James Hollow's Blog about Hybrid Thinking » Japanese innovation

Japanese Innovation: The machine that changed the world

James Hollow — Tue, 16 Aug 2016 00:57:46 +0000

The management theory classic that told the Toyota story for the first time

A little while ago I read a book called The Machine That Changed the World, written in 1990 as a summary of a 5 year $5m MIT research project into the global automobile market.

I discovered it while looking for the best description of the most sophisticated, long-term-successful manufacturing organisation & method (of complex technology) the world has ever produced, and I am tempted to believe that this book describes it. In fact I was so inspired I ended up writing my own notes and sharing them with some friends who are experts in manufacturing in order to understand what has happened since 1990. These additional insights are added at the bottom of the notes below.

The “machine” in question is, in a word: “Toyota”, and it describes the emergence of their “lean manufacturing” model and its subsequent proliferation to the other Japanese car manufacturers and during the 1980s more broadly to many plants in the US as well. But the story is a lot bigger than that one word, than the car industry alone, and made me realise that I really had no idea how much mass manufacturing had evolved since its invention by Henry Ford, even before Toyota, and Japan’s other “assemblers” revolutionised it from the 50’s through to the 90s. Revolutionised is not in any way an exaggeration it seems.

It also made me think a lot about the potential for coupling machines with the sort of creative problem solving that still only teams of humans can deliver. We are now in the era of AI, but actually the lean manufacturing lesson informs us that we are really in the era of “humans x AI”.

Mass production vs Lean production

The book is structured around this dichotomy, with initially Ford, and then GM representing the most successful mass production strategies in sequence, and Toyota representing the lean model, which has since been copied by pretty much every brand that is not in the process of going extinct, starting with the Japanese brands (Honda, Mazda…) and interestingly Ford on the US side, and GM were trying hard even by the late 80’s. The Koreans have been trying to copy “the Toyota way” quite blatantly since this book was written as well, so it is still going on, although as the Japanese makers have had to globalise their manufacturing operations for various reasons the purity of their model has perhaps been diluted when looked at as a global entity, although all retain manufacturing and assembly plants in Japan.

At the point of writing the book, the lean manufacturers seemed to be unstoppable, and their rivals were scrabbling to catch up by studying and adopting the same management techniques as Toyota and others. Since then Toyota has become the largest car company in the world, the mimickers like Ford have done pretty well, the hard-to-adapters like GM have struggled, and Toyota has achieved this at the same time as having to become a more multi-national, decentralised machine, which many thought it could never become. So the intervening years seem to verify the message of the book. They have certainly not disproved its premises.

How transferable are the lessons from this book?

Perhaps more than anything I was struck by the conceptual clarity of the ideas upon which lean production was founded. It’s two inventors at Toyota, Sakichi Toyoda and Taiichi Ohno should be household names the world over, ranked alongside Ford and Edison. Perhaps though the nature of their ideas for organising people and resources put them nearer Marx, Engels or even Keynes. For sure the ideas emerged from the context their inventors found themselves in, specifically post war Japan, with no capital to deploy, a tiny domestic market, very limited resources, employee-biased labour laws… but then all big thinkers and their ideas are products of their time and place so this should not diminish their achievements.

So these core ideas and how they apply to the various aspects of manufacturing and with what consequence should be essential knowledge to anyone trying to create a business founded on:

– producing a complex assembled technology as a product at scale

– targeting increasing productivity over time

– as well as improving product quality (lack of faults) over time

– where a learning curve plays out for each product model produced

– where new models can be produced without long delays & large capital injections

– retaining skilled employees and loyal, co-invested partners

– where the whole process is tuned into both the markets needs and fundamental science / technology breakthroughs

What mass manufacturing does well

Mass manufacturing replaced the craft industries, starting with bespoke car production, but ultimately pretty much all craft manufacturing, so that craftsmanship was sidelined to small market niches, usually exclusive and expensive. It did this by turning the production process into one big machine, within which tasks were atomised and delineated to such an extent that most of the humans involved in it, everyone in fact except the designers, engineers and business management, were given one simple repetitive task to perform that at most took 5mins to learn and did not require to engage their brains while on the job.

What this machine did really well, as still does where conditions suit it, is make one thing at scale, taking advantages of economies of scale to drive down costs. This is exactly what Ford wanted to do with the Model T, and succeeded, and only failed in the end because ultimately the market’s needs fragmented and began to evolve faster than Ford’s big manufacturing machine could adapt to, and therein lies a key weakness of this model. Knowledge is embodied mainly in the hardware of the manufacturing machine itself, not the people running it. This hardware is expensive, and optimised for scale (e.g. stamping out steel plates at 50 per minute) but cannot be optimised for flexibility (stamping different sized sheets, or speed to switch to an alternative shape). Consequently, when he changed car models, Ford would have to throw out half his machinery too. This still made economic sense throughout the 1920’s, but by the mid 1930s GM had got their more flexible “shared platforms, different models” up and running and it was starting to cost Ford dear.

GM took over the gauntlet through the business genius of a guy called Sloane, who created 5 consumer facing brands (Lincoln, Chevrolet etc) that shared most of the same platforms and parts with each other, and hence enjoyed the benefits of scale as Ford’s model, actually more so, but by having 5 distinct brands, was able to meet the increasing diverse needs of the vast majority of Americans, and via overseas subsidiaries like Opel and Vauxhall, a lot of Europe too. So as a model it had more plurality and options, but was still essentially driven by the same manufacturing machine, and the role of humans as unthinking cogs in the machine remained the same as in Ford’s original conception.

Characteristics of the mass production machine:

It tends to invest in big hardware, to achieve economies of scale (e.g. massive steel panel pressing machines with high throughput), and in so doing become systematically vested in the status quo, defined by the technical capabilities of the hardware, and less able to adapt to change
Because “feeding the machines” and an ethos of “move the metal” become dominant, the system requires large inventories, e.g. weeks or months worth of steel panels piled up waiting to be fed into the steel panel press outside. Big inventories are financial liabilities in times of change and or downturns and again create inflexibility
Because of this same “move the metal” ethos, and because the employees, if they are thinking anything, it is to keep things moving to meet today’s production quota, mistakes in assembly, flawed parts get built into products, and layers of assembly bury them, until they are incredibly hard to discover or put right. Hence the MP machine is prone to quality issues and is actually not very efficient at all.

What “quality” becomes in the mass production model

Because of the mass production machine’s tendency to output faulty products, all of the big car plants had testing facilities and massive product recovery areas devoted to discovering the root cause of problems and putting them right, often failing or at best patching a problem. Hence reliability issues were always present in the products shipped to consumers.

Throughout the era of mass production dominance, perhaps from the 30s to the 90s, and perhaps still today with some manufacturers, quality equated to the investment into the recovery yards: then rigour that went into testing and the extent of the artisanal efforts to fix problems. So for instance the high end German brands reputations right through tothe 90s and perhaps still today to some extent are built on the “craftsman”-like skills of fixing flaws in cars that came off a production and assembly system essentially no more sophisticated than that of Henry Ford’s.

Again, this is not an efficient model and only works because of economies of scale that are built up, often state supported.

