Contents

About the Author................................... 2 About the Book...................................... 3 Konosuke Matsushitas family background ............................................................. 3 Student, Apprentice, Employee (18941917).....................................................4 Merchant Entrepreneur (1917-1931).......8 Reasons for low costs- .........................10
Birth of NATIONAL..................................................................................................13

Business Leader (1931-1946)................17

And in 1937 he added 2 more........................................................................................19

Institutional Leader (1946-1970)...........22

First overseas trip...........................................................................................................25 Tie up with Philips.........................................................................................................25

MEI v/s other Japanese Giants...............27

Sony Vs Matsushita.......................................................................................................27 Matsushita..................................................................................................................27 Fighting complacency and innovating...........................................................................28

Philosopher and Educator (1970-1989)..29

MIGM ...........................................................................................................................30

Reasons for Matsushitas success.........31 Analysis............................................... 31 Bibliography........................................ 32

What does one need to be successful or to be a great leader? Great communication skills? High educational qualifications? Financial backing? A high IQ? Good looks? Charm? Stage presence? All these myths get shattered once you read a life story of the self-effacing man who was the founder of worlds largest electronics and electrical goods company - National-Panasonic. He was probably one of the most effective leaders of the 20th century yet very few people have ever heard his name

About the Author

John P. Kotter is a graduate of MIT and Harvard and has been on the Harvard Business School faculty since 1972. In 1980, at the age of 33, he was given tenure and a full professorship at the Business School, making him one of the youngest people in the history of the University to be thus honored. He was the Konosuke Matsushita Professor of Leadership at the Harvard Business School it was during this tenure that he wrote the book. In the past twenty-five years, Professor Kotter has written seven business books that have received awards or honors, better than anyone else has in the world. More than a half dozen of his books have also been business best sellers, including Leading Change, Corporate Culture and Performance, and A Force for Change: How Leadership Differs from Management. He has also created two highly

acclaimed executive videos and a CD-ROM. The many honors won by Professor Kotter include a McKinsey Award for best Harvard Business Review article, and a Financial Times Global Business Book Award for Matsushita Leadership. He is regarded widely as one of the best speakers in the world on the topics of leadership and change. He lives in Cambridge, Massachusetts and on Squam Lake in New Hampshire with wife Nancy, daughter Caroline, and son Jonathan.

About the Book

The book Matsushita Leadership: Lessons from the 20th centurys most remarkable entrepreneur, is a biography of Konosuke Matsushita, founder of Japans General Electric. The book tells the story of Matsushitas life in a chronological fashion and is divided into 5 time period sections and 16 chapters. The book is written by the author in a manner that would bring about a change in the life of the reader, by offering life lessons. Most of all the book is not just a biography of a remarkable man but also a Management Textbook for aspiring leaders like us.

Konosuke Matsushitas family background

Konosuke Matsushita was born on the 27th of November 1894 in Wasamura village of Wakayama Prefecture of Japan to Masakusu and Tokue Matsushita. The last of 8 brothers and sisters, Matsushita had a happy childhood and his family was reasonably well off by the standards of that time. They had 150 acres of land worked by 7 tenants and the Matsushita name was well respected in that village because the family had lived there for at least 3-4 generations.

Konosuke Matsushita was the baby of the family and as such pampered by every one. In 1894 a rice exchange was established at Wakayama. The exchange enabled people to deal in rice futures and options. In 1897 because of a poor harvest price of rice went up 36% the following year; it went back down in 1899 33%. Konosuke Matsushitas father played the futures market and speculated with huge bets and sometime after Konosuke Matsushitas 4th birthday the family was forced to sell all it had to pay off the rice exchange debts and apart from this they also had to suffer loss of face in the community because of Masakusus foolishness. In fact in turn of the century Japan, the feudal system was very much intact, respectability was tied up with wealth- the fall from grace mustve hit the Matsushitas hard. They moved to Wakayama where they stayed in a cramped tenement apartment where the 10 people lived in 2-3 rooms. Here Masakusu opened a geta-clog shop, which the oldest son Isaburo dropped out of school to help run. On October 4, 1900 Hachiro Matsushita (4th child and 2nd son) died of an unknown infectious disease. On April 17, 1901 Fusae Matsushita (3 rd child and 2nd daughter) died. With little experience and all the recent troubles Masakusu soon ran the little shop to the ground. Konosuke Matsushita says in his writings that he remembers being hungry in this period. In summer of 1901 Isaburo Matsushita caught a nasty cold and as his parents watched horrified their oldest son (on whom all Japanese lay all their hopes) died on August 22, 1901.

