic changes, and
these are having profound impacts on our market and our
business. I think these changes will have far-reaching effects
on the world's computer industry, on trade relations between the
United States and Japan and on the overall economic well-being
of both countries. $@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!(J
The reason for these changes is that Japan's economy is
at a critical juncture.$@!!!!!!!!!!!!!!!!!!(J $@!!!!!!!!!!!!!!!!!!!!!!(J
Japan's economic growth and prosperity has been built on
mass production. Japan has replaced the United States as the $@!!(J
world's leading manufacturer of large volumes of high-quality $@!!(J
products. Forty years ago the United States had the world's
best manufacturing facilities and technology. It produced the
world's highest quality products. Japan's manufacturing
facilities had been devasted by the war, its technology was
antiquated and its quality was so poor that "made in Japan" was
synonymous with cheap, shoddy, inferior-quality merchandise.
But the United States' wages were the world's highest, while
Japan's were among the world's lowest. And the United States
was more than happy to export its manufacturing equipment and
technology to low-wage countries like Japan. $@!!!!!!!!(J
The last forty years has shown what happens when a high-
wage, high-quality country tries to compete with a low-wage,
low-quality country in mass production when both have the same
manufacturing facilities and technology. It loses. The
low-wage country wins. Low wages enable it to capture the low
end of markets where low prices beat high quality. Earnings in
the low end of markets provide the funds to improve quality and
move up and capture the portions of markets that demand higher
quality and command higher prices. Just look at the what has
happened to Japan's motorcycle, automobile, home electronics,
office equipment and semiconductor industries. And what has
happened to ours.$@!!!!!!!!!!!!!!!!!!!!(J
This is how Japan overtook the United States in
industrial and economic leadership. But Japan is as vulnerable
today as the United States was forty years ago. For the same
reasons. Although Japan now has the world's highest quality,
and most advanced manufacturing facilities and technology, its
wages are among the world's highest. And it is exporting its
manufacturing facilities and technology to such low-wage
economies as Korea, Taiwan, Hong Kong, Singapore and Thailand.
And even-lower-wage economies like China and India.$@!!!!(Jmojo@flab.flab.fujitsu.co.jp (mojo) (07/10/90)
Recently, a document called the "Red Paper" has been
making quite a hit in Tokyo on CompuServe, and on the Japanese
PC Network, NiftyServe. The "Red Paper" was written by Bill
Totten, the President of K.K. Ashisuto, the largest distributor
of independent software products in Japan. It discusses his
reasons for believing that US software companies are about to
lose their competitiveness in the Japanese software market, and
perhaps, eventually, in the world market.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
RED PAPER
ARE WE ABANDONING OUR COMPUTER INDUSTRY TO JAPAN?
Part II
Japan's prosperity cannot continue if its economy continues
to depend on mass production.
But the United States's approach of abandoning
manufacturing altogether will not work any better for Japan than
it did for the United States. Japan's leaders do not want to
repeat our failed approach of moving manufacturing off-shore to
low-wage countries. Or our equally-failed "post-industrial"
approach of trying to live off converting money from one form to
another, selling one another advice, taking in one another's
laundry or suing one another. Such a service economy merely
moves wealth from one pocket to another; it does not produce new
wealth. It does not enrichen its inhabitants.
Japan must convert itself from an economy producing large
quantities of a small variety of products to one that produces
much smaller quantities of a much wider variety of products.
This is an information-intensive economy. An economy that must
capture and analyze information on which consumers want what
products, when, where, why and how. It uses this information to
decide what to produce, for whom, when to produce it, where to
deliver it and how to sell it. It is an economy that needs a
lot of timely information to fine-tune manufacturing and
inventories so that small quantities of a wide variety of
products can be manufactured as inexpensively as large
quantities of a small variety of products have been manufactured
in the past. An economy that demands that manufacturers,
suppliers and distributors share and communicate information
effectively and efficiently.
This kind of information-intensive economy can compete
successfully with low-wage manufacturers because it can provide
products that better fit its customers' needs and desires at
prices that are only slightly higher than mass-produced goods.
NEED TO MODERNIZE OFFICES
To convert successfully to such an economy, Japan must and
will modernize its offices. It must and will increase the
productivity and effectiveness of its office workers.
Substantially. Quickly. It probably lags far beyond every
industrialized nation in this. Japan must and will learn to run
its offices as effectively and economically as it now runs its
factories, warehouses and transportation systems. Today, 36
million of the 61 million persons employed in Japan work at
desks. That is 60% of the workforce. But the productivity of
office work is very low.
Japan's factories, warehouses and transportation system are
the most modern in the world. Its factories are powered by
nuclear energy and the work increasingly is done by robots. Its
warehouses are highly automated. Its goods are transported by
super tankers, jet airplanes and 250 kilometer per hour "bullet
trains".
But its office workers use the same paper, pencils,
erasers, scissors and paste that were popular in Charles
Dickens' times. Japan's offices look and operate much the same
as when its factories were powered by fast-running streams and
its goods were delivered by slow-walking horses. For example,
per-capita use of personal computers in Japan's offices is only
one-half that in Western Europe and one-fourth that in the
United States.
Why?
DOES THE COMPUTER INDUSTRY SERVE SOCIETY?
Some leaders think the reason is that the computer industry
is not serving the needs of society adequately. It is not
providing computers that are powerful enough to satisfy the
needs of Japan's offices, small enough to fit into those crowded
offices, easy enough to apply to the needs of Japan's offices
and office workers or priced low enough to use as widely as
needed.
