Global Economics

Matsushita's Platform For Success


An engineer's vision of using the same microprocessors and software to power a slew of Panasonic devices is transforming the Japanese electronics giant

Peer inside the newest Panasonic TVs, DVD recorders, and car navigation systems and you probably won't note a lot of similarities. But you should, say engineers at Matsushita Electric Industrial (MC), at least from a design standpoint. That's because all three share a basic technology platform of microprocessors and software.

Such technology platform sharing is at the heart of Matsushita's grand plan to design consumer electronics that can connect to each other and share digital music and video files—and that won't bust the company's budget. The strategy is the brainchild of Satoru Fujikawa, a 47-year-old former computer engineer. As director of platform development he has used his post to upend a company culture at Matsushita that held hardware engineers in far higher esteem than software programmers.

He's also responsible for making sure Panasonic gizmos sync with each other and transfer digital content more seamlessly. If Matsushita is successful, odds are pretty good consumers will keep buying Panasonic consumer electronics, figures Chief Executive Officer Fumio Ohtsubo. "We expect to reap the full benefits of this strategy by next year," when nearly every Panasonic electronics product will be based on a uniform platform.

Sharing Equals Savings

Matsushita's strategy would be a hit at any tech manufacturer. That's because fewer parts can help cut back on the time it takes to get a new product to market. And finding a way to do it at lower cost is crucial, since many gadgets get a makeover more than once a year.

Sony (SNE) and Toshiba (TOSBF), for instance, are racing ahead with their own plans to develop next-generation products and applications with the Cell microprocessor, jointly developed with IBM (IBM). "When you buy a TV, set-top box, or DVD player, it's a couple pieces of plastic or metal slapped together over a board covered with some kind of chip," says IDC semiconductor analyst IdaRose Sylvester. "In theory, any time you're reusing or leveraging intellectual property from one product to another you're saving yourself a lot time and money,"

Matsushita took it a step further last spring. It announced a partnership with Japanese game developer Square Enix (SQNFX). The tie-up will allow Matsushita to rig Panasonic gadgets to play Square Enix games and other digital content without a software upgrade. "We could one day open the platform to many others," says Susumu Koike, Matsushita's senior managing director and chief technology officer.

Long Fight for a Simple Idea

The approach resembles that of software makers. Microsoft (MSFT) has created PC platforms for programmers to create applications. Another example is Symbian, an open, industry-standard, operating system for data-enabled handheld mobile devices. "The most successful technology companies do platforms," says Harvard Business School Professor Andrei Hagiu, co-author of How Software Platforms Revolutionize Business. "Their value comes from generating network effects."

Matsushita's idea of building different consumer electronics from the same template dates back to 1997 when Fujikawa first raised the issue with Matsushita's top brass. Back then he was a mid-level project manager in his late 30s with almost no clout. "Everyone—engineers, executives—opposed my idea," he recalls. Matsushita had been developing stand-alone products. But software and microprocessors were transforming consumer electronics into network-linked devices.

Fujikawa was the first to expose the flaws in Matsushita's system. The biggest problem: Project teams weren't sharing technologies. In the past, the company's executives believed in a decentralized system and stoked internal rivalries to motivate engineers. But it had clearly become counterproductive. TV product engineers refused to talk to, or offer help to, their colleagues working on video recorders, even though the two product lines were using the same digital video technology. "I often thought, 'Why not just take what's here and use it over there?'" he says

A Change of Course

Another headache was cost. As electronics got more sophisticated, the company had to spend larger sums to customize microprocessors and software. Software accounted for an ever larger chunk of development spending on products, rising from 10% in the 1990s to 60% a decade later. At the same time, prices on many of Matsushita's key products were falling.

By 2002, the company was in trouble, reporting the biggest loss in its 80-year history. Then-CEO Kunio Nakamura quickly changed course, promoting Fujikawa and other tech specialists to senior positions.

Fujikawa set about designing three main platforms that could be developed into any Panasonic electronics product. There was one for mobile phones and a separate one for digital cameras and music players. The third was for TVs, digital, video recorders, and car navigation systems. But he still had to persuade engineers to use them. It took another year or more to get them to drop their resistance. "Even after executives were for the idea, engineers were opposing it," says Junji Michiyama, a general manager at the company's platform development center.

Coming Soon to Your Kitchen

By 2005, TV and cell phone engineers had collaborated to develop in record time a new cell phone with a built-in TV tuner for wireless carrier NTT DoCoMo (DCM). Fujikawa saw it as a turning point for the company. "In cell phones, we were technologically behind the competition by about two years," says Fujikawa. "We had several hundred people assigned to the project. It was a chance to knock down the walls between divisions and catch up with rivals in Japan such as Sanyo (SANYY) and NEC (NIPNY)."

The strategy appears to be paying off. This fiscal year through March, the company forecasts an 8.6% gain in operating profit to $3.8 billion on a 1.2% rise in sales to $76 billion. That will be its best earnings performance in a decade. Profit margins are expected to reach 5%, from 4.6% last year and 1.7% five years ago—and executives are targeting 8% to 10% in the next three years.

To keep the momentum going, Matsushita will soon use the platform-sharing approach to design washer-dryers and other home appliances. That could make it possible one day to remotely control your appliances from a cell phone or other wireless device, says Chief Technology Officer Koike.

Despite his successes, Fujikawa shies away from identifying himself as the mastermind of the strategy. "I didn't do this alone," he says. Alone, no—but he's shown how the vision of just one engineer has galvanized Matsushita's entire 334,000-person workforce.


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