Saturday, October 15, 2011

Olympus is Doomed

Olympus just fired their first non-Japanese CEO, Michael Woodford, after eight months on the job. First, this has revealed massive inefficiencies at Olympus. The reveal of these inefficiencies appears to be the primary motivating factor in Woodford's dismissal. Anyone who has ever dealt with the Japanese business world knows that airing dirty laundry is not how things are done, which leads to huge problems. That's why executives have a nasty habit of resigning in dishonor over in that ridiculous culture. Not because they failed, but because the problems became public.

This also signals that Olympus has no interest in growing past its local, Japanese blinders. Look at the list of best-selling cameras in Japan. Olympus and Panasonic both have multiple cameras on the list. Now, look at the list of best-selling cameras in any other country. Neither Olympus nor Panasonic is anywhere even within view of the top-25. They obviously understand the Japanese market, but the rest of the world eludes them. They are so resolutely hamstrung by their cultural mores (or perhaps morass is more appropriate), that they are literally letting the company crumble.

I think that this is indicative of something beyond just Japan. I think that it might signal a shift in global expectations of technology. After WWII, the world was defined by the wonders of technology. Japan did well in this environment. They were collectivist, meaning that individual expression wasn't important. This negated artistic expression, but fomented an engineering perspective best exemplified in Sony's early successes and the eventual rise and global domination of Nikon and Canon. I think that it was further seen in Japan's dominance of the video game market throughout the 1980's and 90's.

But today, things have changed dramatically. The most valuable technology company in the world is Apple. Most of the top video games are made in the US and Europe. And the camera world is undergoing a wild transformation with the most popular camera in the world being... the iPhone 4. The market is no longer interested in just technology, they are interested in the experience available therein. Not that long ago, specs were what mattered. Today, there is still a small group that cares about the details, there always will be. But the rest of the world cares about how the technology makes them feel.

Japan is terrible with this perspective. It is the artistically-driven perspective. It is driven by an auteur with a vision, thus imprinting a personality on a product. Everyone knows the joke: America invents things, Japan figures out how to make them work, then does it smaller, faster, and better. I think that the video game companies have been aware of this for longer than the other conglomerates, with each of the major names running regional operations with their own, in-house development.

Sony tackled this problem head-on when they were the first major Japanese firm to appoint a Westerner, Howard Stringer, to the top position. They explicitly stated that the purpose of his appointment was to cut through the corporate garbage at Sony and better compete with Panasonic in home entertainment, and Apple in everything else.

But where Sony and Panasonic are large, strong companies with growth prospects, Olympus is either stagnating or failing. Their global market share continues to drop and they are losing money in their most prominent division, cameras.

Even worse, corruption would be a preferable explanation to the official one proffered for Woodford's release. “We hoped that he could do things that would be difficult for a Japanese executive to do,” Olympus chairman, Tsuyoshi Kikukawa, said during news conference announcing the event. “But he was unable to understand that we need to reflect a management style we have built up in our 92 years as a company, as well as Japanese culture."

It is that comment about Japanese culture that drives home that Olympus is doomed. In this era of international, globalized business, there is no culture. There is no tradition. There is only good business, and if you desperately cling to the past, the future will consume you. That is Olympus' fate: to be consumed.

It is this comment more than anything that makes me consider leaving behind the Micro 4/3 format. I hope that Panasonic sees the danger inherent in this statement and delivers some soothing words to the market, otherwise, there be problems in 4/3 land.

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