Inspiration for lean production model inventors

Ford’s flagship plant in Detroit became a Mecca for aspiring car manufacturers, and Ford was commendably open about showing people round. Most visitors were awestruck and went home with the intention to emulate it’s scale and automation as best they could.

Perhaps because they were quite late to the party, visiting in the late 40s and perhaps because they understood that emulation was not viable being from a country as weak as Japan was after the war, (any small businesses likely to get gobbled up by Uncle Sam’s corporate giants), Toyoda and Ohno went away thinking “there is waste in that system, waste we cannot afford” and hence they had important clues for how their model needed to be different.

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So the lean model itself; let’s start by reviewing its achievements. Lean manufacturing has proven itself beyond all doubt to deliver:
– higher productivity (ready-to-ship products per unit inputs: capital investment, operational costs, workers, physical space)
– higher quality (fewer errors hiding in shipped products)
– greater agility: faster and cheaper development of and switching of production to new products
– robustness to market cyclicality (although this one alone is a complex)

Founding insights

The early insights that Toyoda and Ohno observed that underpinned their thinking:

The best mass production plants have a lot of “muda” = waste, not least in the rework shops that fix faulty products that come off the end of the line, 25% of human resource, 20% of space are typical
Because of the focus on “move the metal”, i.e. getting as many completed units off the end of the assembly line, so an unwillingness to stop the assembly line, errors (faulty parts, badly fitted parts etc) were compounded as they went down the line, errors that were hard to fix (lots of reworking) or impossible to find (faulty shipped products)
Smaller batches work out cheaper than big ones. Much of Ford and GMs success had come through developing massive machines to make parts in massive batches, e.g. steel panel presses, with very high throughput. But embodying so much value and knowledge into these machines compromises their ability to change what is produced, and errors in the parts were multiplied faster. By focusing on being able to CHANGE the output much easier, and making “Just enough” sized batches, the overall efficiency could be greatly improved.
The mass production “machine” demotivated its workers, so they had no stake in catching errors and improving quality, only in meeting quota day by day.

Based on these, I believe there are three key concepts that hold the keys to the lean model:

1) Fragility drives productivity

For me perhaps the most brilliant, insightful idea that Ohno came up with was that you could create the most efficient and error-free manufacturing machine by making it extremely fragile.Anything can stop the manufacturing machine moving at any time:
– every single person on the assembly line has a chord they could pull to stop the whole line, and are encourage to do so the moment they suspect a problem with half-assembled product on the line. (In mass production lines only the factory foreman had a switch, and would hate to stop it because it could mean they miss quota that day)
– parts arrive literally “just in time” before the previous delivery runs out, and many parts deliveries would be as frequent as hourly. (In contrast mass production’s assembly lines would typically have months worth of parts piled up at its side)
– parts are actually MADE just in time. The box carrying the parts arriving back at the supplier factory is the signal to start making more of those parts

But surely making it so easy to stop would lower production since it would be stopping all the time? Yes, this is true, at the start, but over time “the machine” learns how not to have to stop all the time. How does it learn? People is how. Instead of the mental paradigm being to push units off the end of the line, it switches to tracing the source of errors UP the line.

2) People as agile problem solvers

In the mass production model the people are only there because a machine has not been invented yet that could do their job. (Still the case for many manufacturing jobs, but not for much longer!). They are not required to think.

In the lean production model the workers are required to be super-sensitive to the condition of the machine, it is so fragile after all, and react as problem-solvers to fix issues in real time, whatever their nature and irrespective of the nature of the issue:
– they have to learn to spot problems, even tiny ones, say with a part that does not quite fit snugly.
– they have to learn to snoop out the origin of problems. Ohno and Toyoda came up with the “5 why’s” practice back in the 50s: basically ask why at least 5 times in rooting out the cause of a problem to REALLY make sure you have got to the very bottom of it, often requiring a trip to the suppliers. Nothing moves until you do.
– they have to support each other, literally all rushing to help fix a problem if and when it arises, usually grouped into a small team with complementary but overlapping skills
– working groups have a “leader” usually the most experienced, so that they can cover for any one of the team if they are sick or away, so the people have to solve people issues too as a team

**3) The philosophy of continuous improvement (kaizen)**

This is the one that everyone knows, to the extent that it has almost become a cliche. It is thesame as 2) really, only applied to the system as a whole, and focused on improvements not just solving problems, e.g. in the supply chain, distribution, marketing, everything. In contrast to the various macro-areas of the system, especially the supply chain, acting as self-serving agents, with the ‘invisible hand’ supposedly assuring efficient interaction and transaction, all parties in the system are co-invested in its continuous improvement, e.g. in terms of minimising errors, reducing costs, increasing flexibility, sharing financial risk.

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There is a lot else to say, but I believe that these two ideas are the fundamental ones that all the other beneficial effects spring from.

So from these:
1) make the machine ultimately fragile
2) empower its people to be the ever vigilant, ever problem-solving nurturers of the machine
3) collective striving for continuous improvement
… the effects below emerge as behaviours of the machine. In this way I think the overall system is actually closer to an organism, or organic system, than to a “machine”. Or perhaps the lean model is the point in history at which complex industrial machines become more fundamentally “alive”.

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A lean core

Toyota as a company employs fewer people, has smaller plants, carries less inventory, owns less manufacturing equipment per unit shipped than any car company, and that’s why it is themost successful. Ford first and later GM gained unprecedented scale by pushing the balance of “make or buy” way over to the make yourself extreme than anyone had attempted before, and that is what grew the car industry into the world’s biggest, because it drove economies of scale, but also created vast “muda”.

In contrast Toyota strikes the balance towards the “buy” extreme, but in a very different supplier < > assembler dynamic that pushes the same problem-chasing mentality, and shared responsibility for minimising waste, kaizen, and producing cars to a target product price, called “value engineering”, that lean manufacturers employ internally.

So Toyota sits atop an ecosystem of co-vested, usually co-owned (e.g. Toyota has a 10 / 15% ownership of Denso, Denso owns a few % of Toyota) companies that are free to work with other assemblers, and with which cost-reduction margin gains are shared, hence allowing the partner suppliers to invest in improving their own manufacturing operation (people, machines, analytics etc). This kind of designed mutuality is not unique to car manufacturing in Japan, and something similar can be seen in the zaibatsu structures as well.

Anticipation & judgement

The machine’s humans learn to react with speed and agility to solve problems, but over time as they get tuned into the machines characteristics they learn to anticipate its needs and issues, and act “just before” a problem occurs. This includes the people that work at the parts suppliers as well, since they are “wired into” the machine very tightly also.

Judgement is decentralised, shared between everyone involved, so that everyone’s judgement can effect everyone else. This pressure has the effect of making people think more not less.

Shared responsibility for avoiding mistakes and “kaizen” – i.e. vested partnerships

If a supplier delivers a batch of faulty parts, the whole machine will stop, the 5-why’s process exposes the cause, and everyone in the whole ecosystem of supply and assembly will know what happened. This has the effect of creating transparent accountability and extending the mental awareness of what constitutes “the machine” among operators throughout. More pressure on everyone to not screw up – yes, but more meaningful and rewarding when the whole process sings along with zero flaws. In the mass manufacturing model where this sort of transparency does not exist units are assembled and the problems are buried under layers of assembly and hence hard to assign accountability.

