It wasn’t all that long ago that the best electronics in the world came out of Japan. They made the best stereos, had the biggest TVs, and some of the most beautiful consumer electronics available on the market. It was all but impossible for a kid to ask for some kind of gizmo for Christmas that didn’t come out of Japan. But those days are over.
It all kind of started with the iPod. When the iPod burst on the scene most people were still carrying around a book of CDs and some kind of portable CD player. Within a few years the iPod took over the portable music market. One major factor was Apple’s focus on creating an ecosystem for music: iTunes. Up until then the market for digital music was disaggregated and most MP3s were either downloaded illegally or came from ripping CDs.
Today Japanese electronics companies are suffering. Everyone is laying off people. Financial struggles are mounting. The products they do make are of high quality but aren’t competitive. For the longest time Sony made the prettiest computers, but they were pricey. The same goes for TVs. Korean companies like Samsung and LG have figured out the secret to balancing between quality and affordability. The only area where Japan continues to be a leader is in camera technology. Nikon, Canon, and Sony all make some of the best cameras in the world. Sony even makes the camera for Apple’s iPhone. But their leadership is mostly in the high end camera market (Nikon, Canon, Sony, etc) which is arguably not even the consumer space.
So what’s happened to Japan?
To understand what Japan is going through we must first not think of Japanese electronics as a country but just as industry leaders. When a company, or group of companies, sits on top of an industry they are typically slow to embrace change. Think of the big American automakers. When gas prices shot up they were caught with having no quality products that get good gas mileage. They’d been milking profits off huge gas guzzling SUVs and trucks that suddenly no one wanted. The same thing happened to the electronics industry. The likes of Apple and Samsung, and even Microsoft, came along and shook of various markets within the industry.
Japanese electronics companies continued to stick with older business models. The focus was mostly on incremental improvements in existing hardware. But this is why you don’t see any major Japanese companies with competitive tablets or smartphones. Sony was in the best position to capitalize on the changing environment but they missed the boat. Sony makes hardware but also produces content like music, film, and TV. They could have created the ecosystem that Apple, Netflix, and Amazon are controlling today. But because it was new they resisted. Nintendo and Sony continue to try and make dedicated portable game players while Apple with a simple iPod is destroying them as well.
Japan has been dealing with a host of economic issues but Apple has proven a company doesn’t need to suffer just because the country’s economy is. But Japan’s three largest TV makers: Sony, Panasonic, and Sharp have a combined stock market value that is 1/20th of Apple’s alone. Today they’re just trying to survive and are now simply suppliers to Apple. Hardly even competitors.
Is there a lesson for Japan?
Not as a country. The lesson is for any company that finds themselves at the top of an industry. It’s easy to get complacent and fight to keep old business models as the world passes you by. Companies must be willing to reinvent themselves in order to survive. By just continuing to milk the cash cows you’ll eventually find yourself with no grass to feed them.
The danger these days in electronics is Apple. A less than stellar iPhone 5 launch, the loss of their visionary leader, and a constantly peaking stock price leave some to believe their best days are behind them. However this is a company that reinvented itself a decade ago from a computer maker to mobile gadget producer and content distributor. If they always have their eyes on what’s next they can stay at the top.
Read: As Apple and Samsung dominate, Japan’s tech giants are in a free fall (Washington Post)