VIEWPOINT : In Introducing Business Concepts, Aggressiveness Doesn't Always Work : Development of 2 VCR Systems Is a Classic Case

John M. Ketteringham is a senior vice president with the Arthur D. Little Inc. consulting firm and a co-author of "Breakthroughs!," published by Rawson Associates.

Ask Lee Iacocca or Ron Perelman, Carl C. Icahn or George Steinbrenner. They'll assure you that aggressiveness is the sine qua non of business today. To conquer a market as swiftly and as uncompromisingly as possible is an imperative that permeates the American style of management.

In researching a series of extraordinary commercial successes that have transformed people's lives in the last two decades, my associates and I found little support for such a brute-force approach as it applies to dramatically new commercial concepts.

In repeated instances, we saw that aggression and haste were negative factors--elements more likely to threaten an exceptional new idea than to advance it.

Indeed, in tapping international sources and investment, in acquisitions and in the recruiting of executive leaders, aggressiveness is necessary. But in the realm of creativity, kid gloves work better than boxing gloves.

There was no better example of this paradox than in the development of the videocassette recorder, a 20-year dream of consumer electronics companies throughout the world that finally came to pass in Japan between 1971 and 1976.

The final competitors in the effort to create a VCR technology that was simple, small and inexpensive enough for home use by regular TV-watching consumers were two companies with drastically different philosophies, Sony Corp. and Victor Co. of Japan, otherwise known as JVC.

In an interview, a highly placed Sony manager expressed that company's philosophy: "It's a Sony policy that we should be the leader from the very beginning, from technology to market share. We should always advance the product ahead of everyone else. We should dominate the market from beginning to end."

Compare this to a comment by Shizuo Takano, known as "the father of VHS (Video Home System)," in discussing JVC's approach to videocassette recorder development: "Our basic policy was to spread the information as well as to spread the technology and the format.

The market is large enough to hold everybody. So we don't have to worry about that. Japan does not have to monopolize the video market. One single company does not have to monopolize the whole profit."

'Polite, Gentle, Understanding'

Even more dramatic is a philosophy expressed by former JVC President Kokichi Matsuno on the day he assumed his firm's leadership in 1975.

"The most important value for the people in our company," Matsuno told his assembled managers, "is that you should be very polite and gentle . . . a JVC person should be one who can understand what your business partner is thinking."

What Takano and Matsuno both expressed was not just a moral lesson, but an approach to blending opportunity with creativity in the business world.

Let's look at what happened in the competition between Sony and JVC. The clear divergence in their outlooks began in 1971.

That year, the two companies joined forces with Matsushita Electric and created a single set of technical standards to govern development of a videotape recorder that used a 3/4-inch-wide magnetic tape.

That collaboration of Sony, JVC and Matsushita--Japan's largest consumer electronics company--was extraordinary because they shared engineers, plans, patents--the works.

In the end, however, it was Sony's product that emerged from this joint research effort as the market winner. Moving aggressively into the broadcast, corporate and institutional markets, Sony became dominant in 3/4-inch videotape recorders.

For the leaders of the VCR research effort at JVC--Takano and a scholarly, brilliant cohort named Yuma Shiraishi--Sony's 3/4-inch videotape recorder victory had profound implications.

The company had been losing battles to Sony for a long time, and for JVC senior management it was the last straw. The firm in 1971 canceled almost all its support for the VCR research program.

For Takano and Shiraishi, the defeat was more personal, because they had been stymied once again in their quest to fulfill a dream they harbored for more than 15 years.

It was a dream they had inherited from their beloved teacher, Kenjiro Takayanagi, the "godfather" of video at JVC, a man who in 1926 created television in Japan. For Takayanagi's sake, these two determined engineers had to press on--with JVC's official support or without it.

Takano and Shiraishi saw that both Sony and JVC had failed to invent the thing they wanted to invent--a VCR simple enough for everybody. The next stop in VCR evolution would be to a 1/2-inch tape width.