Student, Apprentice, Employee (1894-1917)

In 1901 Konosuke Matsushita started his formal education. He enjoyed himself at the house of Mr. Murakami, a teacher who was also a

credible male role model and possibly also a father figure. Here he learned to play shogi (a chess like game and he reveled in the praise of Mr. Murakami when he won) and climbed the mandarin orange tree with other boys his age to pick the juicy sweet and sour fruit. And these were the only fond memories KM had of his childhood. Just as a semblance of security was returning to Konosuke Matsushitas life, his father once again was the instrument of grief for the young boy. In 1902 Masakusu left Wakayama for Osaka to find work in a school for children with sight and hearing disability. In 1904 he wrote to his wife to tell her that he had found a place for his son as an apprentice in a charcoal room heater dealers shop. In Japan, at the beginning of the last century, an apprenticeship for young boys meant a secure future for them as shopkeepers. Many not so well to do families tried hard to send their sons into apprenticeship thinking that they were improving their prospects not realizing what the work entailed. The work in the hibachi shop was physically hard. Initially there were just odd-jobs to be done, but soon Konosuke Matsushita progressed to doing finishing work on the products scrubbing and polishing till his soft hands were red, soar and aching. He worked 16 hours a day; he did such hard physical labor at age nine. In March 1905, Matsushita started work in a bicycle shop owned by a man by the name of Mr.Godai. Here also his duties were similar to those in the Hibachi shop, starting with odd jobs and moving up to selling the cycles. Mr. Godai was a firm man but he was kind and fair to his apprentices. But even then life was very tough for the young KM. In 1905 Konosukes mother and sisters moved to Osaka from Wakayama and he had an opportunity to see them more often.

In April 1906 Matsushitas sister Hana died at 18. On May 1906 Matsushitas other sister Chiyo died at 21. On September 1906 Matsushitas father, Masakusu Matsushita dies at age 51. Between 1899 and 1910 half his family died. After seeing an electrically powered tram line in Osaka city Konosuke Matsushita knew that bicycles would soon stop being the preferred mode of transport He also knew that the age of electricity was there to stay. So after 7 years with Godai, the bicycle merchant, he decided to leave. However there existed in Japan at the time and still does to a large extent a sense of loyalty and a sense of owing so great to an employer that Konosuke Matsushita could not find it in his heart to tell his master who had been like a father to him that he was leaving in search of better prospects. So he chose an un-confrontational if a somewhat fraudulent approach to this problem; he lied to him about why he was quitting: he sent himself a fake telegram saying his mother was ill and needed him by her side, and with Godais best wishes he left the bicycle shop where he had spent 7 of the most formative years of his life. In 1909 he approached a brother in law to help him find work in an electric company because after seeing the tram he was convinced that that was going to be the next big thing. Meanwhile, he found work in the Sakura Cement Co. where the work was more physically demanding than he had ever seen. He had to shovel dry cement on to carts mounted on rails and push it to different parts of the plant. 6

When he learnt of a vacancy in the Osaka light company he put in his application and got selected. On October 21, 1910 Konosuke Matsushita started work at Osaka light as assistant to senior employees, pulling carts loaded with tools and fixtures. Soon he went on to wire simple jobs himself. At a salary of 1 yen per month. Within 3 months he got promoted from assistant to installation technician and got a raise. The work was hard and involved physical labour but also was intellectually challenging because the electrical industry was in its infancy a lot of techniques taken for granted now were invented back then. Wiring homes and shops Matsushita saw the lifestyles of rich businessmen their mansions and mistresses and this was probably when he started aspiring to be like them. In 1912, Konosuke Matsushita enrolled at the Kansai Commercial and Industrial School. But after less than 2 years there he quit because of his poor writing ability. In 1913 Matsushitas mother died. At age 20 in September 1915 Konosuke Matsushita married a 19-yr. old girl Mumeno Iue from the farming community of the Awaji Island. Mumenos pictures show her to be pleasant looking and with a determined expression. Mumeno had 8 years of schooling- twice as much as Konosuke Matsushita. In 1915 he was promoted to inspector, fewer duties and ill health followed. He coughed up blood. for a while he was convinced he had tuberculosis and that he had caught it form a colleague at work. A Catarrh of the pulmonary apex was the diagnosis. Ill health always 7

showed up when he was in a cushy position and had no challenges, but with challenges, his health improved. When Matsushita fell ill he designed a new light plug he thought was better than the one they were using at Osaka light. When it was rejected by his boss he got angry and contemplated leaving his secure job Osaka Light to mass market it.

Merchant Entrepreneur (1917-1931)

On June 15 1917 he resigned from Osaka light and he finally left on June 20 1917. In 1917 he began business with 100 yen and a 5-person workforce, As against Kiichiro Toyoda who had a start up capital of 1 million yen from his family. Their first factory was the 2 room tenement house where Matsushita and Mumeno lived. It was 130 square feet: for living and working. They tried to manufacture the new design plug but they could not make the insulation material, they scrounged through garbage to get the discarded insulation material and figure out how to make it. Finally a friend and ex-colleague helped them, as he knew how to manufacture the insulation. In 1917, they tried to market the new design plug but had little success because retailers didnt want to buy just one item from any manufacturers they asked them to return when they had more product lines. After the poor reception of the plugs Matsushitas ex-coworkers left him as they had families to support. In December 1917, on a tip off by a wholesaler who liked the young entrepreneurs they shifted to making insulator plates for Kawakita 8

