Commitment to core values
Morita came across an American buyer who looked at his radio and said he liked it very much. He said his chain had about 150 stores and he would need large quantities. He wanted a price quotation on quantities of 5000, then 10,000, 30,000, 50,000 and 100,000 radios. Morita was thrilled! But back in his hotel room, he began pondering the possible impact of such grand orders on the small facilities in Tokyo. Sony had expanded its plant a lot in recent years but did not have the capacity to produce 100,000 transistor radios a year and also make the other things in Sony’s small product line. Sony’s capacity was less than 10,000 radios a month. If the company got an order for 100,000 units it would have to hire and train new employees and expand its facilities even more. This would mean a major investment, a major expansion, and a gamble.
As Morita put it : “I was inexperienced and still a little naive, but I had my wits about me. I considered all the consequences I could think of, and then I sat down and drew a curve that looked something like lopsided letter U.”
The price for 5000 would be the regular price. That would be the beginning of the curve. For 10,000 there would be a discount, and that was at the bottom of the curve. For 30,000 the price would begin to climb. For 50,000 units, the price per unit would be higher than for 5000 and for 100,000 units the price would have to be much more per unit than for the first 5000.
He mentioned: “I know this sounds strange, but my reasoning was that if we had to double our production capacity to complete an order for one hundred thousand and if we could not get a repeat order the following year we would be in big trouble, perhaps bankrupt, because how could we employ all the added staff and pay for all the new and unused facilities in the case? It was a conservative and cautious approach, but I was convinced that if we took a huge order we should make enough profit on it to pay for the new facilities during the life of the order....... In Japan we cannot just hire people and fire them whenever our orders go up or down. We have a long-term commitment to our employees and they have a commitment to us.”
Adapted from “Made in Japan,” by Akio Morita
Showing posts with label Management stories. Show all posts
Showing posts with label Management stories. Show all posts
Saturday, August 11, 2007
Management lessons through story telling-Sony’s transistor radio
Understanding vision
Sony’s first transistor radio of 1955 was small and practical – Morita saw the United States as a natural market; business was booming, employment was high, the people were progressive and eager for new things, and international travel was becoming easier.
Morita took his little $29.95 radio to New York and made the rounds of possible retailers. Many of them were unimpressed. They said, “Why are you making such a tiny radio? Everybody in America wants big radios. We have big houses, plenty of room. Who needs these tiny things?”
The fidelity was not as good as a large unit, but it was excellent for its size. Many people saw the logic of this argument, and Morita was happy to be offered some tempting deals.
The following is Morita’s narrative:
“The people at Bulova liked the radio very much and their purchasing officer said very casually, “We definitely want some of these. We will take one hundred thousand units.” One hundred thousand units! I was stunned. It was an incredible order, worth several times the total capital of our company. We began to talk details, my mind working very fast, when he told me that there was one condition: we would have to put the Bulova name on the radios.
That stopped me. I had vowed that we would not be an original equipment maker for other companies. We wanted to make a name for our company on the strength of our own products. I told him I would check with my company, and in fact I did send a message back to Tokyo outlining the deal. The reply was, “Take the order.” I didn’t like the idea, and I didn’t like the reply. After thinking it over and over, I decided I had to say no, we would not produce radios under another name. When I returned to call on the man from Bulova he didn’t seem to take me seriously at first. How could I turn down such an order? He was convinced I would accept. When I would not budge, he got short with me.
“Our company name is a famous brand name that has taken over fifty years to establish,” he said. “Nobody has ever heard of your brand name. Why not take advantage of ours?”
I understood what he was saying, but I had my own view. “Fifty years ago,” I said, “your brand name must have been just as unknown as our name is today. I am here with a new product, and I am now taking the first step for the next fifty years of my company. Fifty years from now I promise you that our name will be just as famous as your company name is today.”
Adapted from “Made in Japan,” by Akio Morita
Sony’s first transistor radio of 1955 was small and practical – Morita saw the United States as a natural market; business was booming, employment was high, the people were progressive and eager for new things, and international travel was becoming easier.
Morita took his little $29.95 radio to New York and made the rounds of possible retailers. Many of them were unimpressed. They said, “Why are you making such a tiny radio? Everybody in America wants big radios. We have big houses, plenty of room. Who needs these tiny things?”
