The MCI Restoration - II

Anand Laishram *

Last week we learnt about how Japan’s investments in Market Creating Innovations, in the wake of the death and destruction of World War 2, helped the country rise to become an economic superpower within decades.

We looked at how Toyota tackled the non-consumption of efficient transportation by developing low cost- and fuel-efficient cars, targeted at Japanese and other East Asian markets, which later paved the way for Toyota’s success in the US market.

This week let’s look at other Japanese companies which also helped Japan get back on the economic development treadmill by investing in Market Creating Innovations. Sony, the mega-corporation of today, synonymous with technological innovation and quality, started out from very humble beginnings.

Initially it was called Tokyo Tsushin Kogyo and their first building was in a bombed-out department store. The building was in such a pitiful condition that whenever it rained, puddles of water formed on the floors. (They later renamed the company to Sony, to be more marketable)

The company had modest means, but the co-founders, Akio Morita and Masaru Ibuka, had boundless innovation spirit. They wanted to take the company in new directions and create new markets.

They invested in new products and technologies, with the aim of serving the needs of the Japanese people, who at that time were suffering from the after-effects of the disastrous war. Their first product was an electric heated cushion, which was a failure (it caught fire unexpectedly).

The company couldn’t afford machinery and equipment, so they made their own. They made soldering irons, electrical coils, screwdrivers etc. The company’s first successful product was a G-type tape recorder, which they called a “tape-corder.”

It allowed people to make recordings quickly, cheaply and accurately, anywhere, anytime. In order to successfully market the product, they developed their own sales, distribution, advertising, training, service and support environments, which led to the creation of a lot of local jobs.

Another successful early Sony product was the pocket radio, introduced in 1955. At that time, electrical devices, such as radios, used vacuum tubes. The transistor had been invented in the late 1940s, but it couldn’t match the functionality and quality of the vacuum tubes.

However, Sony saw an opportunity in using transistors to power radios. Transistor radios were less expensive, small and therefore portable. Sony understood that many non-consumers of traditional vacuum tube radios (which were expensive and big) would find transistor radios the more viable and attractive alternative.

One such group of non-consumers were the Japanese teenagers and youths, who wanted to listen to their own radios, away from the restrictions imposed by their parents. Vacuum tube radios weren’t portable. However, transistor radios, by the virtue of their smaller sizes, were.

Portability was a feature that was immensely attractive to this group of buyers, even though the transistor radios at the time didn’t have the sound quality of the vacuum tube ones. This insight would later help Sony develop the enormously successful Walkman, which allowed people to carry their music with them. Sony would go on to sell more than four hundred million units worldwide. Sony today is a $80 billion plus company that employs more than a hundred thousand people around the world.

Another post World War 2 Japanese company that successfully targeted non-consumption and created a new market was Nissin, the company that gave the world instant noodles.
(Readers would perhaps be more familiar with Nissin’s Top Ramen)

Nissin was started by a Taiwanese immigrant Go Pek Hok (later changed his name to Momofuku Ando) who became a naturalized Japanese citizen after World War 2. At that time Japan was reeling under food shortages, amongst shortages of other kinds. People needed a cheap and easy/ convenient source of nutrition.

Momofuku Ando decided to tackle this problem. He set about developing food that met the following criteria:
- Tasty
- Non-perishable
- Ready in less than three minutes
- Economical
- Safe and healthy

At that time, the government wanted the Japanese people to eat bread, made with wheat imported from the USA. Momofuku Ando thought that noodles would be a better option as the Japanese people were familiar with it. He had also observed many people waiting in lines around makeshift ramen/ noodle stalls, to eat a bowl of ramen.

Therefore, he set about trying to find ways to make noodles that would last longer and could be cooked quite quickly and easily, in order to feed the Japanese people. His eureka moment came when he flash-fried noodles in tempura oil, which allowed for long term preservation and instant cooking.

Thus, Ando came up with his first product, the “Nissin Chikin Ramen” in 1958. Initially the noodles cost more than other options available at the time, but it was a lot more convenient and easier to cook. It took less than 3 minutes to boil and start consuming.

Nissin Chikin Ramen eventually became a massive success in Japan, after Mitsubishi Corporation (which was Japan’s major general trading house at the time) helped promote it, starting in 1959.

Ando achieved even more success, when in 1971, he introduced “Cup Noodles”, by packaging instant noodles in a Styrofoam cup. This made it even easier to consume noodles. All you had to do was add hot water. This paved the way for Nissin’s worldwide success, especially in the US market.

Today, instant noodles, made by a plethora of manufacturers, are the go-to option all over the world for people looking for something cheap and easy to eat. Nissin itself has benefited tremendously from their innovations. More than 50 billion units of Cup Noodles have been sold worldwide.

They were not only able to help feed the Japanese people in the difficult post war period, but also create jobs and eventually earn billions of millions of dollars in revenues (a majority of which come from outside Japan).

Thus we see how two Japanese companies, Sony and Nissin, helped create enormous prosperity in post World War 2 Japan, by targeting non-consumption through Market Creating Innovations. They started out by targeting the needs and requirements of the local Japanese population and focused on breaking down the barriers to consumption (Affordability, Accessibility, Time and Expertise) and later on, went on to achieve massive success worldwide.