So across and up and down the organically structured interrelationships lean manufacturing creates shared responsibility. It’s accountability. Same goes if a work group high up on the assembly line keeps making assembly errors. It goes for everything. Arguably this is “stressful” but most research has shown that workers prefer to be part of this psychological paradigm than one in which no one cares about quality, and an individual is treated as a yet-to-be-automated disposable non-asset.

The more positive flip side of this is the fact that anyone from any level or any area is empowered to, actually required to suggest improvements to their part of the system or in fact the whole system ensuring it is always progressing and evolving. This is not just about the removal of errors. The essence of kaizen is to find innovative ways to evolve the machine over time. Not innovation to reinvent the whole machine, but smart “hacks” that increase efficiency, speed, reduce waste… And these improvements are rewarded in a number of ways, not least through the profit sharing, savings-sharing financial relationships between supplier and assembler, thus incentivising genuinely creative thinking not just vigilance. Suppliers are able to apply these incremental breakthroughs to other supplier contracts, hence improving profit across their business.

Information, Data & central control

When early American converts to lean production went on rare pilgrimages to Toyota back as early as the 1960s a common reaction was “oh my god, the DATA those guys have on productivity, it was mind blowing”. The lean manufacturing machine’s performance is obsessively measured. Information is not captured and kept hidden in a central “brain” (see the organism metaphor keeps suggesting itself), but is shared with everyone in real time.

For instance, from the 80s display screens were placed on the assembly lines showing a status dashboard of information. Productivity data and analysis is shared with partners to help them make better judgements too. Of course there has to be central governance, but it is not total control as it is in Mass Production. Nor is it totally decentralised, like an ant-colony with all its parts pre-programmed to react in certain collective ways. It is a balance of central and decentral control and evolution.

Fixed costs vs variable costs, assets

An economic consequence of the lean approach is that unlike mass production which treats human labour and supplier relationships as variable costs that can be adjusted to the cyclicality of the market, both are counter intuitively in the lean model fixed costs. Neither employees nor supplier partners are disposable in tougher market conditions. Instead the lean model can respond by dropping product prices, increasing cost competitiveness to protect sales volume, better than competitors can (for whom big inventories become a bigger issue). Lean producers can also shift to different car models faster than mass producers can, to respond to a surge in demand for smaller, more fuel efficient cars, for instance, or to bigger SUVs as has been the recent trend.

What happened after 1990?

When the book was published in 1990 Toyota was half the size of GM, then the world’s biggest company. Twenty years late Toyota became the biggest car company in the world. Although the story is a lot more complex since 1990, history has clearly shown lean manufacturing and the Toyota way to be world beating.

According to my follow up research study with friends and acquaintances in manufacturing, which while less well funded than MIT’s seemed to reveal a reliably consistent story, the lean model is now the standard in all of major auto manufacturers globally, having been copied to various degrees of success by the US, European and Asian car companies. Hyundai for instance have systematically hired retired Toyota line managers to teach them the model. It is without doubt Japan’s single biggest contribution to the global industrial complex, and its principles are employed in numerous other manufacturing arenas where similar conditions prevail, namely high-unit volume combined with market demand for quality and durability.

In the car industry there has not been a significant new “revolution” on top of lean manufacturing, (although the use of sophisticated robotics is certainly a significant evolution), and lean manufacturing has probably never been achieved to the same level of perfection (flawless cars shipped, symbiotic efficiency etc) outside Japan but there have been a host of other economic and global market factors that make the narrative more complex than the one leading up to 1990, e.g. consolidation among European car brands and sharing of platforms across brands, different emissions standards in Europe meaning Diesel engines have had a perhaps unfair advantage, the financing requirements to invest in emerging markets requiring consolidated purchasing power (e.g. the NISSAN RENAULT Alliance), and of course currency fluctuations, to name but a few.

Today the pinnacle of lean manufacturing in terms of flawless models being shipped is apparently Lexus, Toyota’s luxury marque, models which are mostly manufactured in in Japan still.

Is the iPhone the product of a lean manufacturing model? Chinese assembly plants have achieved economic leanness of cost through mean-minded cost control (not my words!) and punitive control on quality, but the symbiotic partnerships and empowerment of factory workers has not been replicated, indeed FoxConn employs suicide nets in its manufacturing facilities, but the relative short life, disposable nature of smartphones, as well as their electronic as opposed to mechanical guts mean that the comparison is harder to make.

More Japanese innovation? Human x Machine / AI hybrids

Despite the unstoppable march of electronic devices and accompanying dematerialisation of so much of our everyday lives, humankind still needs hardware. In fact the climate crisis we face requires an industrial phenomenon to solve it, and efficiently too. Whether it is wind turbines, nuclear reactors, solar panels and batteries, and more than likely a combination of the above and some new stuff to boot, we are going to have to scale up production of zero-carbon generation hardware like never before while finding a learning curve to drive costs and energy inputs down at the same time. Efficiency will one hopes become even more incentivised across manufacturing as a whole, so it is quite possible that lean manufacturing’s biggest contribution is yet to come.

On a more conceptual level, the way the lean manufacturing approach coupled the potential of machines and humans to mutually empower them may point the way to the next industrial revolution. On losing to Deep Blue the chess grand master and one would assume handy problem-solver Garry Kasparov established a chess league of what he called “The Centaurs” – a chess master combined with a chess AI, since he realised that the AI’s advantage lay in being able to access more game experience data than his brain could alone during play. The “Centaur” type hybrid chess masters of course trump any human or AI separately and represent just one example of how humans augment with AI, or vice versa, are becoming the new standard. But as the lean manufacturing story tells us humans have been amplifying the performance of mass machines for at least 50 years, and the co-evolution of technology and humans may be what defines us as a species since our origin as the tool-manipulating ape.

In academia today there is a burgeoning new arena of AI used as part of researchers’ armoury – drug developers use evolutionary simulations to develop original molecules for instance that might have medical capplication. And of course in everyday life with Google’s AI in our pockets we have already, on the quiet become the AI-augmented species. I have little doubt that industry is going to go the same way, and not least in Japan. Japan biggest R&D spenders, all of them mass / large scale manufacturers, listed AI as one of the most important areas of research and one of the reasons for onshoring more of their R&D budgets, where the onus will be on the human partner to be creative and inventive.

The post Japanese Innovation: The machine that changed the world appeared first on James Hollow's Blog about Hybrid Thinking.

The Japanese advertising industry in a nutshell

James Hollow — Fri, 27 Jun 2014 00:18:34 +0000

In this article I try to unravel one of the marketing industry’s most enduring mysteries: why Japanese ad agencies have succeeded in holding on to such a dominant position in the Japanese market, despite all the efforts of the major global agency networks. I believe the answer lies in a fundamental difference between Japanese and western audiences and the models the agencies use to approach them.

