The romantic image of the founder-millionaire wearing overalls. tinkering visibly with some mechanical marvel in workshop or lab, is often reality.
So it was with Soichiro Honda, in many ways the least typical of the post-war Japanese economic victors: but simultaneously the most visible archetype of the success of Japanese business culture, though an eccentric one. 'Mr Honda', said one baffled journalist, ' is a management executive who always wears red shirts and tells naughty stories when drinking.'
The drinking was important to Honda. In his early sixties, the great man admitted that he didn't understand computers. The fact that he couldn't keep up with the technology, though, was only one factor in his decision to take relatively early retirement. He also couldn't drink so much sake as before, while in sex his 'powers of doing and recovery' weren't what they had been…' and 'without sex and sake, I should quit the life of an entrepreneur.'
In contrast to Honda, Henry Ford I didn't totally surrender power until death took over the decision, and he was notably abstemious in both wine and women. Yet Honda was known as 'the oriental Henry Ford', and deserved the description. Like Ford, whose first business efforts were littered with failures and false starts, Honda learmt the principles of efficient production quality the hard way. Out of 50 piston rings tested in Honda's first manufacturing venture, only three passed. Not surprisingly, the business failed.
His 1947 notion, to make motorized bicycles with two-stroke engines adapted to run on pine-root extract, was no more promising. Five years later, however, Honda came of technological age. With the Japanese market in recession, Honda invested $450,000 in German, Swiss and American machine tools, reckoning that they were the best in the world. He then 'reverse-engineered' the European bikes he was copying – taking them apart to see how they were made: and discovering that their best was simply not good enough.
European manufacturers believed it was impossible to run motorcycle engines at 15,000 rpm, with even faster bursts. Honda not only proved that you could, but also started to win Grand Prix races all over the world. Super-design went with super-efficiency in production engineering. At Honda's motorcycle plants not a single storeroom existed for parts, raw materials, or finished machines; deliveries went in at one end, and finished bikes, up to one every seven seconds, moved straight on to double-decker trucks at the other.
Building the world's 24th largest company (1993 sales, $35.8 billion) on the pillion of the motorbike is not only a prime economic achievement. It's one that, before Honda demonstrated the method, would have been disbelieved – especially by the established British companies, bearing once-proud names such as Norton, Matchless, and BSA. In the Honda era, their decline and fall ended in pathos, with workers at the once-famous Triumph factory fruitlessly defying the management's efforts to close the works down forever.
Like those benighted British firms, the Japanese car establishment refused to take Honda's car plans seriously – especially when they saw his first, doomed model: little more than a covered motorbike. His vault, from a standing start, to number three in Japan (and number one in America) is all the more remarkable – given that the opposition in Japanese cars was infinitely tougher than the biking Brits. Honda recovered from his false start to build, very deliberately, a 'world car': he undertook deep global research, wrote Robert Shook, into 'everything from road conditions to driving habits.' The result was the Civic.
As in bikes, so in cars. Honda's strength was to be ahead or abreast in all the improvements to the car in his time, from fascias and four-wheel steering to engine and braking systems – even though, atypically for a Japanese company, Honda would not buy in technology. As a top Honda man later explained, 'There are some technologies that we didn't have…But when you buy technology it remains frozen, a foreign thing that is not part of yourself, and in the end you don't know where to go with it.'
It's hard not to see in this philosophy the highly visible example of Soichiro Honda writ large. There's the indefatigable inventor who (as with the non-polluting engine) prefers to create his own technology because, if he leaves tasks to other companies, there will be fewer fields to conquer. The whole secret of Honda was his direct participation in the life of the firm and its employees – much too direct in the early days, to judge by one anecdote.
'A bolt that had been tightened by a young worker made a few more turns when Honda did it himself. "You damned fool. This is how you're supposed to tighten bolts," shouted Honda, as he hit his employee over the head with a wrench.'
While definitely visible, that intervention isn't how the West pictures Japanese management. Honda's partner, Takeo Fujisawa, fitted the pattern better when asked this question by the head union negotiator. 'What do you think of the pay offer you're making to us?' According to author Tetsuo Sakiya, Fujisawa replied that 'The offer is so low, I think it's ridiculous.' The boss went on to admit that 'It is our (management's) fault that the situation has become such that we had to make such a low offer'; predicted that sales would pick up in March; proposed a new pay negotiation at that time; and received thunderous applause.