These leaders remember that a major reason why Japan was
able to accomplish its "economic miracle" of the past forty
years is that its automobile, shipbuilding, heavy manufacturing
and other industries were able to obtain high-quality materials
and energy at low prices. Why? Because the suppliers of raw
materials and energy viewed themselves as having a mission to
serve society. To provide the foundations for Japan's economic
rebirth. They sacrificed high profits to provide the best
possible energy and materials at the lowest possible prices to
Japan's manufacturers.
These leaders are beginning to realize that Japan needs a
similar contribution from the computer industry to modernize its
offices and make the transition into an "information-intensive"
society. But, to their dismay, they see an oligopolistic
computer industry dominated by a small number of computer
manufacturers whose avowed goals are to maximize their own
market shares, revenues, profits, return on investment, stock
prices and today's spendable wealth. These computer
manufacturers explicitly base their executives' compensation on
their success in attaining these goals.
These computer manufacturers treat customers as tools to be
used to achieve these goals. How? They invest massive
resources in developing and promoting "proprietary" products
that are intended to "lock in" their customers and "lock out"
their competitors. They consider it normal business practice to
restrict their customers' freedom of choice and sell their
customers as much as they will buy at the highest prices they
will tolerate.
These proprietary computer systems have been so
expensive to build that only a few computer manufacturers could
afford to build them. Most potential competitors are "locked
out". And users find it prohibitively expensive to convert from
one proprietary system to another. They are "locked in". So
this computer industry has few participants, and users have few
choices. This results in a lack of competition that otherwise
would stimulate suppliers to provide the innovative products
that Japan's offices need at prices they can afford.
This industry could be tolerated in Japan when Japan was
able to compete successfully in mass production. But it can no
longer be tolerated in Japan now that Japan must convert itself
into an "information-intensive economy" producing a wider
variety of products in smaller quantities. Japan needs
manufacturers who will produce the tools needed to modernize,
drastically and quickly, its offices and increase the
productivity of its desk workers. At affordable prices.
JAPAN'S ELECTRONICS INDUSTRY TO THE RESCUE
Fortunately, for it, Japan has the world's best and
largest consumer electronics industry. Hitachi, NEC, Toshiba,
Oki, Sharp, Casio, Canon, Ricoh, Sony, Matsushita, Sanyo, Seiko,
Nintendo and others provide the world's most innovative and
highest-quality televisions, stereos, calculators, clocks,
cameras, videos, games, facsimiles and other electronic tools
and toys. And they sell them at the lowest prices -- optimum
prices, an economist would say.
Japan's electronics industry is the world's best and
largest because it is the most competitive. It is competitive
because it is based on standards rather than on proprietary
products. Standards make it easy for new competitors to enter
the industry and make it easy for customers to switch from one
competitor's product to another. The competition stimulates new
ideas for products and new ways to manufacture them more
efficiently. The competition makes the competitors stronger.
Any company that can survive the fierce competition of Japan's
electronics market has the Darwinian strength, will, drive and
corporate character to compete successfully in any other market.
Japan's consumer electronics companies first equipped
Japan's homes, automobiles, wrists and pockets with innovative,
high-quality electronic tools to lighten their workload and make
their leisure time more enjoyable. Then they proceeded to equip
the world's peoples with similar tools and toys.
Now they are turning their attention to Japan's desks and
offices. And they are doing so with standards pioneered in the
United States.
They began by producing personal computers that use
Microsoft's MS-DOS software, which has become the world's
standard for personal computers. Japanese electronics
manufacturers have shrunk the size of personal computers to that
of a notebook fitting easily on the small desks in Japan's
crowded offices. And can be stored easily in a drawer when not
being used. They have reduced the weight of these computers to
about five pounds (2.5 kilograms) so office workers can carry
them around easily, whether ten feet, ten miles or 10,000 miles.
These are not scaled-down computers. They have the capacity and
do the work of acre-size 1960s computers and strong-man "PCs" of
the 1980s.
Competition has driven the price of these personal
computers down to under $1000. As a result, companies now can
afford to buy them for all office workers. Schools can afford
to buy them for their students. And individuals can buy their
own. For example, 575 of our company's 625 employees have a
book-size computer.
Japanese electronics companies now dominate their domestic
market for personal computers. And they have become the leading
suppliers of laptop computers throughout the world.
Japanese electronics manufacturers also have began
supplying "workstations" for office workers who need more power
than personal computers provide, and "servers" for groups of
office workers who need to share both data and expensive
equipment. Here again their products are based on a standard
pioneered in the United States. AT&T's Unix, which rapidly is
becoming the standard software throughout the world for
workstations and servers.
These personal computers, workstations and servers are
beginning to revolutionize Japan's desks and offices. They are
beginning to provide the office productivity that Japan needs to
make the transition to an "information-intensive economy"
producing smaller quantities of a wider variety of products as
efficiently as lower-wage economies produce large quantities of
a narrow variety of products.
Japan's companies will, increasingly, transfer information
work from proprietary computers to standard computers because
the standard computers increasingly do more work for less money.
And so will companies in other countries.
American computer manufacturers are in danger of losing
their worldwide market shares to Japan's electronics
manufacturers. Not because the Japanese "targeted" this
industry, but because Japan's economic health required better
computers at lower prices. And because Japan's electronics
manufacturers have chosen to provide "standard" computers that
enhance competition and widen customers' range of choice instead
of "proprietary" computers that "lock out" competitors and "lock
in" customers. Because they consider "serving" customers the
goal of business while the purveyors of proprietary products
seem to consider "servicing" customers the best way to achieve
their own goals, as Will Rogers used that term to describe
banking services.