(A new follow up to this post can be read here)

The western agencies’ strategy paradigm

I entered the advertising industry off the back of 4 years studying physics at Oxford University, so I was more than a little predisposed to reductionist theories. I was therefor relieved to find a rational framework for solving communication problems, loosely referred to as the ‘account planning model’, being used in the planning departments of London’s agencies, and the agency networks globally. I was taken under the wing of a top strategist in Ogilvy London’s planning department, at that point one of the best strategy groups in town (it still could be for all I know). I also attended lectures at the Account Planning Group, and studied up on the award entry books which documented all of the shortlisted case studies. In short, I threw myself at this branch of the social sciences as if it were the next stage in my academic journey.

The account planning model combines the best of left brains and right brains

The account planning model first emerged from JWT London in the 1960’s and from there became the default paradigm for planning brand communications in the marketing empires that emanated from the UK, US and Europe. It is not designed to remove creativity from advertising, rather to impose structure and authority on an otherwise potentially chaotic and subjective process, and hence give these advertising agencies a process around which to scale up in a way that combines both business rationality and creativity.

By defining the creative task through a rational process, and then letting the best creative ideas compete with each other to be executed, the client can feel confident that the idea finally chosen is going to be the right one for her brand, right here, right now. It also gives the creative teams the freedom of a tight brief, as opposed a long rope with which to hang themselves.

Rationality & creativity combined

The model goes something like this (with the role that takes the lead in each step shown in brackets):

Unearth relevant target insight (account planner, possibly working with researchers)

Clarify the unique thing about the brand or product that needs to be communicated (account planner)

Come up with a concept that ties these two together (account planner)

Based on the concept, create multiple communication ideas, pick the best one (creative team)

Execute the chosen idea in a contemporary style (creative team & production)

It works because the worst that can happen is that the ad says the right thing but fails to get noticed much. When it goes really well, communications get made that jump off the medium and strike the viewers’ consciousness with a thwack and everyone involves gets to go to Cannes to pick up the awards.

Based around this model, western advertising agencies have colonised every developed economy and are well placed in developing ones too. Every one except that is for Japan, where they have captured a small sliver of a huge market and if anything are getting weaker at this point.

So what happened in Japan?

I have heard numerous explanations for this state of affairs, the most common being that local competition is so historically strong and immovable with local media monopolies, particularly DENTSU, that there is not shifting them; the challenge of hiring top talent as a foreign company in Japan (even though foreign companies in other industries manage it); nepotistic relationships between domestic brands and agencies…. There is some truth to all of these, but the argument that the Japan ad market is locked down by the incumbents can be easily refuted by observing that a big new player has sprung up in the last decade, reached #2 in terms of revenue scale, and continues to challenge the old media titans. It is very telling to look at how they did it, as I will do further down..

Dentsu dominates the Japanese advertising industry with a home grown formula for success

The real answer as to why the huge international networks have failed to capture much of the market in Japan, which I have never heard or seen written anywhere before, is this: the western advertising planning model does not work in Japan.

Let me explain.

As eluded to above, Japan’s media and advertising industry is indeed dominated by old-school media in the shape of Dentsu and its old rivals. Their persistent strength is usually put down to the fact that they have long standing exclusive relationships with much of Japan’s biggest media properties, as well as old-boy-network-type relationships with Japan’s biggest ad budget spenders.

But Dentsu’s monopoly is based on access to celebrity, not media. This works because in Japan it is aesthetic novelty, rather than hit-you-on-the-head ideas, that will always win out when building brands, and celebrity is the easiest way to auction novelty to the highest bidder.

That’s 90% of the answer right there. But if you want the full context read on….

An audience wired a little differently

Brought up in an education paradigm that promotes detailed knowledge and skill acquisition as opposed to conceptual originality or critical thinking, communications that aim to get a rise from Japanese consumers on conceptual terms simply do not connect.

In contrast, advertising that presents and explores an incrementally novel aesthetic will gain notoriety in Japan.

In other words, it is not that Japanese culture is shallow. It is just that it is deep in a different way: aesthetically. Aesthetics for advertising in the broadest sense comprises language (copy), celebrity (talent), design (visual execution), and music (including TV ad jingles!).

Aesthetic depth

Take the copy space as an example. Compared to alphabetic languages, Japanese, with its multiple layers of expression: Chinese characters, hiragana, katakana, and alphabet (in which Japanese words are often rendered to connote novelty) is a much more fertile and fast-evolving cultural realm in which to explore new ideas when compared to romanic language based cultures. Indeed, I have seen many campaigns that are driven by playing within this copy space alone, revealing simply a new way of writing a familiar idea.

But in Japan’s personality-centric culture, celebrities will always win out. And this works just fine for Dentsu since, compared to the other areas of potential aesthetic novelty, access to trending celebrity is a lot easier to control than all the others, and it is this that Dentsu has nailed as a business model.

In the west, as agencies vied with each other over producing creative novelty, forcing the division of media sales from strategic and creative services, the onus on the creative agencies was to create even more conceptual originality.

No such onus has ever impinged on Dentsu. In fact, the opposite is true.

When an agency handles competing brands as Dentsu does all the time, creating run-away successful campaigns based on creative novelty only serves to anger the competing brands, and increases their expectation and potential dissatisfaction in the future.

Instead, it is much easier to maintain control of both the market and client expectation by selling access to celebrities at a ranked pricing hierarchy. This is what Dentsu does, and knowing that they live and die by access to celebrity they will go to any extreme to capture and control their assets.

Dentsu’s biggest threat

Today the company that threatens Dentsu most, having risen meteorically to #2 in Japan’s media landscape, is Cyber Agent, the web media goliath. They catapulted up off the back of Ameba, their social blogging platform that, far from being technologically innovative, rose to ascendance in the micro-blogging bubble of 2007~2010 by capturing celebrities. They hired a talent agency golden boy to woo the magazine fashion models, TV celebrities and in general old-world media celebrities onto their digital platform to write (or have ghost written) their celebrity blogs. This attracted both their fans and endorsements plus advertising revenues that come with it. So although an upstart, Cyber Agent really played Dentsu at their own game, only in a different media space.

As cynical as all this is, I do not want to leave the impression that there is no art in Japanese advertising.

Let’s take TVCMs for instance.To generalise, any ad that captures the aesthetic zeitgeist of the moment, usually dominated by the celebrity dimension in terms of the execution, but in the really brilliantly executed examples, all the other aesthetic layers also combine to create a consilient work of art, albeit one that would bemuse western-schooled critics.

An example that springs to mind is this BOSS Coffee ad (Suntory) from 2002. The diminutive J-Pop idol HAMASAKI Ayumi, the most expensive endorser of the early 2000’s, is dressed as a cow girl on a spaghetti western set, singing the Boss coffee song. Her petiteness is juxtaposed with the enormous frame of the Hawaiin sumo wrestler AKEBONO himself dressed as a cowboy, but singing in a cute and endearing manner. A samurai character, cast to resemble Mifune from Kurosawa’s classic samurai films of the 1950s that famously inspired the Spaghetti western genre of the same era in the US, is also reprised in this multilayered aesthetic cultural collage. Two nuns appear towards the end – they are the KANO sisters, who are far from innocent, so the nun outfits are likely an ironic touch to juxtapose the virginal AYUMI.

