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A Very Japanese Path To Profits
Ricoh's reforms avoided American-style layoffs
The 1000 Biggest Companies

It must seem so long ago now — a different age, a different world — when Ricoh suffered its first-ever operating loss. Actually, we're only talking about the early 1990s, and Japan was just beginning to feel the impact of its post-bubble recession. But while the broader Japanese economy has never really recovered from that blow, Ricoh is now in the middle of what it hopes will be its sixth consecutive year of record sales, its seventh straight year of record profits. And if you diminish the accomplishment as virtually preordained, given that Ricoh is a technology company in a technology-crazy world, then you're forgetting about the recent performance of what was perhaps Ricoh's closest competitor, Xerox Corp. The U.S. company that once dominated the market for office copiers and pioneered key personal computer technology has lately been rumored near bankruptcy. Its stock price is barely a tenth of what it was 18 months ago.

Especially amazing has been the fact that Ricoh has achieved its turnaround while embracing a management philosophy that has become much maligned — Japanese management. For example, Ricoh chairman Hamada Hiroshi laid down the law when he was the company's president in the mid-1990s: He said every possible restructuring option would be pursued "except laying off workers." That sort of regard for employees has been a traditional Japanese corporate philosophy, and it was a founding tenet of Ricoh's in 1936. But more recently it has been assumed that Japanese companies should follow an American model that traded layoffs for efficiency. "At Ricoh, we don't have a term 'lay-off' in our vocabulary," says Tsuruga Hiroshi, one of the corporate leaders of the company's information technology strategy.

What Ricoh did have was a Japanese-style restructuring that encouraged bottom-up suggestions for change. An early proposal to digitize all the company's design materials seems pedestrian now, but at the time it was a revolutionary way to share information with customers and employees. Follow-up was critical. Few ideas were allowed to be lost in the kind of bureaucracy that corporations in Japan are sometimes criticized for. Innovations like an online ordering system were conceived, approved and installed in record time.

Ricoh also spent heavily on technology infrastructure and software — more than $100 million in the three fiscal years leading up to March 1999, for instance — but never a dime on consultants. The irony is that Ricoh's managers are now in such demand to talk about their strategies for reinventing the company that they have begun selling the company's knowledge through a consulting arm. Ricoh says it especially targets smaller companies that wouldn't consider hiring high-priced consultants — and who may need the copiers, printers, fax machines and networked office equipment that it sells. That sort of cross-fertilization among different business units isn't necessarily Japanese — just profitable.

— By Murakami Mutsuko/Tokyo

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