Electric who made fans. The mold was made by a blacksmith in a week. Sample was approved by the wholesaler. Matsushita, Mumeno and Toshio Iue made 1000 plates in less than a month by working 18 hrs 7 days a week. They received a payment of 160 yen of which half went for supplies and mold leaving a good profit. And in early January they received an order for 2000 more plates because Kawakita liked product quality and the speedy delivery. In response to the new order Konosuke Mastsushita decided they needed bigger quarters. So in February 1918, they shifted into a new two-story home near Noda railway station on the Hanshin Line, in a section of Osaka called Obiraki-cho. The houses had 3 rooms on the 1st floor, 2 rooms on 2nd, and triple the space of their earlier house. In February and March 1918 they worked on the order of plates and the original socket As a 3rd product they started experimenting with an electrical attachment plug Manufacture of the new plug started in the spring of 1918. Because of low costs they kept low prices and offered the plug at 30% less than competition. It gained reputation and the device sold well. They also started hiring people Matsushita decided to introduce elementary specialization. He himself focused on insulators, Toshio on preparing materials for production and manufacturing and Mumeno on packaging The 4th product was the Adaptor. It became popular because houses have only one outlet in each room. Matsushita got a patent on the improvement of the standard product and it sold better than the earlier 3 products.The product was so popular that they needed financing to expand production. 9

In 1918, a wholesaler named Yoshida asked for exclusive distribution rights for adaptor plugs in return for 3000-yen loan needed for increased production capacity. By the summer of 1918 MEI had 8 employees and 4 products. With increased employees they did not move instead they construct half a story in main workshop room. This was odd looking but frugal and visitors impressed by cost saving ideas. Matsushita kept live-in apprentices like he himself was at the Godais. To the apprentices Konosuke Matsushita was stern but fatherly warm and Mumeno took the place of their mother. In the fall of 1918 Matsushita employed 20 people The business strategy was to sell improved versions of competitors products at lower prices (below market price)

Reasons for low costs1. Minimum overheads- the expansion of the house is one example 2. Long hours- the work culture that had been there when there were
just 3 people was the same when there were 20. They worked long hours and hard. The apprentices also worked long hours.

3. General Penny Pinching 4. Financing did not come at the cost of equity- Equity meant sharing
of profit, so no there was no ploughing back into the business.

5. Employees treated as part of family- people will work harder if they

are treated with kindness,

6. Emphasis on flexibility, speed and new product introductions.

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In 1919, after seeing the potential of the capital city, Konosuke Matsushita sent Toshio Iue to open an office in Tokyo. In 1920, expansion due to new products and new market forced Konosuke Matsushita to look for new premises, he bought a house next door when it became vacant, it was not ideal but it was inexpensive. The same year Mumeno gave birth to the couples first child, a daughter who named Sachiko. In 1921, bigger and better plant was the need of the hour and as soon as an acceptable piece of land was available Konosuke Matsushita drew a rough floor plan and contacted a builder who quoted high rates and negotiations broke down till builder agreed to finance the work. 1919-21- Expansion of MEI was not easy because although Japan was a capitalist economy but it looked more kindly upon the larger business houses. Around this time, through trial and error Konosuke Matsushita came with his Golden Rule: that to be successful in capturing significant market share the product offering must be at least 30% better yet at least 30% cheaper. At first, Konosuke Matsushita did most of the invention himself. He avoided large development staff and long development cycles and all forms of research. In 1922, firm introduced one or two new products each month better but cheaper.

Battery invention, since the products were selling well but not
braking records as expected by Konosuke Matsushita, with a new factory he looked around for new products to manufacture. He found

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demand for bicycle lamps was growing rapidly yet the existing models had drawbacks: 1. Flame in candle lit model was blown out by the wind 2. Acetylene products were expensive and needed constant refueling 3. Battery powered ones ran for just 3-4 hours before battery ran out of power. Konosuke Matsushita wanted to pursue battery idea but thought an improved version necessary. Wanted simple structure and economy (battery to last more than 10 hours) in six months after more than one hundred test models devised bullet shaped lamp by rearranging the power source, the batteries. New miniature bulb made things easier. With new bulb and new battery lamp burned for 30-40 hours. KM tested prototype personally and on rough roads. Assembly started in mid-June 1922. KM ordered 2000 bullet shaped cases because of suppliers minimum order condition. But retailers (electric goods stores) were not interested because of the bad reputation of battery powered lamps. Inventory piled up of the wooden cases. But Konosuke Matsushita used lateral thinking instead off cutting back Konosuke Matsushita invested more in new merchandising strategy Innovationin marketing techniques. He made assembly line workers into salesmen and they had to visit every bicycle store in Osaka. Underlying thought was that the people who owned bicycles would need the lamps too. The salesmen put the lamp on display without the retailer having to pay anything for it. Burning for 30 hours it impressed retailers and so they showed it to customers. The word about the quality of new lamps spread and sales skyrocketed, exceeding the production of 2000 a month. In May 1925, new factory was completed and all lamp products moved there. Yamamoto Trading Co. took care of distribution nationwide, with guaranteed purchase of 10000 units a month. 12

In 1925, success once again made Konosuke Matsushita fall ill. But then he ventured into a new challenge: politicsa local election. Other businessmen from Obiraki-cho, where the factory was located, convinced him to try his luck at a seat in the local district council elections. There were 28 candidates for 20 seats in Nishinoda. Konosuke Matsushita went to Kyoto to rest and recover from illness but as electoral race heated up his supporters asked him to return back to Osaka to pilot his campaign on his own. Health improved as challenge was before him. He was a not a good public speaker but had infectious energy level and sincerity that attracted people and credibility of successful small businessman. He stood second when 20 th would have sufficed to get him on the council. He was 30, at that time. Later he chose not to run for other offices, as he did not like the job because of disparities between his ideals and the practical political process, also politics took him away from his first loveMEI.

