In Japan, 70 per cent of corporate giants still believe that they must do everything in-house. However, with 10 per cent of a car’s manufacturing cost involving software — and with that amount steadily increasing with time — automakers can no longer go it alone. Having repeatedly failed to develop a collision-avoidance system on its own, Honda finally bought technology from Bosch, only to face outrage from the company’s research and development veterans who insist that using homegrown parts was central to ‘Honda’s soul’.
Analogue era champions were so successful that they have an ingrained a mindset which companies find hard to change — even when they try hard. These firms do not hire or promote recruits who are eager to revamp business models. Around 82 per cent of senior managers in Japan’s leading corporations have never worked in another firm. In Germany, that share is 28 per cent and in the United States, just 19 per cent.
The difficulty of teaching an old dog new tricks is hardly unique to Japan, but what differentiates it is the difficulty new firms face in supplanting past corporate leaders. Not a single new manufacturer has entered the top ranks of electronics since 1946, when Sony and Casio were born. By contrast, 8 of the top 21 electronics hardware manufacturers in the United States did not exist in 1970. Among rich countries, Japan has the second-lowest rate of new firms entering and old firms exiting.