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I'm an Open Book...if you know how to read between the lines.

Tuesday, January 10, 2006

Konosuke Matsushita

When we think of Electronic gadgets if there is any brand that comes to our mind other than Sony, it’s Panasonic. Today’s Gyan is about yet another Japanese company and its founder who are living example of “never – say – die” and “Think Big” attitude. It is a story of Konosuke Matsushita who lacked formal education, wealth, charisma, connections and even a special talent. Yet, early hardships unleashed hidden strengths which opened Matsushita's mind to the collective wisdom of others. His lifelong thirst for learning fueled the passion that led this humble, shy, 5-foot-5-inch humanitarian idealist to pioneer management practices and advance his philosophy that the mission of a manufacturer is to relieve poverty and create wealth, not only for shareholders, but for the society as well.

Konosuke Matsushita was born on November 27, 1894 in a little village named Wasamura south of Osaka. His father was a small landowner and prominent member of the community, and Konosuke, the youngest of eight children, enjoyed a comfortable early childhood. But during the war between Russia and Japan, the family's fortunes turned when his father lost his property due to bad speculation in the commodities market. Soon, they were forced to leave their farm and move to a small house in the city. Sadly, Konosuke lost his 3 brothers in a flue outbreak, too.

Still only nine years old, Konosuke bid goodbye to his mother at the train station, and left on the long, lonely ride to the big city – Osaka in search of a job.

To help support the family, Konosuke worked as an apprentice to a hibachi (charcoal brazier) store in Osaka a few months before he was to graduate from elementary school.

But soon, even the brazier went out of the business and Konosuke started working in a bicycle shop for 5 more years to come. He wanted to quit the job at the bicycle shop to continue with his education, learning in the night school. But his father convinced him to stay at the bicycle shop, saying, "The skills you are learning will ensure your future. Succeed as an entrepreneur, and you can hire people who have an education." His father speculated absolutely correct this time around.

Konosuke’s instincts told him that Electricity is going to be the next big thing in future. Eager to join this field, he left the bicycle shop and joined Osaka Electric Company at the age of 15. Within years, he was promoted to the post of “Inspector” – the highest any technical person could think of achieving in the company!

In his spare time, Konosuke had come up with a new design for electric sockets. His supervisor didn’t show much interest in it. Dissatisfied by the lack of challenge in his job, Konosuke found his own company in 1917. Along with his brother – in – law Toshio Lew * and two other partners and with a capital of 100 Yen, the company started its operation from a small house in Osaka. After 10 months, the profit was 10 Yen only! The workers and partners left the sinking ship. Even, Konosuke himself was losing faith in him. In those hopeless conditions, a wholesaler came up with an order of 1000 electric plates. Depending upon that work, Konosuke would get a yearly order of 30,000 plates each. But the timelines were steep as Konosuke had to complete the order in a month. Moreover, no one from the company knew how to make them. But Konosuke somehow managed to grab the order! (Gee, the story so far sounded more like a typical Hindi Movie except that our Hero was already married at the age of 20!)

The company soon took off by manufacturing Attachment Plugs, Two Way light Socket. It also came up with electric lamp for bicycles that would last for at least 40 – 50 hours. None of the manufacturers entertained Konosuke because they couldn’t believe that it is possible to manufacture such a long lasting battery. Konosuke then directly marketed his product to the customers. The trick worked and thousands of orders started flowing in. The company was now known as “Matsushita Electric Works” with a turnover of 1.2 Million Yen.

The movie has not yet reached interval! Interval ke baad, there are more ups and downs twist in the story.

The 1929 Great Depression hit Matsushita too. Even Konosuke himself was bedridden due to illness. All the managers came around to see him and advised him to lay off half the people to keep the company afloat. Konosuke outrightly refused to do so and in turn asked the managers to halve the production and make people sell the products in the remaining hours. Again, the trick worked. The company soon managed to spring back to its feet. By 1932, there were 1000 people working in 10 different plants. The company also owned 280 patents for different electric products! By 1937, Matsushita Group comprised of 9 companies.

But the happy days were soon to go away as Japan jumped into the World War II. The government forced Matsushita to convert their plants to manufacture weapons and ammunition. After the fall of Japan in 1945, all the factories came under US Control. General McArthur came down hard on the manufacturing industry, resulting Matsushita losing 60 odd companies in a single go! Even, Konosuke himself was asked to step down, any other man who has lost almost everything would have surely given away to the pressure. But not Konosuke! He in turn convinced the US authorities why it is important to keep the plants running. To prove his point, he penned a 5000 page report and managed to get support from the workers union. Finally, Konosuke was allowed to continue with his company but all his personal estate and property was seized. Moreover, he had taken huge loans for his companies. People dubbed him “The Loan King”!

It took more than 5 years for the company to come back on track.

In 1951, Matsushita happened to visit America. He was totally mesmerized with its prosperity and decided to make his company famous not only in US but also in whole of the world. In July 1952, he started dealing for a joint venture with the Dutch electronic giant “Philips” to manufacture electronic parts. Philips asked for $500,000 + 30% stake in the new company and 6% consultancy charges! Konosuke argued that Matsushita was going to run the company is Japan and hence, deserves some Management Fees! Finally, Philips settled for 4.5% Consultancy Fees and Matsushita for 3% Management Fees. Back then, Philips was bigger than Matsushita but this did not deter Konosuke.

Matsushita went on to establish the famous “Panasonic” brand. The group bought the MCA Company in US at the same time when Sony bought Columbia Pictures. With a productline having popular brands in TVs, Tape Recorders, Cameras, the company’s net sales are over $81 Billion today. The Matsushita group of companies has 628 companies employing 334,752 people.

Konosuke retired officially from Matsushita in 1973 but continued as an advisor till his death in 1989.

Konosuke was as much a philanthropist as businessman. To him, entrepreneurship was a means to earn money so that it can be used to serve the employees and the society. Even while doing business, he always made a point to explain the workers why they are doing what they are doing because according to him, if the workers themselves are not aware of what they are doing, they won’t be able to suggest improvement and contribute to their fullest.

A man who didn’t even receive a formal education left lessons for today’s managers to learn. Sheer hard work, self confidence, entrepreneurship and patriotism drove him to become the proud owner of a group of companies. Somehow, I recollect words wrote on Andrew Carnegie’s grave and I find them apt for Konosuke, too. It goes something like “Here lies a man who knew how to make people work who were smarter than him”

Regards,
Abhishek

*: Toshio Lew went on to found another electronic company “Sanyo” with whom BPL had made a JV.

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