Birth of NATIONAL
Bicycle lamps were being used as lamps/ hand held torches because of thrift and portability, MEI designed new battery powered torch not for use on bicycles. They called it National, a brand name which is today as well known as GE or Coke. Launched new product by distributing 10,000 units to retailers and wholesalers, batteries in those samples were provided free by dry cell manufacturer Teizo Okada in return for MEI undertaking to sell additional 200,000 dry cells in a year. Aggressive promotion of brand name and massive ad campaigns were rare for small organizations then but MEI went against the grain. National became a household name. Not 200,000 but 470,000 Okada cells were sold. At the same time as torch MEI explored market for electric irons. Nearly 100 cos. were producing small quantities, but retail prices were

13

prohibitive4-5 yen, from a yearly salary of 324 yen, like 1000 rupees out of a salary of 60,000 p.a. in India. Konosuke Matsushita put Tetsujiro Nakao (former apprentice to rice dealer) in charge of design of new model. Nakao sandwiched heating element between two metal plates. At a volume of 10,000 units it could be sold at 30-50% cheaper than other products. Konosuke Matsushita felt no mass production led to deadlock in market for electric irons. So he went ahead and mass produced, risk paid off as sales took off, but initially it did not make money. As at MEI losses were not tolerated, Konosuke Matsushita took over management of iron business. Nakao was asked to come up with less labour intensive manufacturing process. Risk taking- Nakao would not have been chosen to develop a new iron coming from the background he came. Mass production would never have been started with such a small existing market, and having succeeded in expanding the market and capturing a great part of it, management would not have been changed. With the birth of son Koichi. Matsushita felt himself the happiest of all men, now with a flourishing small business and a male heir. But his happiness was short lived. On Jan 20 th 1927when he was returning from Tokyo to Osaka, in a train, sleeping, steward woke Konosuke Matsushita up to hand him a telegram which said only Koichi ill. Iue took Konosuke Matsushita directly from station to clinic where Koichi was being treated and found wife Mumeno, distraught, Koichi was in coma. On Feb 4 th Koichi Matsushita died. Konosuke Matsushita was destroyed by the loss of his male heir, the 10th loved one he had lost to the grim reaper. Loss of his son and failure to have another put a strain on his relationship with Mumeno. In 1928, plans were drawn for a new main office and factory totaling 15,000 sq. feet. Land was bought for 55,000 yen and it took 150,000 yen for construction. A loan was taken for the new office and factory from 14

Sumitomo bank. But the timing for expansion could not have been worse. On 29th October 1929 the stock market crashed in the US. The world financial markets panicked and in Japan demand, prices and employment all dropped, factories either slowed down or stopped production, and the times were so bad that MEIs sales were down by half and warehouses were overflowing with unsold inventory. Many members of the MEIs mgmt were beginning to think that a layoff was the only way out. But this would shatter excellent labour relations and also set the co. back by 12 years. Plus since economy was still deteriorating, laid-off workers would not find work anywhere else. Konosuke Matsushita was recovering from another bout of illness at this time. As usual as soon as a challenge presented itself, he was on the mend. He gave an innovative solution: Cut production by half, but dont dismiss any worker. Output to be reduced not by layoffs but by half days was Konosuke Matsushitas plan: same wages would be paid but all holidays would be eliminated and workers would be asked to do their best to sell the stock. In Feb 1930, the employees went back to their original schedules. In May 1929, MEI formed a JV with a co. called Hashimoto Electrical, with controlling stake, which supplied radio parts. Sales agents soon urged MEI to not just manufacture parts but radios. The existing models had many problems ranging from damage during delivery and mysterious failure while in use. Even though the economy was weak, Konosuke Matsushita decided MEI would enter the field as he saw the potential in it. Konosuke Matsushita bought a factory for 50,000 yen that was already producing radios and enjoyed a good reputation. August 1930- MEI sold the first radio. Immediately problems surfaced. Merchandise was returned in an unprecedented volume and because of radios customer relations of dealers were taking a beating and so 15

they got angry. This would have been a problem at the best of times but in the depression this was nothing short of a disaster. So Konosuke Matsushita decided to find out what was wrong. He spoke to the customers as well as sales agents and his own staff. It turned out that the dealers did not have an adequate understanding of the product to be able to help customers. So they would either have to sell through specialized stores or they would have to produce a radio that was so reliable it could be sold through the existing distribution channel. Konosuke Matsushita was of the opinion that they needed to develop a superior product, while the plant manager (the ex-owner of the company and now partner) disagreed. Finally the man was allowed to leave with his technical staff to form their own business. Then Matsushita asked his design department to come up with a radio, which was better. Innovation- in product design. The research team designed the new improved product in a relatively short time of 3 months. At this time the Japanese Broadcasting Corporation was holding a contest to select the best radios in Japan, MEI entered their prototype and took first place to their own astonishment. At this Konosuke Matsushita said that he was not surprised when he thought about why they had won. They had cultivated an attitude at MEI: Truly able people dont let difficulties get them down. Approach a problem with an attitude that it can be solved. Inspite of the fact the new radio was priced higher than existing models because it cost more to produce, it was popular and sold well. In ten years, by 1942, they had a market share of 30% and monthly volume of 30,000 units.

