Fujio Mitarai, President, Canon Corp
December 24, 2004
Unstoppable Canon
Shukan Post
Fujio Mitarai, president of Canon Corp, has succeeded in making the company one of the most profitable in the world.
While he picked up much of his business acumen in the U.S., however, he did not apply U.S. methods to his business in Japan.
Mitarai has consistently exercised his rationalism in running Canon. He maintains the life-time employment system, but has eliminated the seniority system from it.
In the seven years since he has been president, Mitarai's principle has been "selection and concentration in business." During his tenure, Canon's total assets at the current market value increased to 4,400 billion yen, three times as much as when he took over.
Running a huge corporation like Canon, when do you find time for rest?
When I am sleeping.
I assume you must always be under pressure when it comes to making important decisions.
I am not running the company alone. I have other executives with whom I share my thoughts. We all share our views on the direction of the company through discussion.
Companies like Mitsubishi Motors, Kanebo and Daiei are in big trouble because executives could not say no to their presidents. In your company, are there any executives who can do that to you?
Of course, there are. If there were no disagreement from my executives, running the company would be easier, sure, but I am not perfect. I have been making it a rule to ask my employees directly what their ideas are on business strategies. I want them to come up with different hypotheses.
What do you mean?
I have been working for the company for the last 47 years, which has given me much experience and case studies to refer to. Whenever I encounter problems, ideas for a solution based on those past cases come to my mind, from which I develop hypotheses. That's what all employees should do.
Does market research help?
The results of market research come too late. I question myself whether a hypothesis is right or not and present it to my employees for discussion. After that, we can think about market research.
How do you feel about market research?
Market research doesn't help in developing products. Rather, market research gives us some idea how popular our products are among consumers. If we make products based on the results of market research, the products will be similar to those of other manufacturers.
For manufacturers, information on high technology theory obtained from academic associations is far more important. Based on such information, we can develop new products. Then we will advertise those new products to captivate consumers.
When new products are introduced, they will create new markets and eliminate old products. As you can see, 8-milimeter cameras, typewriters and word processors have all disappeared.
If any company decides to make products just by following others, they will never win. U.S. business leaders are suffering in this respect.
What were your early days in the U.S. like?
I moved to Canon USA in 1966. At that time, Canon USA's market share in the U.S. compact camera market was the lowest. Soon, Canon developed the AE-1-model camera whose body was plastic and which had a mounted CPU. It was light and had a price advantage as well. I thought that the new camera had a great chance. I planned to do a large advertising campaign.
At that time, camera manufacturers were mostly advertising in trade magazines. People criticized me, saying I did not know the U.S. market. At that time, Canon USA had a $38 million deficit and I spent $1.5 million for advertising.
The result was that the new product made a big hit on the market. It was ranked the No. 1 selling product.
What differences do you see between Japanese management and U.S. management?
Mainly in speed. In a U.S. corporation, a CEO has strong power and a top-down decision-making process prevails. The speed of management is important in the U.S.
In Japanese corporations, many of them still have the seniority system. Presidents of those companies reward employees who have worked the longest for their companies. Also, they have a system for consensus management, which eliminates the need for employees to take responsibility.
Since Japan's bubble economy burst, experts have been saying that U.S. management methods are superior and that Japan should learn from them. What do you think?
I don't agree. Labor in the U.S. is consistently moving. The better they are, the more frequently they change companies in order to grow. Top management of U.S. corporations needs high-quality employees to pursue their successful business with high speed management in order to win competition.
If those high-quality employees leave their companies, top management can no longer pursue their business plans. Of course, they can hire capable employees frequently and organize good teams for winning short-term competition.
On the other hand, Japanese corporations can pursue their businesses based on long-term plans. Their employees can be trained on a long-term basis. U.S. business leaders are learning from Japanese management.
Are you saying that Japan's life-time employment system is good?
Yes, it is. However, if the life-time employment system is combined with a seniority system, it would be disastrous. Those companies will lose vitality. Canon has a life-time employment system but we have a salary system for employees based on performance.
Do you see Japan having a mobile labor force?
No. Canon has allocated 200 posts to be filled from outside. In reality, we hire only 50 such employees because we cannot find qualified workers among them.
Canon is by far the leading digital camera maker in the market today. But in the beginning, you were behind. To what do you attribute your success?
We had found that our company had 270 patents in digital camera-related technology, which was the largest in the industry. I created a new division directly responsible to me in order to develop digital cameras. I gave them a sufficient budget for the year and ordered the division to develop a new engine for processing pictures. As I expected, the division developed a super engine. The final product was the IXY-G model and it became the No. 1 selling product on the market.
Do you think the digital camera market is saturated?
Sales of digital cameras more than doubled in 2003 and 2004. Research shows that 70% of families in Japan have a digital camera. Some digital camera manufacturers have excessive stocks of products.
Canon's sales of digital cameras increased 70% in 2004. We are still doing unusually well. It is a reasonable view to suggest that market is about to mature. However, I can still see room for growth.
Where?
With the expansion of broadband Internet connections, the market will be geared more to video pictures from static pictures. NTT has plans to change normal telephones to TV telephones at home.
In the near future, human communications will be made though video pictures on TV units. If the time comes when many families are watching video pictures on Sony TVs and only their printers are Canon, it will disappoint me a lot. Canon must be also the center.
This year, your company built a new plant in Oita Prefecture. Why didn't you build it in China?
I was looking at the company in 5-10 years' time. Suppose we manufacture 50 million units of a certain product a year and the production needs 5,000 laborers. If we double production in five years, we have to increase our labor to 10,000. Even if we build a plant in China, we will not be able to enjoy profits because labor costs in China will have to be high. Investment in a new plant in China would be a waste.
Are you saying that you do not need China for production?
The Chinese market is attractive. The income of the Chinese people will rise, which will boost their purchasing power. In my view, China is not for production but for selling products.
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