R&D pays off for Japan's enterprising Tateishi Electric

In 1957, when Sony had just developed and put on the market the transistor radio, Kazuma Tateishi bought one as a bedside toy.

Mr. Tateishi, an electrical engineer and founder of an aggressively expanding company bearing his name, was then wrestling with a problem a customer in the rapidly growing automation-equipment industry had given him.

''I want a switch that can be used 100 million times before it has to be replaced,'' this customer had said. Mr. Tateishi made Japan's best and most original mechanical switches, lasting for 100,000 contacts before the silver points were eroded. For manual operations, this was quite sufficient, but with automation the switch would not last more than a week.

How could Mr. Tateishi increase the durability of his switches 1,000 times? As he sat listening to his newly acquired radio, the answer came, as most of his answers have, in a flash of inspiration.

''Why, of course,'' he thought. ''The transistor doesn't need a mechanical switch. It uses an electric circuit. If I can devise a circuit that acts as a switch, without contact, it would last forever, or nearly forever.''

It took Mr. Tateishi and his engineers 2 1/2 years to translate the idea into a marketable product. But by the spring of 1960, the company had made the first of the proximity switches that have brought it worldwide fame.

That same year, Mr. Tateishi invested 280 million yen (then worth $777,777) to build a central research laboratory, which has been the core of the Tateishi company's research and development ever since .

''In those days,'' Mr. Tateishi recently recalled at his headquarters near one of Kyoto's well-known Zen temples, ''my company's capital was only 70 million yen. It was quite a bold decision to sink four times our capital into a central research laboratory. But I knew, from a survey I had just concluded, that 60 percent of our sales came from products we had developed ourselves within the past three years. Unless we kept research and development going full tilt, our company would have no future.''

That spirit still pervades Tateishi Electric (or Omron Tateishi Electronics, to give it its full title in English), Mr. Tateishi said. The company devotes 5 percent of its annual sales to research and development. Most Japanese companies do not go beyond 3 percent.

''The IBM incident (in which Hitachi and Mitsubishi Electric, two of Japan's largest machinery makers, were accused of trying to steal industrial secrets from IBM),'' Mr. Tateishi said, ''is a typical example of what I call production by sample - buying a sample from someone else and then imitating it.

''We Japanese started our modernization effort far behind the major Western countries. Most of our companies had to take the road of sample engineering, or of paying royalties to buy other people's technologies, in order to catch up. But this is not a road one can take forever. As for my company, the only time we indulged in sample engineering was before World War II, when a Japanese aeronautics laboratory said it had seen a certain kind of micro switch in an American magazine and wanted us to make one like it. We bought the switch, adapted it, and sold it to the laboratory.

''But otherwise, from the very beginning, all our products have been developed by ourselves.''

Today Tateishi Electric's paid-up capital is 6 billion yen ($24 million), and its annual sales have reached 149 billion yen ($596 million for the company's fiscal year that ended in March 1981).

More than 65 percent of these sales are control devices of various kinds, 20 percent are in information systems - measuring and controlling traffic flow; printing, vending, and scanning railway tickets; automated bank-teller systems; and the like.

The bank cash card is no longer a novelty, but Mr. Tateishi says he is working on a cash-card system that would link bank, store, and customer to allow point-of-sales cashing. Instead of being billed at the end of each month by your bank or credit-card company, you would have the price of your purchases automatically deducted from your account the moment you made a purchase.

But what about customers who like to pay for purchases at the end of the month?

''You're not really getting free credit, though,'' replied Mr. Tateishi. ''Think of all the extra billing work that is involved for bank and store, plus your having to sign and mail your check. If all that work is eliminated, surely the bank and store should pass some of the saving on to you in the form of cheaper goods and services.''

An octogenarian, Mr. Tateishi has already been to the US twice this year to promote this concept. Two and a half years ago he turned over the presidency of his company to his eldest son, Takao, also an engineer. But he remains an active chairman of the board.

Tateishi Electric has about 5,000 employees, but its payroll comes to nearly 10,000, when its subsidiaries are counted. Making subsidiaries of most Tateishi factories is one of Mr. Tateishi's management strategies.

''We make a very large range of products,'' Mr. Tateishi said. ''It is impossible to control them all centrally. It is better to let each factory produce a relatively small product range, and make the managers of that factory responsible for their own decisions. In that way I can get relatively young men to have the experience of decisionmaking - and if they make mistakes, the consequences are not so grave.''

Mr. Tateishi began this spinoff system soon after the war. He called this the ''producer system,'' and he experimented with various versions. At first the central company retained personnel, marketing, research and development, finance , and purchasing functions. Later many of these were allocated to the subsidiaries. Still later, the subsidiaries were brought back into the central company, and new satellite firms were created in various parts of Japan, often with 10 to 40 percent local-capital participation.

These companies were encouraged to stand on their own, and even to compete with the central-company wage scales and working conditions. But senior positions were filled by people coming from the central company, and lateral and vertical links remain strong

On the often-debated question of whether salaries should reflect individual ability, as in the US, or rise in accordance with seniority, as has been the practice in Japan, Mr. Tateishi says he has 50 percent of a salary reflect individual ability and 50 percent the employee's rank or seniority.

''After all,'' he said, ''a man should be paid what he is worth, but at the same time, as he grows older, his family and social responsibilities grow. I think it is fair that his pay should reflect both his ability and his experience.''

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