A typically novel TV ad with a top celebrity

Does anyone remember this ad today? Probably not, because it is not designed to be memorable, but rather to be of the moment and hence position BOSS as such, until the moment passes, and a new aesthetic is demanded.

Why would any westerner be inspired to work in such a market? Well, because it’s fascinating and infinitely challenging. Although we do not have access to the top domestic celebrities, there is a lot of scope for designing communications that do not conform to the talent cookie-cutter formula, not least when you get onto Japan’s diverse digital landscape. And talents come in many shapes and sizes in Japan, character-based communications are common too, and social media offer a different way of building credibility for brands. All in all chipping away at the old model and at the same time exploring the depth of Japanese culture has provided a very interesting 11 years for me since I arrived in Japan for a supposed 1 year stint!

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A recent follow up to this post can be read here

An edited version of this article was posted in Campaign Asia in July 2014

The post The Japanese advertising industry in a nutshell appeared first on James Hollow's Blog about Hybrid Thinking.

What the 2020 Olympics means for Japan

James Hollow — Thu, 31 Oct 2013 11:18:53 +0000

Vision for Tokyo 2020 Stadium

I wrote up this article to be published in a marketing journal, and after a lot of editing it was whittled down into something quite different, but much more suited to a marketing journal! I have included the edited down version at the end for comparison!

What the 2020 Olympics means for Japan
The 1964 Tokyo Olympics put Japan on the map internationally, gave the country the self confidence to become a global economic and cultural force, kickstarting 3 decades of phenomenal growth. By the time 2020 comes around, 56 years will have passed by and Japan will be more or less 3 decades past its economic peak. Where can Japan get to in the next 7 years and what does this mean for businesses and brand in Japan?

Much of the international reaction to Tokyo being named as host city for the 2020 Olympics has cast the news as a welcome fillip to a torpid economy and ravaged national psyche. Those of us who experience life in Japan first hand have become accustomed to the contrast between the reality on the ground and the Japan-on-the-ropes narrative depicted by international news channels, and so we see the 2020 Games results through a slightly different lens.

There is no doubt that winning the bid is great news for the mood in Japan, and connected to that the economy too, but it is not a prop for a train-wreck economy, rather another positive factor in the developed World’s most consistently performing nation. During the so-called “lost decades” since Japan’s economic bubble burst, the country and its society have not done so bad:

GDP has been stable at more or less the same level it reached in the early 90s after the post war “economic miracle”

life expectancy has risen to lead the World (in contrast to the opposite trend in life expectancy in the US and elsewhere) largely through improvements in healthcare provision

Japan has clocked up 21 straight years as the World’s #1 creditor nation, owed around $3.2 trillion, enjoying a large trade surplus up until the the Tohoku earthquake

Japan regularly tops academic quality-of-life studies that factor in prosperity, access to high quality services including but not just healthcare, diet etc

Japan has retained the relatively small wealth gap so important to a healthy, cohesive and robust society

Better informed voices on the Japanese economy compare its consistent affluence to countries like Swtizerland, only Japan has 127m people and is the World’s 3rd biggest economy. Japan’s GDP vs government-debt-ratio of 220% usually underpins the “bug looking for a windshield” view of its economy, and indeed this is nothing to boast about, but unlike similarly challenged western economies, 95% of that debt is owned by people vested in the ongoing stability of Japan’s currency and finances, namely Japanese citizens. The Japanese banks that intermediate this relationship are closely tied to the government too, so it is no surprise that in times of doubt investors jump on the safe bet that is the Yen.

However, just like all huge, real countries Japan has its issues, a situation finally addressed by government policy with Prime Minister Shinzo Abe’s “Abenomics” – a policy quiver of 3 “arrows” aimed at revitalising the economy through a combination of investment stimulus and structural reform that will make it easier for international businesses to invest in Japan and catalyse innovation. Introduced early in 2013 and still work in progress, these measures have already succeeded in stimulating a 40% jump in the value of the Nikkei stock index, huge gains to Japan’s exporters as the Yen has been driven down by intervention by the Bank of Japan, accompanied by a wave of optimism in the business community connected to Japan, not least those of us here.

So far the biggest positive effect of Abenomics has been psychological. Despite its remarkably strong performance, not least given the horrific earthquake and tsunami in 2011, there remains a huge amount of untapped potential locked up in the professional know-how, technology, creative culture, inventiveness, diligence and social stability in modern day Japan. But since the goal of “catching up” in the post-war era was more than surpassed, there has been a lack of collective vision for how Japan can be part of inventing the future, and thus that potential remains ungalvanized. Abenomics has ticked all the boxes so far, but it has not put forward a clear and inspirational vision for a common national agenda. There is no broad appetite in Japan for nationalistic aggression, nor does Japan go for the personality politics that refuels the national dream as elections do for the US, so there is a real danger that Abenomics fizzles out into the passive pessimism that preceded it.

From the point of view of the rational observer it is clear that one of Japan’s roles is that of the pathfinder society for demographically mature nations as they adjust to their new found top-heaviness, and everything that comes with it. Far from ‘managing a decline’, the opportunity is to invent the solutions that make this transition a positive experience for young and old alike, and then export those solutions to those nations that follow Japan into the same territory as they are destined to, starting with the US, China and Western Europe. There are plenty of smart business people in Japan who perceive this and are investing in it, but it is not easy to coin a positive collective vision around this, and yes, the politicians here are not groomed as inspirational visionaries.

So it is against this backdrop that Japan accepts the honor of hosting the 2020 Games, rewarded for being the economic and social “safe pair of hands” that the Tokyo bid successfully proposed to the IOC panel. It is no wonder Prime Minister Abe described the result as more joyous than his 2012 election result, since the Olympics provides the motivation for the infrastructual investment program that is already at the heart of Abenomics, but more importantly fills the ideological void in Japanese politics, and can unite the nation around a common theme that is global in outlook.

Aside from promoting and facilitating participatory sport, the Games offers Japan the chance to project a new and positive role for itself in the world, and with it a new national self-consciousness, just as I believe the London Games did for Britain. The benefits for Japanese people will be multi-faceted, and no doubt there will be a queue of construction contractors offering to turn the stunning vision for the new national stadium and other facilities into a reality:
Video: http://vimeo.com/64632869

However, I believe that it is consumer brands that have the biggest advantage to gain from the recasting of Japan. It was Japanese manufacturing brands that changed the perception of Japan during the 70’s and 80’s, and despite the renewed strength of Toyota, NISSAN, Canon and other category leaders today there is no doubt that the decline of brands like Sony and Sharp have become synonymous with the supposed decline of Japan as well.

Much of Japan’s brand strength goes unseen: most of the significant parts of the iPhone are made in Japan for instance, only to be assembled in China; Japan is one of the few countries to have a trade surplus with China, shipping so many of the essential high quality parts and manufacturing machinery used in Chinese labour intensive economy; the fact that Toyota will soon make more from its OEM deals supplying hybrid drives to foreign car manufacturers than it makes from Prius sales; Canon own the patent for the inkjet printer module that is used in 80% of inkjet printers globally.