PROPRIETARY VERSUS STANDARD SOFTWARE
The difference between "proprietary" computer systems and
"standard" or "open" computer systems lies in the software they
use.
Proprietary computers require their own unique (to them)
software. This software either is developed and supplied by the
manufacturer of the computer or is developed according to rules
and specifications laid down by the computer manufacturer. This
software usually runs only on that manufacturer's computers.
Thus, buying a proprietary computer is equivalent to buying
a stereo system that plays only its own unique audio tapes or
CDs. Think how expensive stereo equipment would be if every
stereo maker had to invest in recording all the music that could
be played on its equipment instead of using the abundant supply
of music available in standard formats. Not many stereo makers
could afford this massive investment. Most of today's stereo
makers would be "locked out" of the industry. The industry
would have far fewer participants than it does today; it would
be far less competitive than it is today.
And suppose you had to replace all of your recorded music
whenever you wanted to switch from one brand of stereo equipment
to another. Your collection of records, tapes and CDs probably
is worth much more than your stereo equipment. So you would not
be inclined to switch. When "your" stereo maker raised prices
for new models, add-ons or enhancements, you would find yourself
trapped. "Locked-in". The stereo industry would be much less
competitive than it is today, our range of choice would be much
narrower and we would pay higher prices for less desirable
products.
As with stereos, most computer users' investment in
software is much greater than the cost of the computers that run
or "play" it. Often ten times greater. And the situation with
proprietary computers is even worse than the stereo analogy.
Why?
Because manufacturers of proprietary computer systems often
design them so that different proprietary software is required
for differently priced models of its computers. Thus, software
that runs on a $5,000,000 computer cannot be used on a $500,000
or $50,000 or $5,000 computer from the same maker. This
prevents users from switching to new, lower-priced models that
can handle the work previously doable only on much more
expensive machines. Unless the user is willing to replace his
existing software, which would be analogous to replacing your
cassettes and CDs to switch to a lower-priced stereo. In other
words, prohibitively expensive. This enables the computer
manufacturers to maintain high profit margins in the face of
rapidly falling prices by preventing their users from taking
advantage of those rapidly falling prices. Nice folks, eh?
Standard or "open" computer systems, by contrast, use
software that adheres to widely-accepted standards. Software
that runs on one brand or model of standard computer usually
runs on many other brands and models. Like the recorded music
we actually use on our stereo equipment. Makers of standard
computers do not need to make heavy investments to create their
own unique software. Therefore, many companies are able to
participate in this industry. Competitors are not "locked out".
Users can switch brands or models and still use the same
software, so they switch more readily. They are not "locked
in". As a result, the industry is as fiercly competitive as the
stereo industry. And, like the stereo industry, this fierce
competition results in rapid improvements in products at rapidly
declining prices. Consumers' heaven.
All of Japan's major consumer electronics manufacturers
have begun making "standard" or "open" computer systems,
personal computers that use Microsoft's standard MS-DOS software
and workstations and servers that use AT&T's standard Unix
software.mojo@flab.flab.fujitsu.co.jp (mojo) (07/10/90)
Recently, a document called the "Red Paper" has been
making quite a hit in Tokyo on CompuServe, and on the Japanese
PC Network, NiftyServe. The "Red Paper" was written by Bill
Totten, the President of K.K. Ashisuto, the largest distributor
of independent software products in Japan. It discusses his
reasons for believing that US software companies are about to
lose their competitiveness in the Japanese software market, and
perhaps, eventually, in the world market.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
RED PAPER
ARE WE ABANDONING OUR COMPUTER INDUSTRY TO JAPAN?
Part III
Japan's computer users increasingly are moving from
proprietary to standard or open computer systems. I believe most
users in most other countries also will move from proprietary to
standard or open computer systems. Japan's consumer electronics
makers have committed themselves to providing standard or open
computer systems. If America's leading computer makers continue
to stress proprietary systems, they will increasingly lose their
shares of the world's computer markets to Japanese electronics
manufacturers. But it will not be Americans losing to Japanese.
Rather it will be closed, proprietary systems losing to open,
standard systems. Because the latter serve users better.
American computer manufacturers can avoid defeat by moving
aggressively to build and sell standard, open systems. If they
do not, they should realize that they voluntarily surrendered
their market shares. Their market shares were not "targeted" or
taken from them.
Many American software suppliers face this same danger.
Those software companies whose strategy is to build and market
software products tied to specific proprietary computer systems
are tieing their own futures to the futures of those proprietary
computer systems. If the proprietary computer systems do not
survive, those software companies will not survive.
JAPAN'S CRITICAL SOFTWARE SHORTAGE
Japan's consumer electronics industry has begun supplying
the computers needed to modernize Japan's offices and increase
the productivity of its office workers. At affordable prices.
They are supplying standard computers that run standard software.
However, this has exposed another problem. A severe shortage of
software. And computers are useless without software to instruct
them to do useful work.
(By analogy, stereos would not be much fun or very useful
for what they do without an abundant supply of recorded music.
Radios and televisions would be useless if there were no
broadcasters. As would video players without video tapes.)
The severity of Japan's software shortage is shown by the
following figures. U.S. companies buy sixty percent of their
software in the form of ready-made, off-the-shelf products. Only
forty percent of the software they buy is custom-made for them.
In Western Europe, the ratio is forty percent ready-made to sixty
percent custom-made. But only ten percent of the software
Japanese companies buy is ready-made; fully ninety percent is
custom-made.
