June 2006 Volume 1
Article 1.
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Article Title
Interview with Shigeo Toda, Seiko Epson (Japan)

Author
John Adamson

Bio Data
John Adamson gained his Doctorate of Education from Leicester University specializing in the area of inter-cultural interview communication with Thai learners. He teaches sociolinguistics, study skills and discourse analysis, as well as Business and General English in Japan at college and company level. His publications focus on interview discourse, learning strategies and Business English methodology. He is most active in his local area of Japan creating teacher research groups and organizing workshops. John is an Editor for the Asian EFL Journal and Senior Associate Editor for the Asian Business Journal. He can be contacted at: johnadamson253@hotmail.com

This interview is one in a series with leading business and technical leaders in the Asian zone. Such insights into the business world carry great relevance for ESP practitioners since syllabus design constantly needs to look into the practicalities and developments inside leading companies in order to address their needs more closely. In one sense, such interaction between the ESP instructor and client represents the kind of inter-disciplinary communication which informs better practice. From another perspective, it informs a wider audience about current business thought and practice.

Seiko Epson: Setting Standards throughout Asia

In March 2006 Shigeo Toda, General Manager of the TFT (Thin Film Transistor) division of the Nagano-based Japanese electronics company, Seiko Epson, was interviewed by John Adamson, Senior Associate Editor of Asian ESP Journal. Thin Film Transistors have a variety of applications in the electronics industry, ranging from Liquid Crystal Display (LCD) projectors to projection T.V.s. and mobile phones. Research and production of TFTs at Seiko Epson is one of the company's key strategic business units. In this interview, the themes discussed were the internal management style of the company, and its business strategies in Asia.

New management blood

The first theme turned to the changing management style in the company. Toda san himself has over twenty-five years experience in Seiko Epson and has seen the company develop into one of the leading printer, projector and electronic devices manufacturers in the world. In his forties, he is young to carry such responsibility in management in Japan. In Seiko Epson, however, he is one of the new generation of managers who leads by his ability to communicate and motivate people around him, rather than relying on the power that his status could bring him. With more than one hundred people under him, I questioned him about his own personal management style and how it differed from other managers. In response, he professes to be less reliant on igen, the Japanese concept of clear hierarchical distance between superiors and subordinates, than previous managers. "This idea of igen doesn't interest me because it doesn't motivate people to share ideas," he explained in the casual meeting area in Suwa Minami called The Club House. "I just enjoy communicating with people," he went on, citing his influences in this regard as his old school and university teachers, as well as one his first managers in the company. "Heart-warming communication" was an expression he frequently referred to in the communication style of these previous mentors, an expression which Toda san himself genuinely exudes.

"So many managers in the past used to speak without this ability to connect with people," he continued. "They had seiron and tatemae" at which point we both scrambled for our dictionaries to explain in English these concepts. Seiron refers to 'logically correct opinions' and tatemae the superficial, polite 'face' often seen in more traditional relations. "What they didn't express is their honne", their real opinions or heart. This affected people in that it made them reticent to freely open up and 'risk' expressing an idea.

Igen, the Japanese concept of hierarchical distance in relations

Toda san went on to stress how Seiko Epson remains a market leader by drawing upon "bottom-up" ideas. This entails creating an atmosphere in meetings and any interaction with staff which avoids the "tallest poppy syndrome", referred to in Japan as "knocking down the nail that sticks up." The most conducive workplace atmosphere, he argues, is one in which people are prepared to become deshabata hito or tongata hito, people unafraid to voice their opinions in a direct way to those around them, in particular towards their superiors. This is a clear break from the past hierarchical nature of Japanese corporate workplace relations. The current Board of Directors at Seiko Epson themselves are keen to encourage this new style of communication in order to provide a model to company employees of how the company can be innovators in the market place, not merely followers.

Delving into the practicalities of enhancing employee innovation, one aspect Toda san stressed was that his own style of managing people was based on the ability to listen well and give genuine feedback to those under him. This, he believes, was passed on to him by a former boss. "The best managers have a sense of 'sympathy' for those around them," he explained. If too much tatemae and seiron exist, it can stifle the willingness of subordinates to object to their seniors, resulting in a corporate culture of "yes" men. Genuine listening entails actively showing the conveyer of the message that the boss appreciates someone who is thinking innovatively about the company's progress. Subordinates who say "no" and give alternatives to current strategy need to be encouraged, not suppressed, Toda san stressed.