To an extent Japan has benefited from this stealthiness, but every society needs to invent new icons of its success otherwise it starts to believe in the myth of its own failure. As Japan’s Olympic vision percolates around the World it will provide Japanese brands with the confidence and impetus they need to show themselves in a new light. Among these will be the manufacturing brands already known to global consumers, but I predict a wave of service and retail brands to eminate from Japan under this new halo.

For anyone who has visited Japan well knows, it is the kingdom of customer service and the same attention to detail and incremental improvement to management processes that has underpinned its manufacturing succes is now being applied to retail. The rival 7eleven and Family Mart convenience store networks, both Japanese based companies, now boast 75,000 stores between them, most of them in Asia, and are investing heavily in service innnovations such as home delivery for the elderly and web & mobile based ordering.

The hugely successful fashion retailer UNIQLO is beginning a broad store roll out in the US where it plans to differentiate its service based on Japanese etiquette, bringing every store manager to Japan to be trained UNIQLO’s own brand of curteousness and service attitude.

In digital spheres, the Japan-based social app for mobile LINE, inspired by the aftermath of the 2011 earthquake, is already being touted as Asia’s answer to Facebook rocketing to 230m users in a little over 2 years, and is expanding rapidly in Asia, Europe and South America with its uniquely cute visual appeal. For these brands and those that follow from Japan, the aura of a vibrant, clean, stable and futuristic Tokyo will rub off positively.

The affiliation between Brazil and Japan as host nations will also strengthen the relations between these two already interlinked cultures. Brazil is home to the biggest population of expatriated Japanese after an emigration program a century ago, and the south american juggernaut is so obsessed with Japanese manga and anime that when anime TV show theme song vocalists tour Brazil they play to crowds of 100k people. The consecutive Olympics will reinforce this two way corridor for industrial investment and consumer brands alike that is being pushed strongly by both governments as well as brands and corporations on both sides.

For international brands looking to grow their businesses in Asia, the consumer confidence that was already growing off the back of Abenomics in 2013 will offer the chance of long term sustained growth within a well regulated and increasingly open-for-business Japan. The ones that will succeed will be those that succeed in understanding the zeitgeist as it evolves with renewed urgency and execute with sensitivity to the subtleties of Japan’s fast-progressing digital platforms.

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The draft above was refocused on “What Tokyo 2020 means for Marketers” and featured in the international marketing industry journal MediaPost.

The announcement a few weeks ago that Tokyo is the winner of the bid to host the 2020 Olympic games was a great achievement for Japan — and proof of Asia’s ongoing position as a global cultural powerhouse.

London 2012 was widely recognized to be the most successful games of all time, both athletically and in returns for those brands that chose to buy into its marketing juggernaut. But will Japan, a country supposedly past its economic prime, deliver the same opportunities and potential rewards?

When Japan last hosted the Olympics in 1964, the Tokyo games put the country firmly on the international map. Worldwide attention and investment offered the nation the self-confidence to become a global economic and cultural leader, in the process kick-starting three decades of phenomenal growth.

By the time 2020 comes around, 56 years will have passed since Tokyo ‘64, and Japan will be nearly three decades past its supposed economic peak.
While Japan’s worldview and international reputation have been largely clouded by the idea of “lost decades,” the country’s biggest problem is not a poorly performing economy. In fact, the national economy has performed better and more consistently than any in the developed world over the last two decades, and living standards here continue to improve.

The truth is — Japan has been suffering from from a “where next?” malaise. Having caught up and then some with the rest of the world leading up to the 1990s, Japan’s nationhood seemed to have lost direction. For a country that invented the future in the 1970s and 80s, the fall from grace of national icons such as Sony and Sharp has led to a lack of national self-confidence and increased introspection.

So the Tokyo 2020 win is just the psychological shot in the arm the nation needed, unlocking huge potential for Japan’s businesses and brands on a national and global scale. Although slightly under the radar, the country is still a manufacturing Goliath. It is one of the few countries to have a trade surplus with China — producing most of the significant components of iPhones, for example.

Japan’s service industry is the most refined in the world, and is poised to go global. Indigenous organizations such as retailers like FamilyMart and 7Eleven are already flexing their international wings, and local retail fashion sensation UNIQLO has big ambitions on the global scene.

These globally minded service brands are putting Japanese values of politeness, attention to detail and efficiency at the center of their international brand strategies. These values are spreading — adding to the crucial characteristics that will contribute to a refreshed Japan Inc. image.

History tells us that Japan does not tend to invent new realms of global business like the Web and smartphones. Instead, it has historically caught up fast and added a new dimension of competitiveness to the market, as in the case of the automotive industry.

So perhaps Japan’s time for Web services is coming. Japanese social platform LINE has reached a staggering 230 million global users in just two years — breaking all records in the process, and showing that a digital user experience can be both intrinsically Japanese and have global appeal at the same time.
Based on its growing international interests and pro-growth economic policies, national sentiment is already strong in 2013 and the expected YEN3trn boost to the domestic economy will only strengthen that.

Tokyo 2020 will reveal a stunning image of a sophisticated metropolitan nation, solving first world issues through technology and progressive policy while doing just fine economically. This positivity will offer fantastic opportunities to both Japanese and international brands that choose to associate themselves with it.
Quick off the mark as ever, Coca-Cola has already begun to associate itself with the Games, reminding consumers of a long association with the Olympics — surely just the beginning of a newfound interest in “brand Japan” for many others as well.

Going forward, the greatest rewards within Japan will come to those brands that successfully interweave fresh and relevant narratives into the emerging consciousness and digital landscape of Japan’s new era. The key to success is forgetting what you think you know about the Land of the Rising Sun to embrace one of the planet’s most exciting and forward-thinking countries.

This same process of reimagining is just what Japan’s consumers are now doing themselves, and as Japan takes the center stage, the opportunities to share in this success may be endless.

The post What the 2020 Olympics means for Japan appeared first on James Hollow's Blog about Hybrid Thinking.

Renault-Nissan Alliance is the pathfinder corporate hybrid and can overtake Toyota

James Hollow — Mon, 21 Oct 2013 09:56:04 +0000

The pathfinder corporate hybrid strategy

I predict that by 2020 the Renault-Nissan Alliance will have replaced Toyota as the #1 car maker. Already 8.1m units annually, or 1 in 10 cars sold globally come from the group, which was established in 1999 through an unprecedented cross-shareholding agreement, that left both sides of the alliance incentivised to help the other succeed, without the respective corporate and brand identities being consumed by the other. A key factor in the success of the group over the last decade has been the creation of successful hybrids of the two company’s strengths, where strengths are shared and weaknesses mitigated both ways. For instance, operationally the “Nissan Production Way” was adopted by Renault’s manufacturing facilities, leading to productivity gains of 15% on the French manufacturer’s production lines. Going the other way, in the same way that German makers have helped Toyota by supplying diesel engines for their European models, many of the Nissan cars and vans sold in Europe today have Renault-built diesel engines, helping Nissan become the biggest Japanese brand in many key markets in the continent.