Honda himself stayed clear of industrial relations (wisely, no doubt, in view of his penchant for hitting workers with wrenches); yet it was he who stumbled on the management style which eventually got the company out of manpower messes for keeps. Honda got angry with 'workers who played baseball on the plant grounds', saying to himself, 'In collective bargaining, they complain about having to work too hard. But when it comes to playing baseball, they do it until they become completely exhausted, even though baseball does not bring a single yen to them. What kind of men are they?'
But then he thought, 'I must recognize that man achieves the highest degree of efficiency when he plays. If someone says he works out of loyalty to the company, he is a damned liar. Everyone must work for himself. Even I work because I like working. I must create a workshop where everybody will enjoy working.' Which is what Honda proceeded to do, not only leading his men by example, but changing the example to one that suited both them and the company.
Visibility isn't only a matter of contact and example between management and men. That between managers and managers is also crucial. One of Honda's successors decided to move the executive suite from the customary top floor to mid-building (so that senior management would spend the minimum time elevating up or down). On that executive floor, there are no separate offices – not even for the chief executive. He sits in a corner at a round desk. The other executives are scattered about the enormous room, also at round desks.
Why round? So that anybody who wants can sit down for a discussion at will. That's eminently practical. But you can't ignore the high and highly visible symbolism of this office layout. Taking the executive suite off the top foor signals that there is no exclusive, literally higher authority. Putting the emphasis on easy access to colleagues signals that involvement figures high in the corporate values.
Then, placing top executives in an open office signifies the intention to have an open style, in which rank and status have no practical importance. The round tables indicate that decisions are only to be taken after full discussion among colleagues who are always on tap. The proximity of the desks establishes that lines of communication are to be short and easily opened. The classic Western office layout, based on the 'behind closed doors' principle, is the antithesis of visibility and delivers an utterly contrasting message.
The Honda message is entiely consistent with the visible example of the founder. In the 'sex and sake' valedictory quoted earlier, Honda revealed that neither he nor Fujisawa had seen any operational papers or attended any operational meetings for the previous ten years. By playing no part in operational management, despite their enormous success and prestige, the two men enabled their successors to go beyond them. That was always their intention, as a banker discovered when he once addressed the pair as follows:
'I think you have an outstanding business going for you. I presume, of course, that you will eventually hand over the company to your sons.' They replied as one man, 'We have no such thought whatsoever.' As Honda explained, with a rhetorical quote, 'If the company belonged to the… family, who would have the motivation to work for the company?'. The unanimity of the partners, on this and other issues, was a powerful force in Honda's success and dates back to a 1949 conversation between Honda and Fujisawa.
Honda was then forty-two; and Fujisawa, four years younger, informed Honda, already known as a brilliant inventor, that 'I will work with you as a businessman. But when we part I am not going to end up with a loss. I'm not talking only about money. What I mean is that when we part, I hope I will have gained a sense of satisfaction and achievement.' A very Japanese wish, but a perfect expression of what business friendship means. They never did part – retiring by mutual agreement on the same day twenty-two years later.
You can get the flavour of their creation from a story about the initial build-up of Honda. It was based on a little, low-powered bike called 'Dream Type D.' The name arose when somebody, at a sake and sardine party to celebrate the prototype, remarked that it was 'like a dream.' At which point, Honda yelled out, 'That's it! Dream!' The story comes form an excellent book entitled Honda Motor: The Men, the Management, the Machines, by Tetsuo Sakiya.
Honda, though, made plenty of mistakes on the road from the Dream to the Civic and beyond. 'Success', he wrote, 'can be achieved only through repeated failure and introspection. In fact, success represents 1% of your work, which results only from the 99% that is called failure.' The errors occurred even in the technology where he was most triumphant, engines. He obstinately insisted, against all contrary opinion in the company, that air-cooled engines, not water-cooled, held the future for cars. Finally, Fujisawa resolved the issue at dinner with his long-time partner. Here's Sakiya's fascinating account of the proceedings:
'They had not seen each other for quite some time and Fujisawa's mind was made up: "If Mr Honda refuses a water cooled engine, this would mean he is following a path different from mine. If the two of us cannot go in the same direction, our teamwork will not function." At the dinner, Honda told Fujisawa, "The same thing can be achieved with an air-cooled engine, but I guess that's difficult for a man like you to understand." Fujisawa replied, "You can do one of two things. You can continue to serve as the president of our company, or you can join the engineers at Honda Motor. I think you should choose now."