Sony was moving to that research stage based on its 3/4-inch product success. But the view of Takano and Shiraishi was more insightful. They decided that, regardless of sales, all previous videotape machines were fundamentally flawed--because none had made the leap to the consumer market.

To catch up to Sony, which was moving quickly from its 3/4-inch product to a 1/2-inch variation, JVC dropped out of the race and headed back to the starting line. "Looking back on all the failures, we decided to start out from scratch," Takano said. "All the work of the past was forgotten."

In halting the forward rush, Shiraishi and a small team of VCR research survivors perceived a number of critical flaws in the existing technology. People would not embrace a VCR, for instance, that had only one hour of tape in its cassette--even if the cassette was cunningly small.

The reason was simple: one hour wasn't long enough to record a feature-length movie. Other manufacturers would not embrace a one-hour VCR tape. Likewise, manufacturers would not welcome a VCR format that was difficult to build. Takano, more than Shiraishi and more than Sony, realized that the market for the first consumer VCR would not be consumers at all. It would be other manufacturers.

Network of Engineers

Hence, while Shiraishi and his team were devising a simple and nearly unbreakable tape machine that would satisfy consumers with at least two hours of playing time, Takano was busy informing and politicking through a network of engineers in all of Japan's major consumer electronics companies.

Repeatedly, Takano broke the secrecy of JVC research. Politely, gently, he built alliances among the companies JVC would need when VHS finally reached the market.

Blending technology, self-examination and politics, Shiraishi and Takano created the concept of the VHS format.

They carried out what my associates and I have come to call the "elegant concept," an idea expressed early in this century by Thomas A. Edison when he stated the essence of successful invention.

Even before you begin to build, he said, "all parts of the system must be constructed with reference to all other parts. . . . The failure of one part to cooperate properly with the other parts disorganizes the whole and renders it inoperative for the purpose intended."

When, in mid-1974, Sony completed its prototype for the Betamax VCR, the first consumer VCR in history, the company tried to interest two of the world's largest TV manufacturers, first RCA in America, then Matsushita in Japan.

Flaws Unseen by Early Consumers

But there were flaws in Betamax, flaws unseen by the early consumers who rushed to buy this delightful new gadget. But these flaws were foreseen by Shiraishi and Takano.

They were flaws noticed by most of the manufacturers, including RCA and Matsushita. They were flaws that Sony refused to fix because Sony was in a hurry to reach the market with the first and the smallest VCR.

Betamax was flawed by manufacturing difficulties and by Sony's diplomatic failures. Sony executives had failed to discuss the new technology with other companies as they were developing it.

Most critically, Betamax was flawed by a cassette that provided consumers only one hour of playing time. By mid-1976, a year after Sony had introduced Betamax, these problems were manifest in the marketplace. Sony's sales were unimpressive, less than 200,000 units worldwide.

JVC came out 18 months later with the VHS, and its product was--in the words of Konosuke Matsushita, the grand old man of Japanese electronics--"something very nice."

Typically, JVC's first product introductions were neither for press nor public. They were presentations for other manufacturers. The statement that the polite but crafty Takano always made at these presentations was this: "Well, JVC has . . . come up with the prototype, but I am sure everyone else in this room has also developed some sort of prototype by now.

I don't really care which company's equipment or format we go for, but let's go for the best system we are all working on."

This air of JVC humility, which combined the company's traditional diffidence with Takano's cleverness, was in striking contrast to Sony's take-it-or-leave-it attitude with the Beta format.

Not insignificantly, JVC's licensing terms for VHS were also a tempting contrast, both to Beta licensing terms and to the cost for other companies of continuing to seek their own 1/2-inch VCR format.

Patience, persistence, politeness truly won out in the "race" to dominate the VCR market. Both companies, Sony and JVC, created beautiful machines.

But in the end, the difference that resulted in today's 80%-20% market share breakdown between VHS and Beta came down to a difference in intellectual insight and diplomatic sophistication.

In the race to build the better mousetrap, Sony courted mice. But Yuma Shiraishi understood mice; and Shizuo Takano gently seduced mousetrap makers.

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