Company culture

In Seiko Epson a "One Epson" motto exists which encapsulates the corporate thinking and vision set down by the Head Office in Suwa, Japan and is disseminated among its worldwide network of branches, franchises, research laboratories, and production facilities. Toda san admits that the translation of this corporate vision is a work-in-progress. There are currently 13,000 employees in Japan with over a further 80,000 overseas. In this sense, the globalization of the Seiko Epson vision over the last decades has advanced quickly in terms of the number of people representing the company's image. However, in reality, each local branch or office has developed its own regional philosophy permeating its modus operandi - in effect, as Toda san stresses, the process of globalization has moved naturally on from a Japan-centric vision to one which embraces local knowledge in order to more effectively penetrate the diverse markets in which the company operates. This is an age in which Epson has established regional Head Quarters (Holland, the USA among others) which have the autonomy to determine their own direction. This stage of globalization is what Toda san refers to as "The Third Age of Globalization" (Hindle, 2003), the first being in the post-war years when many companies sold products abroad that had been made in Japanese factories. The second age, generally from the 1960s saw the transfer of the production facilities abroad, whilst maintaining their head offices - and therefore the decision-making power - in their home countries. The third currently emerging age is one in which companies start to transfer the location of their head offices to different countries in an attempt to include more 'local' considerations in the decision-making process.

The "Third Age of Globalization" encapsulates Seiko Epson's global corporate culture

Although this new age is not without its problems, Toda san feels that this regional autonomy enhances the talent that exists within the larger global Epson group in a bottom-up manner similar to the way he himself manages his own staff directly under him. In this sense, there is a consistency at the global and local levels of corporate culture.

Seiko Epson's markets

The next part of the interview moved on to Seiko Epson's markets, both geographical and demographic. The TFT products themselves that Toda san is responsible for are categorized into three 'domains', termed as "3 i's": imaging on paper (printers), imaging on screen (projectors and rear projection T.V.s,) and finally imaging on glass (LCDs on mobile phones). The established geographical markets for these domains are North America, Europe, East Asia and South-East Asia (particularly Singapore and Malaysia), however, more attention is being paid to the emerging market areas of Brazil, Russia, India and China (BRIC countries). Although disposable income levels in the BRIC areas are perhaps lower than those in the more established markets, Seiko Epson is looking at them more in terms of their future demographic potential. BRIC countries, Toda san explains, have a younger average age of population than their western counterparts. In these countries, governments are purchasing Seiko Epson's technical equipment for schools and the tertiary education sector for students who will become familiar with their use and aspire to buy them for their own personal use after graduation in their 20s and 30s. These potential future consumers, termed as anken mono in Japanese, are the next market of Seiko Epson users who, unlike their parents, have the chance to gain a more technologically-oriented education.

The demographic targets in the more established markets are, in contrast, a generation ahead and are either those who are termed as the dankai sedai (the Baby Boomer generation) in their 60s, or those in their 40s and 50s with high disposal income. In Japan itself, Toda san emphasizes the importance of catering to the needs of the elder generation of consumers who are perhaps not so up-to-date with technological developments, but nevertheless wish to keep pace with the latest that their disposable income can buy.

A reversal of the 'hollowing out' - ku do ka - of Japanese production to Chinese production plants will eventually occur

Toda san continued by talking about the corporate activities in other Asian markets. TFT production facilities do exist in China but the company presence there is based firmly on the idea of cost advantage. Without the benefit of low labour costs in China, there would be no reason for Chinese investment since margins are tight. This is the stark reality facing not only Seiko Epson, but other Japanese manufacturers who have been forced to adopt a ku do ka (hollowing out) policy of their domestic production and, consequently, to move to overseas factories. Asked how he sees the Chinese market in the next few years, Toda san commented that there is a limit to how much production Japanese companies should transfer away from Japan. Manufacture of peripherals in China is currently beneficial cost-wise, but Quality Control remains an issue with such labour-intensive production. It is important, he stresses, to retain the fundamental "know-how" in Japan and utilize Asian markets for their labour cost advantage. Eventually, he predicts, advances in automated production will reach the point where production, like their rivals Cannon, can be returned back to Japanese plants. "High end" production should, he believes, take place in Japan, leaving low-price production to overseas Asian plants. This reversal of the ku do ka process may eventually occur for Seiko Epson, resulting in purely automated production in Japan in which only a small number of highly trained engineers are required to maintain mass production.

Strengthening the business

Upon moving into the theme of how the company can strengthen its business, Toda san outlined various points which are currently being considered. The previously mentioned three domains - the 3 i's - need to be expanded. In other words, new business models are needed, not simply those which emphasize selling products which meet an existing need, but those which create new ones in the market place. He explained this by taking the example of projectors; due to the increased popularity of Microsoft and PowerPoint, Seiko Epson could meet a need which had, fundamentally, been created by other companies. It followed the market trends in the demand for projectors for PowerPoint presentations in business and education and has profited greatly. This is, however, reacting to market circumstances, not creating and controlling those circumstances as a market leader should. To achieve this level of innovation and control over their business, he stressed how important it is to create new demand, especially with the upcoming changes in Japanese broadcasting in July 2010 over to digital T.V. A greater challenge, but also one seen as an opportunity, lies in research into the application of TFTs in control panels in household use. The next generation of Seiko Epson's technological research is focusing on how consumers can control their living environments with all-purpose control panels to manipulate heating, security systems and communications. TFTs are essential in this research and represent a means by which the company can take leadership in the lucrative household electronics market

Ecological policy

The interview then turned to an area in which Seiko Epson has been taking clear leadership for several years, its ecological policy. The company has set a benchmark for other electronics companies in the way that it reduces waste, recycles as much energy as possible, and produces environmentally-friendly products. This has been an evolving policy over the years and has resulted in the company adopting the slogan "The Earth is our Friend." In 1990, Seiko Epson took the impressive step of abandoning the use of carbon fluro-chloride products which are harmful for the ozone layer. Toda san spoke of the pride which company employees have in their day-to-day policy of avoiding waste and the extreme safety measures they take when handling any dangerous substances.