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Business Leader (1931-1946)

In 1932, Matsushita was visited by one of his customers. This man seemed at peace with himself and this attracted Matsushita to him. The customer told Matsushita the secret of his inner peace. He had found solace in a religious sect called the Tenrikyo religious sect. The man invited Matsushita to visit the head temple of the sect but Matsushita declined the offer giving work as the excuse, nevertheless he could not get the man out of his mind, he kept thinking of the mans dedicated manner and apparent happiness. After 10 days, the customer returned and Matsushita agreed to visit the sects head temple, and although he declined the invitation to join the sect, he was deeply impressed by what he had seen. Here was a large group of people working hard without apparent economic incentives. This kind of dedication was seldom met with outside small entrepreneurial set-ups. And since MEI had grown from one such small set-up to a huge company, it had lost some of that dedication along the way. He kept thinking about why a large group in a religious setting worked better than a large group in a business setting. The answer came to him. Quite clearly, if the corporation could be made more meaningful then people would be more satisfied and more productive. Two months after visiting the temple of the Tenrikyo sect, on may 5 1932, Matsushita called a meeting at the Osaka Central Electric Club

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auditorium of 168 MEI office workers and executives to share his thoughts. He began by reminding them of their collective achievements in the past. Then he told them of his recent experience at the sect and how that had forced him to reexamine the vision of the organisation. There he made his famous proclamation: The mission of a manufacturer should be to overcome poverty, to relieve society as a whole from misery and bring it wealth. He gave an example of tap water, a vital product that was produced and distributed so cheaply that virtually anyone could afford it. That is what the entrepreneur and manufacture should aim at: to make all products as inexhaustible and cheap as tap water. And he said that when this was achieved, poverty would vanish from the face of the earth. Matsushitas philosophy is a little difficult to understand: he wanted to help by increasing profits. As bigger profits meant that the customer had perceived a product to have that high a value. So, Matsushita said that a products profitability was a measure of how well it served society. He made clear that the purpose of an enterprise was neither profit maximisation, nor to maximise shareholder wealth, nor to maximise market share, but this did mean that the organisation would become one that gave away to charity all it earned. He spoke always about serving society by giving it goods it needed and could afford. This speech would not have been taken seriously had not Matsushita always conducted himself in a manner consistent with all that he had said. People could not have been led my Konosuke Matsushitas great oratory skills for the simple reason that he just did not have any. What he did have was a zeal that was evident from all he did himself. But still there were some that were skeptical about his lofty ideals like eradication of poverty etc. 18

Matsushita put his principles into writing and asked his employees to say them out loud each morning in the assembly. They were: Service to public Fairness and honesty Teamwork for a common cause Untiring effort for improvement Courtesy and humility Accord with natural laws Gratitude for blessings

And in 1937 he added 2 more

It is interesting to note that this practice was so successful, that it became a much vaunted management practice, to increase an employees sense of belongingness to an organisation. So much so that even in India, considered a hinterland of innovative management practices, there are at least 2 companies who are currently following a similar practice. Mathura Refineries has a morning assembly where all the employees gather together and Yash Paper Mills which has a company song much along the lines of MEI. He warned that achieving the goals of prosperity for all would take long, perhaps as long as 2 or three centuries, but that this should not deter them from trying. Of course like all novel ideas one too met with some resistance. Some employees disliked the morning assemblies with the recitation of the company values. But Matsushita was firm on that. They would just have to do it. But there is no doubt that this practice helped Matsushita become one of the worlds largest companies with some of the worlds most satisfied employees and customers alike.

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MEI was called the copycat whereas Sony was the innovator, but the minimal spending on new product development was one of the reasons costs could be kept so low. However, that is not to say that Matsushita was not an innovator. He innovated business ideas and practices that we take for granted today. For example, few people know that MEI was one of the first companies in the world to divisionalise. The first known company to do this General Motors in 1921. But Matsushita in all probability had no clue about this. In May of 1933, Matsushita created 3 divisions and a 4th followed in 1934. By divisionalising he was just doing something he thought would help him to implement the new mission and business principles. Division one manufactured radios, 2 manufactured lamps and batteries, 3 wiring implements and synthetic resins, 4 (started in 1934) took care of irons, foot warmers and heaters. The division system had some cons but it had pros that far outweighed them. While economies of scale were lost, the broader responsibilities helped managers to grow as independent businessmen and entrepreneurs The vision was getting lost in such a huge organisation which so many product lines. Divisionalisation helped them to get back the small firm feels that the functional organisation did not provide. In fact so successful was divisionalisation in realising its objective that the unheard of happened after the Second World War. Usually in huge cult companies as they are called, the number two person never leaves, eventually taking over the company when the number one retires or dies, and even then is never as successful as the number one. But Toshio Iue, Konosuke Matsushitas right hand since the inception of MEI and also his brother in law left after the Second World War and started the also hugely successful Sanyo Corporation. Even though divisionalisation was obviously desirable most of the companies 20