This is a tremendous burden on Japan's computer users.
Making anything from scratch is much more expensive and time-
consuming than using ready-made products. Quantity is limited,
quality is poor and the cost is high. And buying custom-made
products is expensive.
(An analogy to making software from scratch are the days
when mom made the family's clothes and dad built the furniture.
And rolled his own cigarettes and distilled his own whiskey. An
analogy to buying custom-made software is to suppose ninety
percent of your clothes, including underwear and shoes, had to be
custom-made. Think of how much they would cost, how few you
could afford and how little money you would have left to spend on
things other than clothes.)
Another indicator of the severity of Japan's software
shortage comes from the Ministry of International Trade and
Industry. "MITI" estimates that Japan needs 600,000 more
software engineers than it now has, and that the shortage will
reach one million software engineers by the year 2000.
Japan cannot modernize its offices and increase the
productivity of its office workers, as drastically and quickly as
it must, unless it finds a solution to this software shortage.
The reasons for this software shortage are easy to
understand. Among other reasons, major Japanese corporations
maintain a policy of "lifetime employment". They hire employees
when they graduate from college and retain them until they reach
retirement age. They tend not to hire and fire as the company's
business goes through peaks and valleys. But they have peaks and
valleys, and their need for personnel rises and falls
accordingly. To cope with these fluctuations, Japan's major
corporations use subcontractors to fill their temporary needs for
personnel.
Most of Japan's software companies were established to
smooth major corporations' fluctuating needs for computer
engineers. These software companies are capable of packaging
their knowhow into ready-made, off-the-shelf software products.
That is what their counterparts in the United States and Europe
do. Making and selling software products should be much more
profitable than custom-making software for each user. Recording
and selling records is a much easier way for an established
singer to make a living than doing dinner shows.
But making products requires an investment. There also is
the risk that the software product will not sell. And the
current demand for custom-made software is so great in Japan that
its software companies can make a good living without making
those investments and incurring those risks.
Japan, essentially, is in a vicious circle. Its software
companies are so busy with custom work that they do not need to
make the investments or incur the risks to build software
products. So they don't. So few software products are
available. So the demand for custom-made software is much
greater than it would be if more products were available. And
the circle continues.
The result of this critical software shortage is that all of
Japan's industries suffer. They are not getting enough of the
software they need to modernize their offices and increase the
productivity of their office workers. This is preventing them
from making the transition, as quickly as they should, into an
"information-intensive economy" that produces small quantities of
a wide variety of goods.
Solving this software shortage is a critical national
problem that Japan must solve. Japanese industries must solve it
to remain competitive. And Japan, as a nation, must correct it
to maintain its prosperity. Japan will solve it.
THE NEED FOR INEXPENSIVE SOFTWARE
In addition to needing much more ready-made software than it
now has, Japan needs that software at much lower prices than it
now has to pay. Software products for mainframe computers
usually are priced at least 50% higher in Japan than the same
products sell for in the United States. And software products
for personal computers usually cost several times more in Japan
than in the United States.
One reason why Japanese use more custom-made software and
less ready-made software than Americans is that software products
are priced so high here.
The high prices being charged for software products in Japan
went largely unnoticed until last year when Japanese electronics
manufacturers begun shipping book-type personal computers. As
pointed out above, these computers are now small and light enough
to put on every Japanese office worker's desk. At around $1000,
they are inexpensive enough. And light enough for office workers
to carry around with them. Every major Japanese electronics
manufacturer has announced or is about to announce a book-type
personal computer. The intense competition is producing a steady
stream of more capable and powerful machines that weigh and cost
increasingly less.
But the high prices being charged for software are
inhibiting the spread of their use. Spreadsheets, wordprocessing
packages and other office productivity software products each
cost almost as much as a book-type computer. Software products
have been so expensive that companies could not afford to buy
them for all their office workers. Basic corporate integrity
prevents them from stealing the software (read: copy without
payment or permission). The social penalties and damage to their
business reputation would be too costly. So they have refrained
from buying personal computers for most of their office workers.
In short, the high prices being charged for software
products have been preventing the spread of computers. This, in
turn, is inhibiting Japanese companies' efforts to increase
office productivity so that they can convert from manufacturing
large quantities of a small variety of products to manufacturing
smaller quantities of a larger variety of products. Thus, the
high prices being charged for software have become intolerable.
Consequently, since Japan is a modern, resourceful nation,
the problem is being addressed. People have begun analyzing WHY
software prices are so high. And they are not limiting their
analysis to the prices of software for small computers. They
have begun to question the prices they are being charged for
software products that run on large computers as well. Strange,
but true, most American software houses are not facing the
question.
SOFTWARE IS A PUBLISHING BUSINESS
This analysis shows that the software products business is a
publishing and distribution business very similar to book and
music and movie publishing and distribution. An AUTHOR writes
the musical score or book manuscript or computer program. A
PUBLISHER packages and promotes it. DISTRIBUTORS sell it. If
the author or publisher or distributor charges too much for its
contribution, one of three things must happen:
1. The product must be sold at a higher price, thus making
it more difficult to sell. (More difficult than if that one
party had not charged too much for its contribution.) This
reduces the market for the product.
2. One of the other two parties must spend less on its
contribution. (Spend less than it would have if that one party
had not charged too much for its contribution.) This reduces the
success of the product because something is not being done as
well as it could have been.
