by John Boyd

Success secrets of foreign IT companies

I was recently asked to moderate a discussion on the secrets of successful foreign IT companies in Japan. The topic's broadness gave me reason for pause. Analyzing the success factors of a specific company, a Microsoft, Intel, or Sun Microsystems, is not so terribly difficult. But successful foreign companies across the IT board?

That forced me to sit down and consider a fundamental question. Were there as many "secrets" as there were successful companies? Or was there a single overriding factor that could be pointed to? Let's consider several successful companies from different IT segments.

IBM is the oldest established foreign IT company here. It first arrived in 1925 and returned again in 1949, during the Occupation, before Japanese law forced foreign companies to form joint ventures. As elsewhere, IBM dominated the computer market in Japan during the '60s and into the '70s. But in order to get a manufacturing license and to facilitate imports, Big Blue bowed to government pressure and licensed its patents at a bargain price.

This helped the rise of Fujitsu, Hitachi, Mitsubishi Electric, and others (with much government assistance) and though IBM continues to be quite successful today, Fujitsu has long been top gun in Japan.

Intel Japan has cornered over 90% of the local PC microprocessor market. Yet back in the 1980s, the company struggled to succeed in a protected industry spurning foreign goods. "It was questionable if Intel, or any foreign semiconductor company, could be successful in Japan then," recalled Bill Howe, when looking back on his time as president of Intel Japan during the '80s. Intel had already been kicked out of DRAM memories--a market it invented--by more efficient Japanese manufacturers. Worse, in 1985, NEC launched its V Series: backward-engineered clones of Intel's cash-cow 8086 and 8088 microprocessors.

NEC's chips ran up to 15% faster, and threatened to leave Intel eating silicon dust. But lawsuits eventually halted NEC, while Intel went on to become the world's largest semiconductor maker.

In the latter half of the '70s Apple, Tandy (then Radio Shack), and Commodore dominated the fledgling PC market in Japan by virtue of having no local competition, particularly in software. But by the decade's end NEC, Sharp, Sord, and other domestic PC vendors had won over the market for Japan. They did this by providing computers that could operate in Japanese: first in kana, then kanji. The US PCs used only English.

Later Apple came out with a Japanese operating system for the user-friendly Macintosh; market share zoomed into double digits, and Apple Japan climbed to No. 2 behind NEC. But Apple cooled when Microsoft launched Windows 3.1J and the industry moved to DOS-V, Japan's localized version of the PC AT architecture.

The Unix workstation market has been dominated from the beginning by US vendors Sun and Hewlett-Packard (HP). This domination continues today. Yet HP is just one of a crowd of players in the PC workstation market. Why?

Equally curious, HP is the global leader in inkjet printers, yet it's barely been an also-ran in Japan. Things have begun improving recently for HP, but Epson and Canon between them account for over 80% of the market, according to IDC Japan.

If there is one common characteristic shared in all these success stories, and which is absent from the unsuccessful examples, it's that all the winning companies have a technology edge (or its equivalent) over their Japanese competitors.

IBM was almighty until it licensed out its patents. Apple, Tandy, and Commodore were early winners because nothing else was available. Intel is inside everything, because it sues the silicon off anyone else who tries to muscle in. And Sun and HP are allowed to dominate the specialist niche market of Unix workstations, but Fujitsu and NEC don't let it happen in the larger PC workstation market. HP may lead the world in printers, but in Japan Canon, Epson, and a string of other manufacturers have more or less kept pace with its advances.

The same lack of a clear technology advantage explains why HP, Compaq, Dell, and Gateway hold only second-tier status in the PC market here, and why the appeal of Apple's Macintosh declined once the industry backed a Windows version that provided the Mac's ease of use.

So is it a case of many secrets or one overriding factor? The answer is yes to both. The foreign companies that are successful here all maintain an individual technology edge over domestic rivals.

John says he's all ears if you would like to reveal your own secret of success:boyd@gol.com.

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