The fidelity was not as good as a large unit, but it was excellent for its size. Many people saw the logic of this argument, and Morita was happy to be offered some tempting deals.
The following is Morita’s narrative:
“The people at Bulova liked the radio very much and their purchasing officer said very casually, “We definitely want some of these. We will take one hundred thousand units.” One hundred thousand units! I was stunned. It was an incredible order, worth several times the total capital of our company. We began to talk details, my mind working very fast, when he told me that there was one condition: we would have to put the Bulova name on the radios.
That stopped me. I had vowed that we would not be an original equipment maker for other companies. We wanted to make a name for our company on the strength of our own products. I told him I would check with my company, and in fact I did send a message back to Tokyo outlining the deal. The reply was, “Take the order.” I didn’t like the idea, and I didn’t like the reply. After thinking it over and over, I decided I had to say no, we would not produce radios under another name. When I returned to call on the man from Bulova he didn’t seem to take me seriously at first. How could I turn down such an order? He was convinced I would accept. When I would not budge, he got short with me.
“Our company name is a famous brand name that has taken over fifty years to establish,” he said. “Nobody has ever heard of your brand name. Why not take advantage of ours?”
I understood what he was saying, but I had my own view. “Fifty years ago,” I said, “your brand name must have been just as unknown as our name is today. I am here with a new product, and I am now taking the first step for the next fifty years of my company. Fifty years from now I promise you that our name will be just as famous as your company name is today.”
Adapted from “Made in Japan,” by Akio Morita
Management lessons through story telling-The Sony Walkman
Leading by intuition
The idea took shape when Ibuka came into Akio Morita’s office one day with one of the portable stereo tape recorders and a pair of standard-size headphones. He looked unhappy and complained about the weight of the system. Morita asked him what was on his mind and then he explained, “I like to listen to music, but I don’t want to disturb others. I can’t sit there by my stereo all day. This is my solution – I take the music with me. But it’s too heavy.”
The following is Morita’s account: “Ibuka’s complaint set me into motion. I ordered our engineers to take one of our reliable small cassette tape recorders we called Pressman, strip out the recording circuit and the speaker, and replace them with a stereo amplifier. I outlined the other details I wanted, which included very light-weight headphones that turned out to be one of the most difficult parts of the Walkman project.
Everybody gave me a hard time. It seemed as though nobody liked the idea. At one of our product planning meetings, one of the engineers said, “It sounds like a good idea, but will people, but it if it doesn’t have recording capability? I don’t think so.”
I said, “Millions of people have bought car stereo without recording capability and I think millions will buy this machine.”
Nobody openly laughed at me, but I didn’t seem to be convincing my own project team, although they reluctantly went along. I even dictated the selling price to suit a young person’s pocketbook, even before we made the first machine.
The tape recorder was a relatively expensive unit, selling for 49,000 yen in Japan, Morita wanted the first models of our new stereo experiment to retail for no more than thirty thousand yen. The accountants protested but Morita persisted. Morita told them he was confident about making the new product in very large numbers and the cost would come down as volume climbed. Morita chose the basic configuration of the Pressman because many parts for the Pressman were available worldwide at service centers, and Sony knew the unit was reliable. Therefore Sony could start out without worrying about any mechanical failure.
Morita continues his narrative: “In a short time the first experimental unit with new, miniature headphones was delivered to me, and I was delighted with the small size of it and the high-quality sound the headphones produced. In conventional stereo with large loudspeakers, most of the energy used to produce the sound is wasted, because only a fraction of it goes to the listeners’ ears. The rest of the sound vibrates off the walls and the windows. Our tiny unit needed only a small tricky of battery power to the amplifier to drive the tiny lightweight headphones. The fidelity that came through the small headphones was as good or better than I expected.
I thought we had produced a terrific item, and I was full of enthusiasm for it, but our marketing people were unenthusiastic. They said it wouldn’t sell, and it embarrassed me to be so excited about a product most others thought would be a dud. But I was so confident the product was viable that I said I would take personal responsibility for the project. I never had reason to regret it. The idea took hold and from the very beginning the Walkman was a runaway success.”
Adapted from “Made in Japan,” by Akio Morita
The idea took shape when Ibuka came into Akio Morita’s office one day with one of the portable stereo tape recorders and a pair of standard-size headphones. He looked unhappy and complained about the weight of the system. Morita asked him what was on his mind and then he explained, “I like to listen to music, but I don’t want to disturb others. I can’t sit there by my stereo all day. This is my solution – I take the music with me. But it’s too heavy.”
