Lessons from Japan's technological progression

The WWII ended by pulverising Japan. Japan was barred from pursuing technologies to sharpen its military edge as part of the WWII settlement treaty. The island nation did not have many natural resources and domestic markets. Despite these limitations, how did Japan rise as a global industrial powerhouse? On the other hand, why could not India and many other less developed countries benefit from their independence, huge natural resource stock, domestic market, and international road and rail networks?

There have been many hypotheses in explaining the rise of Japan. One such is that Japan has built its industrial economy through reverse engineering, coping, and imitation. It has also been mentioned that the Japanese people work longer hours than many others. We also know that the Japanese take too long to understand a situation and make decisions. Such a reality raises another critical question. How has Japan succeeded through slow decision-making in the rapid technological progression?

As Japan was barred from pursuing technologies for military purposes, the Japanese had little incentive to pursue scientific discoveries and technological inventions. Irrespective of the greatness, invariably, most of the technologies have emerged in embryonic form. In the early life cycle stage, they support only primitive product innovations. Often, the military is the customer of those primitive products. Hence, Germany and many other European countries developed technology edge by capitalising on the military. Later, the USA scaled it up as a national strategy to turn the military into acaptive market to nurture technological possibilities. There have been numerous examples, from computers, mobile phones, hard disks, and semiconductors, to satellite communications. Due to this, America attained a significant technological edge during the 2nd half of the 20th century, creating several technology clusters. But Japan could not pursue this path in achieving technology edge for building the industrial economy. Furthermore, Japan’s basic research and invention capability was far inferior to Europe and America.

Unlike the USA and Europe, India, Brazil, and many other less-developed countries started pursuing the path of import substitution through replication and imitation. They focused on making existing products to leverage a large labour pool, domestic market, natural resource stock, and international connectivity. Hence, they condoned intellectual property infringement and focused on technology import. Despite early success, none of these countries has succeeded in developing a high-performing industrial economy.

How has Japan succeeded without access to the military market, basic research capacity, invention track record, and import substitution focus? In many cases, Japan has turned inventors into importers. Is it through copying with a low-cost labour force through infringing intellectual properties? If that had been the case, how has Japan succeeded in building an industrial economy through exports to Europe, the USA, and the rest of the world? There could be an argument that Japan pursued the path of Malaysia, China, Bangladesh, or Vietnam in supplying labour for being the manufacturer of American and European companies. The answer is no. If that were the case, how did Japanese companies take over the business of American and European companies like RCA, Kodak, GE, Leica, and many more?

In retrospect, Japan focused on two strategies. The first one was about outperforming inventors in the incremental advancement race. The next one was about pursuing reinvention through the change of technology core in making inventors’ existing capability obsolete.

Let’s draw a lesson from a few examples. In 1956, IBM invented rotating magnetic disk-based data storage technology, supporting the hard disk innovation in 1957. This 5MB hard disk weighing 1 ton found only the US military as the customer. But this technology core was amenable to progression, making subsequent innovations better and cheaper. As Japan was barred from the military market, Japanese companies waited until the technology became suitable for corporate and small and medium-sized enterprises. Hence, Japanese Toshiba delayed entering the hard disk business by twenty years. But as opposed to infringing intellectual properties and making copies of IBM hard disks or becoming manufacturers for American hard disk makers, Toshiba focused on licensing technologies and advancing them further. It happens to be that Toshiba’s incremental advancement velocity was far higher than that of IBM and all other hard disk makers. Consequentially, Toshiba emerged as the global leader, forcing IBM to quit the hard disk business. From automobiles and bicycle gears to microwave ovens, there have been many examples of Japanese firms outperforming inventors in the incremental advancement race.

The second Japanese strategy was reinventing existing matured products by changing the technology core. One of the notable examples had been leveraging semiconductor technology to reinvent an array of products. Right after the invention of the transistor in 1947, Sony-led Japanese firms decided to leverage it. Hence, as early as 1952, little Sony embarked on the journey of taking a licence of transistor from American Bell Labs. But the transistor technology was primitive and highly expensive. In 1956, American Fairchild Semiconductor priced its first batch of Transistors at $150 a piece. Although Fairchild found profitable military customers for this expensive device, Japanese Sony could not profit from making radios, requiring at least five transistors, for civilians. But transistor was amenable to progression. Hence, Sony led Japanese companies to focus on its refinement, making transistors and other semiconductor devices smaller and better at a faster rate than American and European firms. Consequently, Sony and many other Japanese firms succeeded in reinventing radio, television, music recorders, and many other consumer electronics products by changing the vacuum tube technology core with semiconductor. Of course, American and European firms also attempted to do the same; but Japanese firms started outperforming them in advancing the semiconductor technology core. In some instances, Japanese companies succeeded in turning American and European inventors bankrupt.

Japan has also developed a robust basic research capability to support this race. For example, in the race of advancing semiconductors for winning consumer electronics innovations, one of Sony’s engineers got Nobel Prize in 1974. The Japanese got Nobel prizes in LED and Lithium-ion batteries for the same reason. It appears that the Japanese’ success in winning 19 Nobel Prizes in Physics and Chemistry during the first 20 years of the 21st century has been due to the urgency of the global race to sustain an innovation edge and outperform incumbents. On the other hand, due to the lack of focus on advancement, India and many other countries could not succeed in building a solid industrial base through their import substitution strategy. More importantly, America and Europe lost their inventions to Japan, as Japanese firms showed superior performance in incremental and reinvention races. Furthermore, the underlying reason of Japan’s prolonged decision making is that Japanese companies invest time in understanding the dynamics, waiting for the right entry point, and building shared understanding among the team members. Such decision making culture is vital for winning the technology edge in building the industrial economy.

M Rokonuzzaman, Ph.D is Academic and Researcher on Technology, Innovation, and Policy.
Zaman.rokon.bd@gmail.com