Logistics is another key area of where hybrids of the two companies are paying dividends, working tightly together to create efficiencies across purchasing warehouses, shipping containers, shipping… In logistics alone the annual savings through collaboration amount to $300m. For the group as a whole the an enormous $2bn per year is estimated to have been saved in 2012 through collaboration.

The benefits of partnership do not just work on a global level, but also when they target strategic growth markets. In 2011 the Alliance launched a hybrid “Brazil Offensive”, investing $1.8bn in local manufacturing facilities establishing a 200k unit annual capacity for Nissan, due to come online in 2014, and for Renault increased capacity to 380k units, a combined total of nearly 600k for this market that will soon become the World’s 3rd biggest overtaking Japan itself. In another BRIC market, Russia, where the group is targeting 40% market share as quickly as possible, the Renault-Nissan Alliance has taken a 67% controlling stake in the biggest local manufacturer AvtoVAZ, and together will expand local manufacturing capacity to 1.7 units annually by 2016. The move, which has been blessed by Putin, also brings the iconic Lada brand under the groups wing, adding it to the growing list of marks in its stable: Renault, Nissan, Infiniti, Dacia, Datsun, Renault Samsung Motors and now Lada.

In a globalised car marketplace where competition is increasingly intense, and car sales are often decided on the loan-purchase and warranty agreements rather than the uniqueness of the vehicles, the big players need all the operational efficiencies and economies of scale they can grab, and there is no doubt that deals as attractive as the AvtoVAZ one would not have been possible without the combined financial grunt of the Alliance behind them. But in such a market genuine technological leadership becomes even more important, as Toyota proved with their hybrid technology.

The Alliances biggest technology play has been the bold investment in electric vehicles, a move that would not have been a viable option without the combined financial strength, nor without the complementary R&D contributions of Renault and Nissan respectively. The Renault Nissan Alliance is leading plugin cars sales with 100,000 since 2010 and is deeply involved in building out the infrastructure to support an EV car culture in developed markets. Whether this will prove to give Renault-Nissan a decisive advantage in the race to the top is yet to be seen, but if EV adoption accelerates they are better placed than any.

If this partnership has been so successfully then why have not others followed suit? Actually they have. Similar deals have been struck between VW & Suzuki, GM and Peugeot and others, but none have been nearly as effective. Why is this? You could point towards Renault and Nissan’s relatively well matched scale and mutual strength, meaning that the relationship could not be too one sided, as was the case with VW and Suzuki’s failed alliance. However, back in 1999 Nissan were on the brink of bankruptcy, so a similar disparity might have evolved in the Renault Nissan Alliance too.

Carlos Ghosn, CEO of both companies and the Alliance itself used the metaphor of a marriage to explain its success:
“A couple does not assume a converged, single identity when they get married. Instead, they retain their own individuality and join to build a life together, united by shared interests and goals, each bringing something different to the union. In business, regardless of the industry, the most successful and enduring partnerships are those created with a respect for identity as the constant guiding principle.”
This mutual respect was reflected in the decision to retain the two distinct corporate HQs in Paris and Yokohama, but establishing a separate headquarters for the Alliance in Amsterdam, on neutral territory as it were, where the two sides can share ideas, technology and work on refining and developing new synergies and strategies.

I am not alone in thinking that at the heart of any innovative organisation is the diversity of its culture. Too many people thinking in the same way and accepted approaches get reinforced. But in hybrid teams everyone has to make an effort to empathise with and understand the alternative ways of thinking, and this leads to original thinking.

This sort of diversity does not have to come from different national cultures, but it is certainly one way of baking such diversity into an organisation. In an another post I speculated as to what would arise from a hybrid of Japanese and Brazilian cultures. In the same way I am intrigued to know how the Japanese and French cultures combine, albeit with many other nations blended in to the multi-national context. Just like all marriages, it probably is not all plane sailing, but if the willingness to make it work is there, then special things can happen.

Japan & Brazil getting closer together

The value of cross cultural hybrids in catalysing innovation is especially relevant to Japan since its society and hence workforce is relatively homogeneous compared to say the US or the UK. In the context of an ageing demographic yet essentially healthy, capital-rich economy I expect many more Japanese corporations in other industries to instigate cross border alliances.

Having just overseen a merger between two companies, albeit on a somewhat smaller scale, I know from personal experience that it is the differences between two companies that implies the value of bringing them together, but you need cultural synergies to make it work, and someone who can understand both sides and so nurture the resulting union. In this sense much of the credit for the successful partnership must go to Carlos Ghosn, himself a Brazilian-Lebanese-French multilingual hybrid. His success in bringing Nissan back from the brink has made him a near cult figure in Japanese business, and perhaps one day he will sit on top of the world’s biggest car maker. Already though the world, not least Japan, has a lot to learn from his experiences.

The post Renault-Nissan Alliance is the pathfinder corporate hybrid and can overtake Toyota appeared first on James Hollow's Blog about Hybrid Thinking.

Hybrids rule in Japan, and are taking over the world

James Hollow — Wed, 09 Oct 2013 01:26:43 +0000

The words hybrid and hybridisation first became used commonly in 19th century in the context of rearing domesticated animals and plants. A mule for instance is a cross between a horse and a donkey. Rose gardeners created hybrid roses to achieve original colour combinations.

These days hybrid technologies are equally if not more common. Among these hybrid cars are the most famous, a technology popularised largely due to the efforts of the Japanese car industry, not least the little known parts supplier Aisin Seiki Co. which invented the Hybrid Synergy Drive that made the Prius an international hit.

Simplified diagram of the hybrid drive train

Hybrid cars represent the classic hybrid concept: take two complementary species or systems, combine them to create a new species or solution that comprise the advantages of both systems, and at the same time mitigating their weaknesses. This article describes the current state and popularity of hybrid cars in Japan, and the effect the technology has had on driving transport technologies forward globally.

The 2 top selling cars in Japan are Toyota’s smallest hybrid models – the relatively new Aqua, and the world famous Prius. The same was true in 2012, when Honda’s Fit and Freed came in at #3 and #4, both of which had strong selling hybrid models. Here is the top ten sales ranking for the period April ~ September 2013:

Aqua (Toyota) 127,993 (-2.3%)

Prius (Toyota) 121,634 (-19.2%)

N-Box (Honda) 110,155 (-7.0%)

Move (Daihatsu) 107,591 (+44.5%)

Wagon R (Suzuki) 88,071 (-8.7%)

Mira (Daihatsu) 76,690 (-26.6%)

Fit (Honda) 67,918 (-33.2%)

Note (Nissan) 66,259 (+101%)

Spatia (Suzuki) 64,003 (NA)

Tanto (Daihatsu) 60,069 (-31.8)

The interesting thing to note about the rest of the top 10 is that they are all ultra-low gasoline consumption vehicles, hybrids or not. Toyota’s “Hybrid Synergy Drive” is so smart and expensive to develop that makers like Suzuki and Daihatsu have been forced to compete on fuel efficiency without such trickery, but instead by shaving away inefficiency from the traditional engine & power train set up, and by making the car itself lighter. So successful have they been with this approach that Daihatsu now boasts near-comparable fuel efficiency with Toyota and Honda’s hybrids, at much cheaper price points. It is interesting to note that Toyota have a majority stake in Daihatsu, so they are winning at both ends of the market.