3. One of the other two parties must take a loss on its
contribution. (Make its full contribution but not receive
sufficient compensation to the extent that one party charged too
much for its contribution.) This limits the future of the
business, because no sensible party will continue for long making
its full contribution at a loss.
Further analysis shows that Japan's computer software
publishers have been paying authors too much. Far too much.
Mostly to American authors and owners of computer software.
Most software products sold in Japan to date have been
imported from the United States. The American authors demand
royalty burdens of from one-third to one-half the price Japanese
customers pay for each unit of their software sold. And Japan's
publishers of computer software have been paying such exorbitant
per-unit royalties.
But everyone is losing, for these reasons:
1. Since too much money is paid to authors or owners of
computer software products for their manuscripts, too little
money is left to publish and distribute that software at
reasonable prices.
2. Quality is compromised because publishers cannot
package the products as well as they should. Distribution is
weak because distributors cannot promote the products as
aggressively as they should, and cannot use all of the
distribution channels they should use. And prices are much
higher than in other markets.
3. As a consequence, use of custom-made software
remains much higher in Japan than in other countries, and use of
ready- made, off-the-shelf software products remains much lower
than in other countries.
By comparison, book and music and film publishers, in Japan
or any other country, pay authors of manuscripts or scores only
five to ten percent of the price consumers pay for the book,
record, audio tape, compact disk or movie. Because book and
music and movie publishers pay authors only five to ten percent
for manuscripts or scores, they can afford to spend substantially
more money packaging their manuscripts and scores into high-
quality, attractive products than can the Japanese publisher of
American computer software. The book or music or movie publisher
can spend far more promoting the book or record or film than the
Japanese computer software publisher can spend promoting its
American product. And book and music and film distributors can
spend dramatically more to sell their products than Japanese
publishers can spend to sell American computer software products. mojo@flab.flab.fujitsu.co.jp (mojo) (07/10/90)
Recently, a document called the "Red Paper" has been
making quite a hit in Tokyo on CompuServe, and on the Japanese
PC Network, NiftyServe. The "Red Paper" was written by Bill
Totten, the President of K.K. Ashisuto, the largest distributor
of independent software products in Japan. It discusses his
reasons for believing that US software companies are about to
lose their competitiveness in the Japanese software market, and
perhaps, eventually, in the world market.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
$@!!!!(J RED PAPER$@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!(J
ARE WE ABANDONING OUR COMPUTER INDUSTRY TO JAPAN?$@!!!!!!!!!!!!!!(J
$@!!!!!!!!(J
Part IV$@!!!!!!!!(J
SUICIDAL POLICY
One consequence of the exorbitant per-unit royalty rates
being charged by American computer software suppliers is that
Japanese companies are not getting the high-quality, affordable
software products they need to modernize their offices and
increase the productivity of their office workers. But this is a
temporary, short-term problem. Japan is a modern, resourceful
nation. It perceives and will solve this problem. It already
has begun.
The real, long-term, permanent loser stands to be the
American software industry. It seems to have a death wish.
Until now, it has dominated the world's second largest market,
Japan. But it now is abandoning this market. Surrendering.
Abdicating. Here is how:
1. Most American software companies design their
products strictly for the American market. They ignore the
special needs of the Japanese market when designing their
products. These "special" needs include supporting the written
Japanese language, operating on the computers that are popular
here, supporting Japanese business and social customs and
conforming to Japanese laws. Most American software companies
refuse to design their products to support these needs even when
the needs, and the reasons why they are important, are explained
thoroughly and repeatedly.
2. As a consequence, most American software products
require substantial adaptation before they can be sold
successfully in Japan. But most American software companies
actually INHIBIT such adaptation of their products, in two ways:
a. They refuse to allow their Japanese publisher do the
adaptation. Some think they can do a better job themselves, but
they rarely give it high priority or assign enough resources.
Others simply do not trust their publishers.
b. Second, the exorbitant per-unit royalty rates they
demand make it financially impossible for the Japanese publisher
to adapt the product properly even when the author permits that.
3. American software companies cannot seem to
understand that Japanese consumers expect, demand and get a much
higher level of quality in the products they buy than American
consumers. This includes computer users. American computer
software products tend to be too big and bulky, run too slowly
and contain too many errors for Japanese tastes. And most
American software suppliers inhibit their Japanese publishers
from improving the quality of their products in the same ways
they prevent their publishers from adapting the products to
Japanese market needs:
a. By not allowing it.$@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!(J
b. By charging such high per-unit royalty rates that
the Japanese publisher cannot afford to invest in bringing the
quality of the product up to Japanese standards.$@!!(J
4. Software products usually come with voluminous
documentation explaining how to use them. From several hundred
to several $@!!(Jthousand pages. This documentation all has to be
rewritten in Japanese for the product to sell well here. This
is unavoidable, but it also is expensive. Most Japanese
publishers of American software products compromise here to save
money, because the exorbitant per-unit royalties they pay to the
American supplier do not leave them enough money to rewrite the
documentation properly.$@!!!!!!!!!!!!!!!!!!(J
5. Most American software suppliers force their
Japanese $@!!!!!!(Jpublishers to price the product much higher in
Japan than it is priced in the United States. Anywhere from
fifty percent to $@!!(Jseveral hundred percent higher. Some do this
directly by $@!!!!!!(Jspecifying prices. Most do it indirectly by
setting minimum $@!!(Jper-unit royalty amounts so high that the
Japanese publisher is forced to charge high prices.
6. The exorbitant per-unit royalty rates American
software $@!!!!(Jsuppliers charge prevent their Japanese publishers
from promoting the products as aggressively as they should.