in the world resisted it as it pushed power down the ranks and CEOs opposed this system. End of 1930s, MEI employed 6,500 people. It sold hundreds of products to millions of people. In April 1940, Daughter Sachiko married Masaharu Hirata a graduate of the law department of the Tokyo Imperial School (now known as University of Tokyo) He was the son of a Japanese Noble man. Konosuke Matsushita was very happy his daughter was married into a noble family. Hirata changed his name to Matsushita as per custom as Konosuke Matsushita had no sons of his own. Life was perfect but not for long. During the war MEI and a number of other companies were forced to become the instruments of the Japanese armed forces and to manufacture products for them. MEI supplied the forces with bayonets, wooden propellers, ships and planes. In manufacturing these, the electronic consumer goods business had to be sacrificed. On December 7 1941, Japan bombed Pearl Harbor. US in retaliation bombed Hiroshima on August 6th and Nagasaki on August 9th. At the end of the Second World War, Matsushita was fifty years old and after leading MEI from strength to strength, he suddenly found himself in an impoverished country with a decimated population. At an age when most people are ready to retire and enjoy the fruits of their labour Matsushita had to once again start from scratch and he rose to the challenge. The momentum gained from being a divisional organisation was lost, and emphasis was once more on factories and production. During the war years MEI found it difficult to survive as money was being used only for the war and so consumer demand was falling. They tried to combat this by growing overseas and introducing new product lines. 21

At the end of WW II MEI was much bigger with 67 plants, but it was no longer a consumer Electronics Company, as part of it acted as the manufacturing arm for the armed forces. Matsushita himself was not a war enthusiast, but he could do or say little at such a time as he was the product of a nation which had a culture that demanded that the head of the state be obeyed not questioned. But when defeated, Matsushita knew that he would not only have to build up his Company again but also his nation and he thrived on the challenge taking along with him his employees. As always with a challenge, Matsushita became stronger and put on weight.

Institutional Leader (1946-1970)

A new challenge posed itself to MEI at the end of WW II. The allied powers declared MEI to be a Zaibatsu Company. Zaibatsu Companies were large family owned conglomerates actively nurtured by the government. 33% of the total paid in capital in Japan was held by the 10 largest of these firms. Well-known Zaibatsu companies were Mitsui, Sumitomo and Mitsubishi and Yasuda. Actually to call MEI a Zaibatsu company was an oversight on the part of the powers that were, as the company was very young and founder led as compared to the other much older and better connected to the government As being called Zaibatsu increased controls on a company it slowed down decision making and therefore recovery. Matsushita made more than 50 trips from Osaka to Tokyo to plead his case before the allied headquarters. He compiled 5,000 pages of information about the operations of MEI and in English at that, to give to the allied command.

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Also, news came in that Konosuke Matsushita was going to be removed as the allied command was getting ready to remove all the executives over a certain post. His paternalistic policies paid off at this time. The MEI labour union heard this and gathered more than 15,000 signatures on a petition to the allied command asking to let Matsushita stay on as President. The Petition was taken note of by the allied command and after 12 months of investigation MEI was removed from the Zaibatsu list. But at this time two of Matsushitas closest aides- Toshio Iue and Takaeo Kameyama both men not just employees but relatives, left MEI. We can only imagine what Konosuke Matsushitas feelings on the occasion were, on the one hand the massive rebuilding work to be taken care of and on the other the loss of two of his closest aides. In 1948, inflation was rampant and the black market flourished, in fact you could not make money unless you were breaking the law. A Matsushita light bulb sold officially for 4.2 yen in the black market, it sold for 100 yen. Workers asked to be paid in bulbs, and it was done on one occasion, but, eventually, rather than ease refused financial on the difficulties grounds by agreeing this was Matsushita corrupting. In mid 1948 MEI was almost out of funds and was forced to take a 200mn yen loan from Sumitomo Bank. But even with that for the first time MEI had problems paying everyone. As in 1949 the Japanese Govt. announced the Dodge plan to cut government spending, the economy faced deflationary trends. At this time, the press reported that MEI owed an immense sum in taxes with total liabilities exceeding 1 billion-yen. 23 that