We are looking at how European companies conduct environmental accounting and are prepared to learn and adapt these lessons to our context
But what benefit does this have for business itself? In response, Toda san talked of the concept of kankyo kaikei - environmental accounting. "We are looking at how European companies conduct environmental accounting and are prepared to learn and adapt these lessons to our context," he explained. It is a difficult process to create added product value through an ecological policy, but it is one which Japanese consumers are beginning to appreciate. Toda san remains convinced that more and more buying decisions will be based on such ethical principles. Seiko Epson has a policy of no CO2 emissions and aims to win over more environmentally-aware customers with this as a selling point. Toda san stressed the idea that this process of setting a value standard in ecological policy is one which needs to be easily translated in marketing terms. Every year he is involved in formulating the corporate "Risk Communication" to the public outlining current ecological activities and data. This is part of an on-going effort to create a sustainable policy and open dialogue with the public about how the company is conducting itself. "We cannot afford to make environmental mistakes," he explained and warned: "Accidents which damage the environment require much compensation."

Asian relations

The interview moved on to the final topic of how Seiko Epson viewed relations with other Asian countries. 2005 saw anti-Japanese demonstrations in China and there are regular outcries at the visits by Japanese political leaders to Yasukuni shrine. How did Toda san see the impact of these events on business in the Asian zone for Seiko Epson and Japanese companies in general? Toda san reflected deeply on this point and explained how aware Japanese must be of the historical relations between Japan and the outside world. Politicians, he stressed, tend to communicate differently to business people. Although in the Japanese context, business leaders and politicians need to co-operate closely at times and appear to be similar, there are fundamental differences in how they convey their objectives to the public. Carefully he continued: "..modern people can respect each other….but psychologically many people have complaints, for example, the past and their memories…so sometimes they want to complain." This seems to suggest that, despite the shock experienced by many Japanese business people in 2005, there is a sense of acceptance among many that voices are better heard than suppressed. Seiko Epson's policy towards China has not changed throughout the difficult times. It remains positive about relations with China and sees the increasing disposal income of normal Chinese as an opportunity.

This sense of viewing Asia as a business opportunity is strong at Seiko Epson. Rising living standards in China, India, Vietnam and Thailand, among others, mean that Asian consumers will aspire to the same standards of technology that Japanese have taken for granted for years. "After 2008 (the Olympic Games), Chinese production facilities will start to move away from the Chinese west coast to the more central highland areas," Toda san predicted. Foreign investment in China will shift to the lower labour-cost areas, eventually moving to other Asian countries. This is an opportunity for foreign investors in China if they remain flexible.

Copyright infringement is a big threat for us

The threats to foreign investors, however, cannot be easily brushed aside, he explained. There exist huge problems protecting Seiko Epson's copyright in China. "Copyright infringement is a big threat for us," he warned. It is one that needs to be addressed in the long-term since many other Japanese companies active in the semiconductor and LCD development and production field have had similar problems to Seiko Epson. The difficulty lies in the protection and exploitation of a company's original research. "Take for example, some Korean LCD makers. The basic, original technology was 'grown' in Japan but Korean manufacturers, like Samsung, are the biggest in the world." This appears to be a weakness in Japanese industry, Toda san complained, and is basically due to the high labour costs in Japan which make it difficult to produce great ideas cost-effectively compared to other Asian competitors. The key is to automate Japanese production to the extent where production costs and quality on Japanese soil can compete with Asian competition. Transferring production overseas is one solution but always carries with it the danger of losing protection of the company's copyright.

Looking back at the points covered in the interview with Toda san, one cannot help but admire the breadth of knowledge and insights which he has developed over the years. On a corporate level, the keys to the company's success appear to depend on a manager's awareness of a variety of perspectives on the positioning of Seiko Epson in the region and community. On a personal level, the strongest impressions remaining from the interview are those of the importance of knowing how to empathize and motivate people, and also of how to convey the corporate policy, particularly regarding its ecological accountability, to the public. These perspectives and skills are, as Toda san finally added, ever evolving, never static, and require the ability to look into the future from an Asian perspective.

References

Hindle, T. (2003). The third age of globalisation. The World in 2004. The Economist, pp.109-110.