These exorbitant royalty rates also preclude the Japanese
publisher from using all the distribution channels they should
use.$@!!!!!!!!!!!!!!!!!!!!!!!!!!!!(J
The BIG LOSERS from all this are the American software $@!!!!(J
suppliers. It is their products that do not fit the market well
enough, that do not measure up to Japanese quality standards, $@!!(J
that are not documented well enough, that are over-priced and $@!!(J
that are neither promoted nor distributed as aggressively as
they should be. It is their software products that Japanese
users are rejecting in favor of custom-made software.$@!!(J
Most American software suppliers should see this, because
they are not as successful in Japan as the size of the market $@!!(J
indicates they should be.
They also should have the business acumen to see that $@!!!!(J
MAXIMUM per-unit royalty rates are different from OPTIMUM
royalty rates. If American software suppliers want to maximize
their success in this market, they must negotiate royalty rates
that do not stifle or choke-off the publication and distribution
efforts necessary to such success. OPTIMUM royalty rates are
those that facilitate the broadest distribution of a
high-quality product at fair prices. Optimum royalty rates
increase the revenues of author, publisher and distributor so
that they want to continue working together. And they enhance
the reputations of each so that customers will want to continue
buying their products.$@!!!!!!!!!!(J
American software suppliers better wake up and see these $@!!(J
things soon because, if they do not, it will be too late. They
are on the verge of abdicating the Japanese computer software $@!!(J
market to Japanese authors of software products. Right now, in
1990. $@!!!!!!!!(J
$@!!!!!!!!!!(JJAPAN'S EMERGING SOFTWARE PRODUCTS INDUSTRY$@!!!!!!!!!!(J
American software suppliers do not have much time left
to heed the wake-up call and see the flashing amber and green $@!!(J
lights, because Japan's software authors have begun to
understand the situation and use it to their own advantage. $@!!(J
$@!!!!!!!!!!!!!!!!!!(J
Heretofore Japan's software authors found it difficult to
get their software published, even in their own country, because
American software was considered superior. But by offering
their manuscripts at optimum royalty rates, they are getting
published. A few have become best sellers. Each success has
given that author and others more confidence and stimulated them
to write and submit more software for publication.
I am not talking only about teenage geniuses a la Steve
Jobs and Steve Wozniak working in backyard garages. Mammoth,
multi-billion dollar Japanese corporations are turning their
minds and resources to this endeavor.$@!!!!!!!!!!!!!!!!(J
Japanese individuals and companies have begun creating $@!!!!(J
software products that are competitive with the best software $@!!(J
products from the United States. And these Japanese software $@!!(J
products are starting to beat American software products in $@!!!!(J
Japan's market for the following reasons:$@!!!!!!!!!!!!!!!!!!!!!!(J
1. They are comparable in functional capability to the
best $@!!(JAmerican products. Usually not better, just comparable.
Usually workhorses rather than racehorses. But good enough.$@!!!!(J
$@!!!!!!!!(J2. The Japanese products are built specifically to
satisfy the needs of the Japanese market. They support the
Japanese language, run on all computers that are popular in
Japan and fit Japanese social and business customs and
practices. Thus, the publisher does not have to spend time and
money "Japanizing" them. $@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!(J
3. They usually are of much higher quality than
American software products. They are more compact, operate more
efficiently, and contain practically no errors. These Japanese
software products generally have the same kind of quality we
have come to expect of Japanese manufactured goods.
4. The Japanese products come fully documented in the
Japanese language, using terms and examples familiar to every
Japanese person, so the publisher does not have to invest in
translating and rewriting documents written in English for
Americans.$@!!(J
5. Japanese computer software authors rely on their
publishers and distributors to set prices and terms of sale for
their products. Good software publishers and distributors are
experts in determining the prices and terms of sale that will
maximize returns for their authors and themselves.
6. And, as discussed above, Japanese software authors
charge no more for their manuscripts than authors of books or
music or movies. Five to ten percent of what the consumer pays
for the published product. And they make more money, because
the lower royalty rate enables the publisher and distributors to
spend more money to package and sell their products.
Each success with domestic software at these low royalty
rates is convincing Japan's software publishers and distributors
that they are foolish to pay royalty burdens of thirty to fifty
percent for foreign, mostly American, software.
American software suppliers were able to do business in
Japan when there was no domestic competition, but they now are
losing what market share they once enjoyed here.
And you can bet that when the Japanese have secured the
surrender of the Japan market, they will build truly exportable
products -- high quality, competitively priced products built to
fit their target markets.
$@!!!!!!!!!!!!!!!!(JEVIDENCE$@!!!!!!!!!!!!!!!!!!(J
I think our company provides excellent evidence of what is
happening to American software suppliers in Japan. Since $@!!!!!!(J
incorporating in 1972, we consistently have sold about half of
the independent (of computer maker) software products sold in $@!!(J
Japan. During our first sixteen years of business, all of our
revenues came from importing American and European software $@!!!!(J
products. In 1988, 99% of our revenues came from imports and 1%
from selling Japanese products. In 1989, less than 95% of our
revenues came from imports; more than 5% came from selling $@!!!!(J
Japanese products. This year, we are forecasting that less than
80% of our revenues will come from imports and more than 20%
will come from selling Japanese software products. This is a
dramatic change over such a short (two year) time span!$@!!!!!!!!(J
Why has our business changed so dramatically? Because
we increasingly are finding in Japan better products, that fit
our market better and that we can publish and distribute on
better terms than we can find in the United States. An ominous
trend for this piece of U.S. industry. Price, quality and
market fitness. And soon, exportability.