The following is Morita’s account: “Ibuka’s complaint set me into motion. I ordered our engineers to take one of our reliable small cassette tape recorders we called Pressman, strip out the recording circuit and the speaker, and replace them with a stereo amplifier. I outlined the other details I wanted, which included very light-weight headphones that turned out to be one of the most difficult parts of the Walkman project.
Everybody gave me a hard time. It seemed as though nobody liked the idea. At one of our product planning meetings, one of the engineers said, “It sounds like a good idea, but will people, but it if it doesn’t have recording capability? I don’t think so.”
I said, “Millions of people have bought car stereo without recording capability and I think millions will buy this machine.”
Nobody openly laughed at me, but I didn’t seem to be convincing my own project team, although they reluctantly went along. I even dictated the selling price to suit a young person’s pocketbook, even before we made the first machine.
The tape recorder was a relatively expensive unit, selling for 49,000 yen in Japan, Morita wanted the first models of our new stereo experiment to retail for no more than thirty thousand yen. The accountants protested but Morita persisted. Morita told them he was confident about making the new product in very large numbers and the cost would come down as volume climbed. Morita chose the basic configuration of the Pressman because many parts for the Pressman were available worldwide at service centers, and Sony knew the unit was reliable. Therefore Sony could start out without worrying about any mechanical failure.
Morita continues his narrative: “In a short time the first experimental unit with new, miniature headphones was delivered to me, and I was delighted with the small size of it and the high-quality sound the headphones produced. In conventional stereo with large loudspeakers, most of the energy used to produce the sound is wasted, because only a fraction of it goes to the listeners’ ears. The rest of the sound vibrates off the walls and the windows. Our tiny unit needed only a small tricky of battery power to the amplifier to drive the tiny lightweight headphones. The fidelity that came through the small headphones was as good or better than I expected.
I thought we had produced a terrific item, and I was full of enthusiasm for it, but our marketing people were unenthusiastic. They said it wouldn’t sell, and it embarrassed me to be so excited about a product most others thought would be a dud. But I was so confident the product was viable that I said I would take personal responsibility for the project. I never had reason to regret it. The idea took hold and from the very beginning the Walkman was a runaway success.”
Adapted from “Made in Japan,” by Akio Morita
Management lessons through story telling-The Boeing 707
Setting Big Hairy Ambitious Goals
Until the early 1950s, Boeing focused on building huge flying machines for the military. However, Boeing had virtually no presence in the commercial aircraft market. McDonnell Douglas had vastly superior abilities in the smaller, propeller-driven planes that composed the commercial fleet.
In the early 1950s, however, Boeing saw an opportunity to take on McDonnell Douglas by marrying its experience with large aircraft to its understanding of jet engines. Led by Bill Allen, Boeing executives debated the wisdom of moving into the commercial sphere. They concluded that, whereas Boeing could not have been the best in the commercial plane market a decade earlier, the cumulative experience in jets and big planes they had gained from military contracts now made such a dream possible. They also realised that the economics of commercial aircraft would be vastly superior to the military market. They were just flat-out turned on by the whole idea of building a commercial jet.
So, in 1952 Allen and his team made the decision to spend a quarter of the company’s entire net worth to build a prototype jet that could be used for commercial aviation. They built the 707 and launched Boeing in a bid to become the leading commercial aviation company in the world. Three decades later, after producing five of the most successful commercial jets in history (the 707, 727, 737, 747, 757), Boeing stood as the greatest company in the commercial airplane industry, worldwide.
Adapted from “Good to Great” by Jim Collins.
Until the early 1950s, Boeing focused on building huge flying machines for the military. However, Boeing had virtually no presence in the commercial aircraft market. McDonnell Douglas had vastly superior abilities in the smaller, propeller-driven planes that composed the commercial fleet.
In the early 1950s, however, Boeing saw an opportunity to take on McDonnell Douglas by marrying its experience with large aircraft to its understanding of jet engines. Led by Bill Allen, Boeing executives debated the wisdom of moving into the commercial sphere. They concluded that, whereas Boeing could not have been the best in the commercial plane market a decade earlier, the cumulative experience in jets and big planes they had gained from military contracts now made such a dream possible. They also realised that the economics of commercial aircraft would be vastly superior to the military market. They were just flat-out turned on by the whole idea of building a commercial jet.