'Honda looked unhappy to have to make such a decision, but replied, "I'm sure I should continue to be the president." "Then," said Fujisawa, "you will permit your engineers to work on water-cooled engines, too, won't you?" "I will," Honda agreed. Their conversation had lasted no more than a few minutes, after which the meeting turned into a party with both of them drinking sake and singing old folk songs together. The next day Honda went to the R & D centre and told the engineers, "Okay, now you can work on water-cooled engines."'
Although Honda was never seen to smile when anybody talked about water-cooling thereafter, his surrender was another marvellously visible example to everybody else. Remember, this was a highly combative, competitive man, who hated to give in to anybody or anything, especially a rival. That characteristic, highly developed in the Japanese economy as a whole, has been a major factor behind the national success. In Honda's saga, the greatest example came in the motorcycle wars of the early 1980s.
This domestic Japanese bloodbath began with near-defeat. Yamaha's motorbike sales had pulled tantalizingly close to Honda's: 37% of the domestic market against 38% – and you can't get much closer than that. There was a reason for the rise, as Yamaha's president shrewdly spotted. His words were reported by James Abegglen, a veteran Japan watcher and resident, and George Stalk, Jr., in their book Kaisha: 'At Honda, sales attention is focused on four-wheel vehicles. Most of the best people have been transferred (into cars). Compared to them, our specialty at Yamaha is mainly motorcycle production… If only we had enough capacity, we could beat Honda.'
Suiting the action to the words, Yamaha decided to match Honda new model for new model; then it went for the supreme prize. In 1981 Yamaha announced a new factory that would inside one year take the domestic lead; within two years the upstart would be 'number one in the world.' This was not a threat that Honda could brush aside. Its reading of the situation was as clear as Yamaha's: 'Yamaha has not only stepped on the tail of a tiger, it has ground it into the earth.' Honda adopted a new battle cry: 'Yamaha wo tsubusu,' translated as 'We will crush/break/smash/butcher/ slaughter/or destroy Yamaha.'
The message got across. Whatever Yamaha produced, Honda produced more, until the Japanese islands seemed in some danger of sinking under the weight of unsold motorbikes.In innovation, the counterattack was even more dramatic. In eighteen months, Honda introduced 81 new models, against only 34 from Yamaha. That understated the full impact of Honda's devestating response. Its 81 new models were accompanied by 32 discontinuations. Since Yamaha could only manage three withdrawals, it was outgunned by 113 changes to 37. 'The customer,' says Kaisha, 'was seeing fresh Hondas and increasingly stale Yamahas.'
After a year of blood, sweat and tears, the story had a happy ending – for Honda. The group chairman at Yamaha observed the wreckage and said, 'We plunged like a diving jet. My ignorance is to blame.' The Yamaha motorcycle boss, who had started the wars, now saw reality: 'We can't match Honda's product development and sales strength. From now on I want to move cautiously and ensure Yamaha's relative position.' Personally, he didn't have the chance to pursue this more sensible strategy: he was out, and the great motorbike wars were over.
Those victorious product development strengths are no accident. At Honda, the production of new models and new ideas is thought so important that it's a young man's job. Development teams are selected to match the age group at which the new model is targeted, and engineers in R&D who haven't reached top status by forty are packed off elsewhere – just as Honda packed himself off when he considered that his prime usefulness was over. His successor, a mere 43-year old, in turn made way for a younger man ten years later.
As Rosabeth Moss Kanter has pointed out, a key to Honda's success was that its resident genius used to work directly on new products with the engineers. That was only posible because, as noted above, he and Fujisawa had delegated all operational responsibility. Honda was thus free to concentrate on his vision of the future and to share it visibly with others. The corporate vision statement is like the founder himself, enormously practical:
1. Quality in all jobs – learn, think, analyse, evaluate and improve.
2. Reliable products – on time, with excellence and consistency.
3. Better communication – listen, ask and speak up.
Developing a philosophy built on the experience of a practical engineer, the founding father had created a corporate culture that would go on working towards his objective – nothing less than becoming and remaining the world's best motor manufacturer – long after his own active day. His influence, like the man himself, is still highly visible. And the visibility is inseparable from the success.