In 1950, it became clear that a lay off was imminent and it was ultimately unavoidable and for the first time in its 33-year history MEI laid off people. 13% of the work force was laid off. The total debt of MEI was 7 million-yen and a chunk of it was money he had personally borrowed to build facilities suited to the militarys requirements. Ultimately though, slowly MEI paid off all its debts and got back on its feet. It was at this time, just after the war that Konosuke Matsushita started having problems with insomnia. He started drinking and sleep came to him only after sleeping pills and alcohol. And he started reflecting a lot more on the reason for his existence or for any one elses for that matter. He started studying human nature. He started a movement at the end of WW II called PHP Peace and Happiness through prosperity. He had started this movement to help keep Japan from ever again indulging in pointless Wars. Since PHPs name was in English and its ideology pacifist people thought it was a PR ploy aimed at the allied command, but for Matsushita during the hard years after the war PHP was his anchor to sanity. PHPs core philosophy was Matsushitas core philosophy. It can be summarised in a few points. (read from book) Japans economy finally started expanding robustly, even then the GNP in 1950 was only 3/4th the GNP in1939. MEI for its part tried to recapture the glory it had enjoyed prewar but was smart enough to know that that would come not simply from expanding in Japan, but also throughout the rest of the world. In 1950 the division system that was lost during the war years was reconstituted and once again the benefits from it accrued.

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First overseas trip

In early 1951 at age 56 Konosuke Matsushita for the first time went abroad on a trip to the U.S. He was scheduled to stay for a month in New York but extended his trip to nearly three months. He was fascinated by New York because of its progress and modernity. He was struck by the huge gulf between living standards in the U.S. and in Japan. While Japan faced daily power cuts from 7pm to 8 pm, lights in Times Square NY were bright 24 hours a day.

Tie up with Philips

When he came back he carried with him visions of a prosperous and democratic country. Konosuke Matsushita was particularly struck with what he had seen in the US and so in October 1951 Matsushita left for the U.S. once again with a view to find a potential source for new technology that MEI could produce at a low cost and high quality that had always been the success mantra at MEI. He finally zeroed in on NV Philips, a Dutch electronics major with whom MEI had done business before the War. Matsushita believed the two Companies had compatible corporate cultures. The idea was to establish a JV between MEI and Philips in Japan with Philips providing technical know-how and owning 30% while MEI would manage and control the remaining 70%. Philips asked for an upfront payment of $500,000 and 7% revenues. Arataro Takahashi, Head of the storage batteries and transformer division, who had been sent to negotiate, said he would accept the terms with a few changes. If Philips agreed to pay MEI a yearly management fee. Philips did not agree to this and talks stalled. But Takahashi stuck around and stuck to the issues. Again and again he stressed how Philips would benefit. He asked if Philips wanted to lose the opportunity to access new markets. Did they want to lose a

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fantastic opportunity to work with the best electronics company in Japan? Didnt Philips want to help a country as small and resource poor as The Netherlands, the home country of Philips? Arataro Takahashi had displayed all the classic MEI qualities- perseverance and hard work and gentle persuasion skills. Where a westerner would have gone home, frustrated Takahashi stuck to his guns and achieved what he had set out to. Finally Philips agreed; probably because they had never encountered such stubbornness before. The terms were MEI would pay Philips 4.5% technical fees and Philips would pay MEI 3% management fees. So Philips went from 7% to 1.5% (i.e. 4.5%-3%). The alliance needless to say, was a success the technology world class and the Organization well led. When the contract expired after a decade the terms of the new contract were 2.5% for the technical fees and 2.5% for the management fees. 1953- MEI built a Central Research Laboratory in an Osaka suburb. As usual, the lab did not innovate any new products but improved existing ones. The lab increased the attractiveness of MEIs products abroad. 1954- Exports=0.5 bn yen, 1958- Exports=3.2 bn yen- A GROWTH OF 650% IN 4 YEARS. In 1959, sale Company was established in the US where the products were sold under the brand name of Panasonic. Overseas sales companies were a necessity because of the growing exports. Also, manufacturing was thought sensible outside. They learnt that the mission and values of MEI could easily enough be transmitted abroad, however people from Japan MEI needed to be present there to inculcate these values.

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MEI v/s other Japanese Giants

In the 1950s three Japanese Companies were making inroads in the world market as never before, they were Honda, Sony and MEI. The comparison between Sony and MEI is inevitable as their product lines over lap. There are a no. of similarities in the history and functioning of the two organisations. : 1. Both were run by 2 person teams initially: Ibuka and Morita at Sony and Matsushita and Iue at MEI 2. Both focused on the consumer electronics business. 3. Both were risk takers. 4. Were bold 5. Questioned convention and 6. Moved fast 7. They both established their own retail distribution system rather than use the existing ones in Japan 8. They both built very strong brands-Panasonic, National and Sony. 9. They grew rapidly abroad 10. They were not at all like either the Japanese or any other world firms of the time, but were like each other. But there are also some glaring differences. Sony Vs Matsushita Urbane Sony Educated Matsushita and The country cousin Never pioneered, improved

sophisticated Pioneered totally new devices

existing products Sony was called cutting edge MEI was always the Copy cat Akio Morita and Prof Ibuka were Konosuke Matsushita came from a both from affluent families and background of abject poverty and had a good education little formal education

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We can see that great companies have some things in common if not all.