So, in 1952 Allen and his team made the decision to spend a quarter of the company’s entire net worth to build a prototype jet that could be used for commercial aviation. They built the 707 and launched Boeing in a bid to become the leading commercial aviation company in the world. Three decades later, after producing five of the most successful commercial jets in history (the 707, 727, 737, 747, 757), Boeing stood as the greatest company in the commercial airplane industry, worldwide.
Adapted from “Good to Great” by Jim Collins.
Management lessons through story telling-The hedgehog and the fox
What the hedgehog teaches us about focus
In his famous essay, “The Hedgehog and the Fox,” Isaiah Berlin divided the world into hedgehogs and foxes, based on an ancient Greek parable.
The fox, a cunning creature, can devise several complex strategies for sneak attacks upon the hedgehog. Day in and day out, the fox circles, around the hedgehog’s den, waiting for the perfect moment to pounce. Fast, sleek, and crafty – the fox looks like the sure winner.
The hedgehog, on the other hand, waddles along, searching for lunch and taking care of his home. Minding his own business, the hedgehog wanders right into the path of the fox.
“Aha, I’ve got your now!” thinks the fox,. He leaps out, bounding across the ground, lightning fast. The little hedgehog, sensing danger, looks up and thinks, “Here we go again. Will he ever learn?” Rolling up into a perfect little ball the hedgehog becomes a sphere of sharp spikes, pointing outward in all directions. The fox bounding toward his prey, sees the hedgehog defense and calls off the attack.
Retreating back to the forest, the fox begins to calculate a new line of attack. Each day, some version of this battle between the hedgehogs and the fox takes place, and despite the greater cunning of the fox, the hedgehog always wins.
Adapted from “Good to Great” by Jim Collins.
In his famous essay, “The Hedgehog and the Fox,” Isaiah Berlin divided the world into hedgehogs and foxes, based on an ancient Greek parable.
The fox, a cunning creature, can devise several complex strategies for sneak attacks upon the hedgehog. Day in and day out, the fox circles, around the hedgehog’s den, waiting for the perfect moment to pounce. Fast, sleek, and crafty – the fox looks like the sure winner.
The hedgehog, on the other hand, waddles along, searching for lunch and taking care of his home. Minding his own business, the hedgehog wanders right into the path of the fox.
“Aha, I’ve got your now!” thinks the fox,. He leaps out, bounding across the ground, lightning fast. The little hedgehog, sensing danger, looks up and thinks, “Here we go again. Will he ever learn?” Rolling up into a perfect little ball the hedgehog becomes a sphere of sharp spikes, pointing outward in all directions. The fox bounding toward his prey, sees the hedgehog defense and calls off the attack.
Retreating back to the forest, the fox begins to calculate a new line of attack. Each day, some version of this battle between the hedgehogs and the fox takes place, and despite the greater cunning of the fox, the hedgehog always wins.
Adapted from “Good to Great” by Jim Collins.
Management lessons through story telling-The Stockdale paradox
Lessons from a Vietnam War survivor
The story of Admiral Jim Stockdale offers some great lessons in leadership. Stockdale was the highest ranking United States military officer in the “Hanoi Hilton” prisoner-of-war camp during the height of the Vietnam War. He was tortured over twenty times during his eight-year imprisonment from 1965 to 1973. He shouldered the burden of command, doing everything he could to create conditions that would increase the number of survivors, while fighting an internal war against his captors and their attempts to use the prisoners for propaganda. At one point, he beat himself with a stool and cut himself with a razor, deliberately disfiguring himself, so that he could not be put on videotape as an example of a “well-treated prisoner.” He exchanged secret intelligence information with his wife through their letters, knowing that discovery would mean more torture and perhaps death. He instituted rules that would help people to deal with torture. He instituted an elaborate internal communications systems to reduce the sense of isolation that their captors tried to create, which used a five-by-five matrix of tap codes for alpha characters. Once the prisoners mopped and swept the central yard using the code, signalling “We love you” to Stockdale.
The famous author Jim Collins eagerly looked forward to the prospect of spending an afternoon with Stockdale. As they got talking, Stockdale remarked, “I never lost faith in the end of the story, I never doubted not only that I would get out, but also that I would prevail in the end and turn the experience into the defining event of my life, which, in retrospect, I would not trade.”