The Honda Fit, previously at #1, will likely bounce back to near the top of the sales ranking with its new model released in September 2013 that claims the highest fuel efficiency of any car in Japan, at 36km/l (86mpg), and with its reinvented drive train and dual clutch, and an EV only start that will bring it more in line with Toyota’s hybrid driving experience. Honda have just started building a second production plant in Brazil, the 4th biggest car market globally where they are already 7th in the market on sales. They see the Fit type car and its hybrids as being very relevant to Brazil’s growing fuel-cost-conscious middle class.

Although many of Japan’s relatively affluent and brand conscious middle class will prefer a Toyota with a Hybrid Synergy Drive badge or a Honda with its own version, the low cost highly efficient manufacturing techniques developed by the other brands are very relevant to emerging markets, like Suzuki’s stake in the Indian car market for instance or Daihatsu in Indonesia. In other words, the innovations for Toyota have made the Japanese car market very lean and competitive when it comes to fuel, and hence more relevant to growth markets.

This competitiveness has likely contributed to Japanese makers’ strength as OEM suppliers as well. Toyota’s hybrid drive supplier, Aisin Seiki Co., which Toyota has a minority stake in, supplies drive trains to Ford, NISSAN and Mazda. Suzuki’s are sold with GM badges all over the world, as Maruti-Suzuki in India, to name just a few relationships.

The advantage of hybrid technologies is often misunderstood. The common perception is that because half the time the car is not using the combustion engine, it is more fuel efficient. Although this is somewhat true with Toyota’s Hybrid Synergy Drive, the real advantage is that the electric engine adds power when the car is accelerating, meaning that a smaller combustion engine can be used to deliver a satisfactory acceleration. The energy used is generated by the motion of the car itself and recovered during braking, which is itself very efficient, but the main efficiency is having a smaller engine that uses less gasoline.

This situation is somewhat analogous to Apple computers being faster than PCs despite having slower clock speed processors, because of the holistic hardware-software design – they make more of what they have got.

But are hybrid cars inherently better than gasoline only cars? Based on fuel efficiency, yes they are. Since they combine the advantages of energy recovery you get with an electric drive train, and hence smaller combustion engine, with the range and piece of mind of having a full tank of gasoline, it is the classic “best of both worlds” hybrid solution.

But do you ever make back the incremental cost of buying a hybrid car over a conventional gasoline car? If you drive a taxi it is an easy equation, and indeed all the Toyota Crown taxis in Japan are steadily giving way to Prius. For those drive less, maybe the incremental cost will never be made back in fuel savings. Also, when you factor in the energy costs of producing a hybrid car, particularly the batteries, and the relatively short life of those batteries, are they actually better for the environment overall? Some argue that they are not, although battery technology is improving all the time and personally I see this as a necessary investment to get the world to a more eco transportation system.

As noted above, hybrids have made the whole market more energy efficient, so their contribution to reducing overall emissions is already noteworthy. Anecdotally there are now so many hybrids on the roads in Tokyo that gasoline stands are having a hard time and many have closed down.

Europe has also been on a trajectory to higher fuel efficiency, but with a quite different solution – diesel engines, despite the relatively dirtier exhaust fumes. Japanese makers like Toyota, Honda and NISSAN are all geared up to sell in the car-obsessed US, which makes Europe’s infatuation with diesel engines particularly perplexing, and is one of the reasons that German and French cars have such a stranglehold there. Indeed Toyota have even been forced into doing a deal with Mercedes to supply diesel engines for some of their European models, while Nissan’s Alliance partner Renault supply them with their 1.5L diesel engines which are used in a huge range of cars and trucks for both Nissan and Renault.

A compelling side plot in the hybrid arms race comes from Mazda. They have their own version of hybrid, that they refer to as “the cross over without compromise”: a compact SUV that they claim has the best highway MPG of any SUV, including hybrids. Their “SKYACTIV” engine range achieves this by “reimagining every component to work together in unprecedented harmony”. It seems that the hybrid era has driven the Japanese “Kaizen” philosophy of incremental improvement to proven technologies, in this case the internal combustion engine to new levels.

However, Mazda are using diesel to solve the same problem that Toyota’s Hybrid Synergy Drive solves, that of how to deliver powerful acceleration with a small engine. Electric motors are very good at delivering torque, and as it turns diesels can be as well. SUVs need high torque, because their drivers want strong acceleration despite their vehicle’s bulk, and so big engines are required. Even the Lexus hybrid SUVs only do 16km/l (38 mpg) or so. Mazda’s 2.2l SKYACTIV-D diesel engines advantage comes through a “revolutionary” low compression ratio as explained here. Packaged inside the compact SUV Atenza model it can do 20km/l +, and deliver the same torque as a 5l gasoline engine.

New Diesel engine technology rivals hybrid engines

When it comes to reducing emissions industrial transportation is just as if not more important than personal transportation, particularly in Japan where so many commute by public transport. Hybrid drive trucks and delivery vans are becoming increasingly common, and both the electric hybrid and low compression ratio diesel innovations are being delivering that high torque with small engines are even more significant to haulage vehicles.

Given all this innovation and augmentation of the internal combustion engine technology, you can see why EVs are struggling to get to mass scale, despite the massive commitment made byTesla, NISSAN with the LEAF and the VOLT from Chevrolet, since they share the same battery costs problem with the hybrids, only they are more critical, and yet do not yet deliver the range and piece of mind you get with the gasoline tank and gasoline stand infrastructure, at least in terms of consumer perception.

Also, although electricity has an inherently cleaner image than gasoline, when all your country’s electricity is generated by fossil fuel, as is the case in Japan since the nuclear reactors, the only viable low carbon energy source available at the moment, were switched off, there is no ecological advantage to electricity unless you are generating your own solar, and even then you are still dependent on the grid. All you are doing is changing the location of where you burn the fossils.

I believe 100% in the future of electric cars. Already they are becoming quite common in Tokyo and their extensive range and the growing charging infrastructure makes them a viable choice, and also popular with car-sharing services. I really hope they become ubiquitous, combined with zero carbon electricity generation, but current battery technologies are still seen as a limiting factor for a lot of their would-be drivers. The fact that hybrids share similar limitations on the electric side, particularly now with the “plug in hybrids”, but are able to sell in bigger volume because they comprise the benefits of a gas tank, and hence help to drive down battery production cost and drive battery technology forward at the same time, hybrids are in many ways helping the EVs in the long run.

Nissan Leaf – viable EV

There is a psychology dimension to this as well. Hybrids and now plug-in hybrids are getting the average driver accustomed to the idea of electric powered cars. Also, by becoming a mass selling option hybrids create a market for those who want to go that little bit further in the ecological dimension. If the Toyota Prius had not been such a mass seller, would as many people chosen to buy Tesla?

Whether hybrids provide the best of both worlds is a subjective judgement, but the fact that hybrid cars have transformed the car market by putting pressure on all technology platforms to reduce fuel consumption and emissions is beyond doubt, and demonstrates that there are still areas where Japanese innovation is changing the world.

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