Fighting complacency and innovating

As the company grew there was a need to hire new people all the time and as the new members of the work force had never seen anything but good times they were liable to get complacent. Konosuke Matsushita knew the dangers of complacency. Also these people had not been exposed to the MEI way for too long, both these factors together would spell doom for MEI so Konosuke Matsushita stressed time and again about what the future would bring them. Japan had had protectionism, but Konosuke Matsushita was shrewd and knew that the protectionist utopia would be short lived, so he told his employees that they would have to be ready to fight not just domestic but foreign competition as well. And this meant increasing profitability along with growth. MEI was growing but was not profiting at the same rate. Demands for big budgets were met with speeches such as Do you think Edison had big budgets at his disposal? To reinforce his words he put up pictures of his hero Thomas Edison on office walls and a statue of his in the garden at the corporate headquarters. He also stressed collective wisdom where every employee would have a say in decision making. This was not for democratising MEI because Konosuke Matsushita could very well have taken the decision himself, but it was because he wanted a well informed input from all angles in the organisation. In 1967, when the Company was doing exceedingly well Konosuke Matsushita shook it up by proposing raising employee wages to European and North American standards. Because he had tremendous foresight he knew that low wages alone could not always be Japans

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comparative advantage, but in MEI some people were not convinced about this idea. They thought the costs would no longer be competitive but Matsushita stuck with his plan. So new costs saving ideas were adopted to fight complacency and the MEI workers became the envy of all other workers in the Industry. And MEI became the most efficient company not just in Japan but in the world.

Philosopher and Educator (1970-1989)

In his life time Matsushita wrote 46 manuscripts. The first published in 1953 and the last in 1990. Konosuke Matsushita was very tuned to the socio-political problems faced by Japan and was constantly looking for solutions. For example in 1978 he suggested it might be possible to make Japan in to a tax-free state by having surpluses in each annual budget. The idea was brilliant in its simplicity. The government would set aside 10% of its collection of all revenues in a savings account and the interest on that amount would be used to reduce the tax rates. He gave away $ 291mn from his own pocket and $99 mn from the Companys coffer. But the biggest philanthropy was the Japan prize 29

established in 1983. The Japanese equivalent of the Nobel intended to honour Scientists of all nationalities whose research had made a substantial contribution to the attainment of a greater degree of prosperity for mankind. The Prize carries a monetary value of $ 500,000 today (the Nobel is worth $900, 000 today).

MIGM
In Japan as in India and unlike in the US or Europe, the high schools are very tough and the four years of undergraduate college are thought of by many youngsters as party time. Konosuke Matsushita observed young people wasting their time in college and said Japan could ill afford this waste of human potential. He suggested young people joining work after high school because he argued that since people anyway ended up doing just one thing in their lives, it would be better if they learnt on the job rather than costing the Japanese govt. money. It cost the govt. 150 bn yen ($1.5bn) each year to run the Tokyo University. Konosuke Matsushita was dissatisfied with the political leaders in Japan as he thought their approaches very short term and many were corrupt and lacked vision. He tried at one point of time to start his own party but failed to attract support from influential people. Finally, he founded MIGM: Matsushita Institute of Government and Management. It was founded in 1979.the program was a post graduate one and could be from 2 to 5 years. Unlike traditional Japanese universities with their fascination for pen and paper tests, MIGM concentrated on Lectures as well as guest lectures, self study, projects and research. Another factor that sets apart MIGM from other institutes of the kind the world over is that students decide their own curriculum and their own projects. Since Konosuke Matsushita believed growth came from hardship, the living environment in MIGM was Spartan to

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say the least. The overall objective of setting up MIGM was to contribute to peace and prosperity by doing research on significant topics and educating a new generation of political leaders.

Reasons for Matsushitas success

1. Customer orientation 2. Frugality 3. Hard work competitive drive and very high motivation 4. Steely determination to make dreams come true 5. Keen sensitivity to customer needs. Use of emerging technology 6. Willingness to take risks, to experiment and learn. 7. Innovation in Product design, Marketing, Personnel policies 8. Loyalty from dealers and customers stemming from treating them as partners.

Analysis
This book is more than a mere biography because it also serves as a text book of management for the entrepreneurs, leaders and managers of the 21st century. It is a case study to learn from. Book is written in a very lucid and interesting manner. Although there are many lessons to be learnt from the book, but these lessons are not as explicit as the author stated while writing his intention while writing the book. The author has ignored a huge part of Matsushitas life- his family, there are just fleeting mentions of his relationship with his wife, none about his daughter. The author keeps referring to Matsushitas autobiography. This is slightly irritating; you wish you were reviewing that instead

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The author has taken the liberty to suppose what Matsushita mustve thought or felt, making it more fictional than factual, but this was probably unavoidable due to lack of credible information regarding his private thoughts in times of adversity in particular because he has not referred much in all his writings about his poverty and his relations with his wife. Author has taken care to not present Matsushita as the god the Japanese believed him to be but instead mentions at different places in the book the many quirks he had- of a hot temper, intolerance for slackness, Keeping a mistress and eventually acknowledging the children he had by her, his addiction to sleeping pills and alcohol. etc.

Bibliography
John.P.Kotter: Matsushita Leadership (1997; The Free Press) www.amazon.com www.simonsays.com

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