$@!!!!!!!!!!!!!!!!!!!!!!!!!!!!(JSUMMARY$@!!!!!!!!!!!!!!!!!!(J
To summarize, we are seeing cataclysmic changes in Japan's
economy. These changes are causing changes in Japan's market
for computer products. American computer manufacturers and
software suppliers heretofore have dominated Japan's market.
But instead of responding to the changes now occurring, American
computer manufacturers and software suppliers appear to be
abandoning Japan's market. Surrendering. Abdicating. By doing
so, they are creating a vacuum that Japanese must fill. And are
filling.
1. Japan's leaders recognize that their nation's
post-war "economic miracle" came from its ability to excel in
mass production. They also recognize that mass production will
be taken over by lower-wage economies. To maintain its economic
prosperity, Japan must convert itself into a producer of smaller
quantities of a wider variety of products.$@!!!!!!!!!!!!!!!!!!(J
2. This is an information-intensive economy. To
succeed, Japan must modernize its offices and increase the
productivity of its office workers. Drastically. Quickly.
This is an imperative, not a wish.
3. This requires widespread use of computers. Another
imperative.
4. The oligopolistic, American-dominated computer
industry has not provided good enough computers at low enough
prices to enable Japan's companies to modernize their offices,
increase the productivity of their office workers and make the
transition to an information-intensive economy. This industry's
"proprietary" products seem to maximize its suppliers' profits
much more effectively than they satisfy its customers' needs. $@!!(J
5. So Japan's powerful consumer-electronics industry
has begun to supply the computers that Japan's companies need to
modernize their offices. At prices they can afford. It is
doing so by offering "open" computer systems that use standard
software. Like stereos that play standard records, cassette
tapes and CDs.
6. As a result, Japan is now getting from Japanese
companies the computers it needs to modernize its offices. At
affordable prices. And American purveyors of "proprietary"
computer systems rapidly are losing market share in this, the
world's second largest, market. A market they once dominated.$@!!(J
7. Solution of the computer problem has focused
attention on software. Japan has not had enough good software
at affordable enough prices to utilize computers effectively.
For two reasons:
a. Its domestic software companies found such great
demand for custom-made software that they could not justify the
investments and risks required to produce less expensive (to
users) and potentially more profitable (to themselves) software
products. $@!!!!!!!!!!!!!!(J
b. Foreign suppliers charged such high prices for their
software products that Japanese companies could not afford to
use them widely. And those foreign, mostly American, products
often have not fit the needs of Japan's market adequately.$@!!!!!!(J
8. Meanwhile, Japanese have come to recognize that the
software products industry is a publishing and distribution $@!!!!(J
industry quite similar in concept to publishing and distributing
books, records, films and other forms of intellectual property.
Japanese with the talent to create good computer software have
found that they can maximize their own incomes by creating $@!!!!(J
publishable manuscripts and offering them at royalty rates $@!!!!(J
similar to those received by authors of book, music and movie $@!!(J
manuscripts. Royalty rates designed to optimize revenue and $@!!(J
market share for themselves and their publishers and
distributors. $@!!!!!!!!!!!!!!(J
9. And Japanese software publishers and distributors
are, increasingly, finding software written by domestic authors
profitable to publish and distribute. Much more profitable than
lower-quality software written by Americans, which does not fit
Japanese market needs and is burdened by self-defeating pricing
and royalty structures.
10. So Japan now also is getting the software it needs
to modernize its offices. From Japanese companies. At
affordable prices. And America's software industry is
abandoning the world's second largest market. A market they
pioneered and have dominated until now. Surrendering.
Silently. Perhaps without even perceiving there was a contest
or other contestants.
11. In short, Japan is taming the computer industry and
training it to satisfy the needs of its society. It is getting
this industry to supply the computers and software it needs to
modernize its offices, increase the productivity of its office
and manufacturing workers and decision-makers, and complete the
transition to an information-intensive economy. So it can $@!!!!(J
compete stronger at home and overseas and, thereby, maintain its
prosperity.
12. A side effect of this seems to be that American
computer manufacturers and software suppliers are losing their
shares of this Japanese market they once dominated. Not because
they were "targeted" or pushed out, but because they were not
interested in serving the market. Servicing, perhaps, but not
serving. $@!!!!!!!!!!!!!!!!(J
WARNING$@!!!!!!!!!!!!!!!!!!(J
American computer manufacturers and computer software $@!!!!(J
suppliers have dominated the world's markets to date. They have
dominated Japan's market along with the others. They have faced
only slight competition from Japanese companies within Japan and
almost no competition from Japanese companies outside Japan. $@!!(J
They have been as entrenched in Japan as any Japanese company in
any line of commerce.$@!!!!!!(J
But they have satisfied neither the critical needs of $@!!!!(J
Japan's society and economy nor those of its corporations and $@!!(J
individual consumers. They have not provided the products
needed at affordable prices. Hence the Japanese search for
alternate sources for the computers and software they need.