After a period of silence, Collins asked, “Who didn’t make it out?”
“Oh, that’s easy,” he said, “The optimists.” Collins was completely confused.
Stockdale explained, “The optimists, Oh, they were the ones who said, “We’re going to be out by Christmas.” And Christmas would come, and Christmas would go. Then they’d say, ‘We’re going to be out by Easter.’ And Easter would come, and Easter would go. And then Thanksgiving, and then it would be Christmas again. And they died of a broken heart.”
Adapted from “Good to Great” by Jim Collins.
The story of Admiral Jim Stockdale offers some great lessons in leadership. Stockdale was the highest ranking United States military officer in the “Hanoi Hilton” prisoner-of-war camp during the height of the Vietnam War. He was tortured over twenty times during his eight-year imprisonment from 1965 to 1973. He shouldered the burden of command, doing everything he could to create conditions that would increase the number of survivors, while fighting an internal war against his captors and their attempts to use the prisoners for propaganda. At one point, he beat himself with a stool and cut himself with a razor, deliberately disfiguring himself, so that he could not be put on videotape as an example of a “well-treated prisoner.” He exchanged secret intelligence information with his wife through their letters, knowing that discovery would mean more torture and perhaps death. He instituted rules that would help people to deal with torture. He instituted an elaborate internal communications systems to reduce the sense of isolation that their captors tried to create, which used a five-by-five matrix of tap codes for alpha characters. Once the prisoners mopped and swept the central yard using the code, signalling “We love you” to Stockdale.
The famous author Jim Collins eagerly looked forward to the prospect of spending an afternoon with Stockdale. As they got talking, Stockdale remarked, “I never lost faith in the end of the story, I never doubted not only that I would get out, but also that I would prevail in the end and turn the experience into the defining event of my life, which, in retrospect, I would not trade.”
After a period of silence, Collins asked, “Who didn’t make it out?”
“Oh, that’s easy,” he said, “The optimists.” Collins was completely confused.
Stockdale explained, “The optimists, Oh, they were the ones who said, “We’re going to be out by Christmas.” And Christmas would come, and Christmas would go. Then they’d say, ‘We’re going to be out by Easter.’ And Easter would come, and Easter would go. And then Thanksgiving, and then it would be Christmas again. And they died of a broken heart.”
Adapted from “Good to Great” by Jim Collins.
Management lessons through story telling-Circuit City
Lead with questions, not answers
In 1973, one year after he became CEO, Alan Wurtzel’s company stood at the brink of bankruptcy. At the time, the company was a hodgepodge of appliance and hi-fi stores with no unifying concept. Over the next ten years, Wurtzel and his team not only turned the company around, but also created the Circuit City concept and laid the foundation for a stunning record of results.
When Wurtzel started the long turnaround, he began with the question of where to take the company. Unlike many CEOs, Wurtzel resisted the urge to walk in with the answer. Instead, he began with questions. Wurtzel stands as one of the few CEOs in a large corporation who put more questions to his board members than they put to him.
He used the same approach with his executive team, constantly pushing and probing and prodding with questions. Each step along the way, Wurtzel would keep asking questions until he had a clear picture of reality and its implications. “They used to call me the prosecutor, because I would home in on a question,” said Wurtzel. “You know, like a bulldog, I wouldn’t let go until I understood. Why, why, why?
Adapted from “Good to Great” by Jim Collins.
In 1973, one year after he became CEO, Alan Wurtzel’s company stood at the brink of bankruptcy. At the time, the company was a hodgepodge of appliance and hi-fi stores with no unifying concept. Over the next ten years, Wurtzel and his team not only turned the company around, but also created the Circuit City concept and laid the foundation for a stunning record of results.
When Wurtzel started the long turnaround, he began with the question of where to take the company. Unlike many CEOs, Wurtzel resisted the urge to walk in with the answer. Instead, he began with questions. Wurtzel stands as one of the few CEOs in a large corporation who put more questions to his board members than they put to him.
He used the same approach with his executive team, constantly pushing and probing and prodding with questions. Each step along the way, Wurtzel would keep asking questions until he had a clear picture of reality and its implications. “They used to call me the prosecutor, because I would home in on a question,” said Wurtzel. “You know, like a bulldog, I wouldn’t let go until I understood. Why, why, why?
Adapted from “Good to Great” by Jim Collins.
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