Chapter 16 - Distracted by Competition

Not infrequently, company leaders fail to meet new and potent competition because of an outdated obsession with protagonists from the past. For almost two decades, America’s IT sector was preoccupied by visions of cheap Japanese computers swarming the marketplace; they would beat us in computers as they had in automobiles, motorcycles, VCRs, watches, and cameras. In 1982, just 5.1 million automobiles rolled off U.S. assembly lines compared to Japan’s 6.9 million. And America’s pathetic export level of just 353,000 cars trailed far behind Japan’s 3.8 million—not to mention Germany, France, and even Spain, which exported 495,000 cars.

“Once again, the alarm is being sounded across the U.S. EDP countryside, warning of the imminent invasion of the U.S. market by the Japanese,” mused Datamation in January 1973. Nearly nine years later, BusinessWeek devoted its December 1981 issue to the coming onslaught. Particularly endangered was U.S. dominance in PCs, because “the Japanese traditionally have low costs for components such as semiconductors and keyboards.”

Sure enough, Japanese exports of data-processing equipment in the first six months of 1983 tripled, to $819 million from $274 million a year earlier. Most of the increase represented printers, floppy disks, modems, and fax units. But there was also $300 million in mainframes and mainframe components bought from Fujitsu and Hitachi, respectively, by Amdahl and National Advanced Systems (NAS), a National Semiconductor subsidiary formed to sell and support computers after Itel exited the business.

In addition, Japan’s government-sponsored Fifth Generation Project promised huge advances in parallel processing, artificial intelligence, automated language translation, robotics, and other future stuff, drawing near-hysterical responses from American pundits and academics. So Armonk, led by John Akers, was most probably obsessed with Japan Inc., too—especially its Fujitsu and Hitachi components with their IBM-compatible mainframes.

Xenophobia as Strategy

Old-timer Fujitsu had been formed in 1935 as a spin-off of Fuji Electric, itself a joint venture of the Zaibatsu conglomerate Furukawa Electric and the German telecommunications-equipment supplier Siemens. Fujitsu launched its computer business in 1953 with the Facom 100 model—“only seven years after ENIAC,” we were pointedly reminded at our first visit there. By 1970, under the guidance of Japan’s “Mr. Computer,” Toshio Ikeda, Fujitsu was second only to IBM in the Japanese market. Nine years later, it was No. 1, driven by an aggressive sales campaign heavily spiced with a “buy Japanese” flavor. Of course, Americans were no strangers to the nativistic card, either.

Fujitsu became a favorite target of America’s business press because of its aggressive stance at home and its high-profile connection to Amdahl in the United States. For example, Forbes (June 9, 1980) commented on AT&T’s rejection of a Fujitsu fiber-optics contract: “It is heartening too that we seem ready to defend our leadership. AT&T chose last month to Buy American rather than honor a loaded low-ball bid from Fujitsu on advanced fiber optics work. Congress and the FCC applauded the action. The gauntlet is picked up. This time things will be different.”

BusinessWeek (May 19, 1980) followed the trend with a cover story photo of a scowling Fujitsu Chairman Taiyu Kobayashi, cropped to make him appear particularly menacing. Two years later, Fortune (May 22, 1982) carried a fairly innocuous remark from the company’s president, Takuma Yamamoto, explaining his company’s lead over IBM in the Japanese market. “‘At IBM, they don’t commit themselves to specific delivery dates. It seems they act superior to their customers.”