They have found domestic electronics manufacturers ready and
willing to supply the computers they need at prices they can
afford. And they have found domestic authors ready and willing
to supply the software they need at affordable prices.$@!!!!!!!!!!(J
$@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!(Jmojo@flab.fujitsu.co.jp (Mark Johnson) (08/02/90)
About a month ago, I posted a document called the "Red Paper," written by Bill Totten, the president of a software distributor in Kawasaki. The first page is included below, for anybody who missed it. Unfortunately, the copy which I posted apparently had a lot of really ugly formatting noise, when viewed on an American terminal. Even worse, being a first-time poster, I forgot to include a .signature to let you know who was responsible for the mess (also see: disclaimer) :-). If anyone is interested in the falling market share of American software in Japan, but didn't make it through the formatting noise last time, I'd be glad to send you a copy with the noise (I hope) edited out. Here's page 1 again, as a preview. >* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * > > RED PAPER > > ARE WE ABANDONING OUR COMPUTER INDUSTRY TO JAPAN? > > I call this a "red" paper because red is the color I >most associate with danger. I believe that the United States is >in danger of abandoning another vital industry to Japan. This is >its computer industry, both computer hardware and computer >software. Abandon. Surrender. Thrown away, not taken away. >Not stolen. Not elbowed aside by artificial means, simply >surrendered. > > I see the same pattern of abandonment and surrender now >beginning in computers that has occurred before in such >industries as motorcycles, automobiles, consumer electronics, >office equipment and semiconductors. The first products >American companies let go to competition are the low-end, >inexpensive products. The first markets they let go are foreign >markets. But surrendering the inexpensive products and foreign >markets usually are their first steps down the relentless path >toward losing the more lucrative products and their own home >market. > > The danger to our computer industry is particularly life >threatening, because computers are critically vital to U.S. >industry in general. We are not talking about "Toys-R-Us"; we >are talking about a critical, strategic industry. > > The danger comes from the way American computer >manufacturers and software houses are running their businesses >and treating their customers, not from any "targeting" of their >industry or other conspiracy by the Japanese. This danger can >be avoided only if American computer companies perceive the need >to correct the way they are running their businesses and >treating their customers. And, act on that life saving >perception. Now, while there still is time. Blaming or bashing >the Japanese will not help. Clyde Prestowitz, Jr., put it >clearly in twelve words: "The U.S. doesn't have a Japan problem. >It has a U.S. problem." > > I am an American citizen, and a permanent resident of >Japan. I have lived in Japan for twenty-one years, since 1969. >I co-founded and am the president of K.K. Ashisuto, a Japanese >company that publishes computer software products and >distributes them in Japan. We have 625 employees. Our revenues >last year were nine billion yen, 95% from software products we >imported from the United States. Our products range from the >least expensive for the smallest personal computers to the most >expensive for the largest corporate computers. From products >selling for less than $100 to products selling for most of a >million dollars. > > I see this danger because it affects my business, >increasingly, every day. I am worried about it. As a >businessman, I want to see a strong and competitive American >economy. As an American citizen, I want to see a strong and >competitive American economy. As a resident of Japan, I want to >see a strong and competitive American economy. So does the >world. > * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * A brief history of the Red Paper: According to Mr. Totten, whom I spoke with once about a week after I posted the paper, it was originally written as a letter, which he mailed to several US Senators and Representatives. Since he believed it was a good summary of what he saw as a real danger, he gave copies to his friends and business associates, requesting that they forward the document to anyone and everyone who might be interested, "with or without attribution." He assured me that, since he wants the document to receive the largest audience possible, readers are still encouraged to re-distribute it widely. The version which I posted here is an electronic copy, which I received via PC-mail from a friend. The Red Paper has appeared in Japan on CompuServe (in English) and NIFTY-Serve (in Japanese), and was re-written for the July issue of Tokyo Business Today (Tohyo Keizai). Mr. Totten included a copy at the end of his book, "Nihon wa Warukunai"--"Japan Ain't Bad." Totten himself has been appearing on television quite a bit recently -- his book, and his 21 years in Japan, have made him something of a celebrity. Unfortunately, all of this publicity means that nobody's had time to re-write the paper, which was originally written for non-professionals, in a form which provides useful answers for questions like "What features do Japanese consumers need" and "What is a reasonable price structure." I think Mr. Totten's intent was to make software companies think about the problem, and send people to Japan to investigate, not to tell them what to do; the most obvious feature of the Japanese market is that it can't be penetrated from across five thousand miles of ocean. I'd be happy to share my own opinions, but since I write "custom in-house software" (mostly for my own use) instead of "software products," I'm sure somebody else on the Net can give better answers than I can. --- "If it is in a book, it is at least four years old, and I don't have any use for it." -- Henry Ford Mark Johnson Fujitsu Labs Ltd., Japan (044) 754-2639 Disclaimer: I am on temporary assignment at Fujitsu Laboratories. Nothing I say or do in any way reflects the opinions and attitudes of Fujitsu, or of its related companies.
davis@barbes.ilog.fr (Harley Davis) (08/03/90)
In article <8918@flab.flab.fujitsu.co.jp> mojo@flab.fujitsu.co.jp (Mark Johnson) writes:
About a month ago, I posted a document called the "Red
Paper," written by Bill Totten, the president of a software
distributor in Kawasaki. The first page is included below, for
anybody who missed it.
Unfortunately, the copy which I posted apparently had a
lot of really ugly formatting noise, when viewed on an American
terminal. Even worse, being a first-time poster, I forgot to
include a .signature to let you know who was responsible for the
mess (also see: disclaimer) :-).
If anyone is interested in the falling market share of
American software in Japan, but didn't make it through the
formatting noise last time, I'd be glad to send you a copy with
the noise (I hope) edited out. Here's page 1 again, as a preview.
I've reformatted the Red Paper for Latex. If anyone would like the
Latex source, I'd be happy to distribute it. (Unless there are too
many requests.)
-- Harley Davis
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