February 03, 2021

Overcoming the "Big Business Syndrome" and Bringing Back the Ever-lasting Spirit of Venture

A Visionary's Perspective - Unraveling the Innovations and Corporate Management Philosophy of OMRON Through the Thoughts of OMRON's Founder, Kazuma Tateishi : Episode 7

In this series of articles with 8 episodes, we trace the thoughts and speculations of OMRON's founder, Kazuma Tateishi, a rare technologically minded executive, and looks at the background to his growth and business philosophy.

In this seventh installment, we would like to introduce the efforts of Kazuma, who pointed out that OMRON was facing the danger of falling into so-called "Big Business Syndrome", which means the distance between the top management and the frontline became far away that delays decision making, and avoids challenges for fear of risks due to the expansion of the organization as the business grows. What kind of venture spirit he has been striving for?

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How Much Cost are Needed to Grow a Business?

Have you ever heard of the term "Big Business Syndrome"? It is a pitfall that a company tends to fall into during the process of expanding its organization and growing into a large company with the success of its business.

Even venture capital companies that were originally aggressive in taking risks and trying new things tend to seek management stability as their scale expands. The distance between top management and the frontline often becomes so far apart that it becomes difficult to see what is going on inside the company. As a result, the organization becomes rigid and communication between employees and departments becomes stagnant and there is a danger that the business will go into decline.

Kazuma used the term "business venture" even when the concept of venture capital companies was not yet common and stressed the importance of entrepreneurship in creating new business through innovation. He believed that a company that develops advanced technology with an eye on the future must always challenge new things without losing sight of its founding spirits.

The Shadow of "Big Business Syndrome" Creeping into OMRON

In 1979, Kazuma handed over the position of president to his eldest son and he himself became the chairman of the board. After he became chairman, the company's business was doing well and its performance was growing steadily. On the surface, it did not appear that any problems were occurring. However, Kazuma, with the keen insight of a founder, sensed a subtle abnormality in the health status of the company and had been wondering something is wrong.

For example, one of the discomforts was the delay in response. Even when he instructed the factory to reduce inventory, it could not reduce as quickly as it used to be. Kazuma began to realize that the company-wide management capability was declining.

In addition, the company was too slow to respond to customers' requests. In the old days of Tateisi Electric, if a sales person came back to the office with customers request, in other words, the seed of a new social need, the engineers were able to develop a prototype in a short period of time. It took only less than two weeks to make a part without a drawing and assembling it. And if it worked well, they brought it to the customer and received an official order on the spot. However, now it took two to three months, and in the meantime, there were cases where customers were going for other manufacturers.

Kazuma grasped these were because of "Big Business Syndrome" and if he let those go, it will cause serious problems.

Returning to the Origins of Small and Medium Enterprises by Reconsidering the Entrepreneurial Spirit

The reason Kazuma noticed the hint to eliminate the "Big Business Syndrome" within the company was because he thought there was a connection between health management and business management, as mentioned in Episode 6. In other words, he applied the "Symptom equals Goodness (Therapy)" view to the company, and thought that the delay in response and other situations were symptoms that manifested themselves in order to cure the "Big Business Syndrome". He then realized that in order to overcome this syndrome, his company should go back to the small and medium-sized organization that were the starting point of his business. In other words, he and all employees should go back to the starting point of the business and work with entrepreneurial spirits.

For Kazuma, entrepreneurship was an expression of his will to constantly develop new business through innovation. Of course, it takes a lot of risk and courage to do so. Kazuma believed that a company engaged in cutting-edge, pioneering work must always return to its founding spirit and maintain a strong entrepreneurial spirit. Therefore, he thought if the employees could change the mindset of a large company to think and work like a small business, the venture spirit of the period from 1955 to 1970 would be revived.

Kazuma thought if such an organization could be realized, there would be no pressure from the top and employees would be able to work freely and openly, and exercise their natural talents to the fullest and return to a way of working that was full of creativity and ingenuity. He hoped that this would result in creating new products through a series of technological innovations, reviving the golden age of research and development the time that the entire company had poured its enthusiasm into research and development, and realizing the social needs.

Organizational Reform Brings Back the Venture Spirit

In June 1983, an organizational reform was carried out based on this belief. This reform had two main pillars: the first was to bring top management closer to the frontline, and the second was to divide each business into smaller segments and decentralize them thoroughly, so that each business segment could be operated as a small or medium-sized venture businesses within the company.

The first thing done to bring the top management closer to the frontline was the abolition of the executive committee, the highest decision-making body consisting of nine executives above the rank of Managing Director. Instead of it a new Representative Council was established, consisting of the Chairman, President, and Vice President, all of whom have representative authority. This representative board, the highest decision-making body, met once a week, and the top executives themselves were required to make decisions within a week to ensure quick response.

The other pillar of the decentralized subdivision system means that the business segments and their subordinate divisions will manage as the venture businesses as small and medium-sized companies within a large company. Under this policy, an aggregation of about 20 venture businesses were created.

Thus, the spread of the venture spirit within the company as what Kazuma envisioned was accelerated and company has made progress in overcoming the Big Business Syndrome. One year after the new system was implemented, sales grew by 27% over the previous year.

To Spread the Creation of World-leading Innovations

Once again, the venture spirit spread within OMRON, Kazuma's next thought is to spread the same spirit outside the company. In 1990, he established the Tateisi Science and Technology Foundation, a public interest incorporated foundation.

This foundation was established to support steady scientific and technological research which Kazuma had been dreaming for many years. It encourages the development of new industries through innovation, in other words, it cultivates the new seeds of society. This is the practice of the SINIC Theory, which encourages the seeds of innovation that transforms society, as mentioned in Episode 3. It contributes to the development of science and technology, and the creation of innovation by providing grants for researches that promote harmony between humans and machines and international exchange. Through these efforts, it has been contributing to solve social issues.

The reason for narrowing down the scope of the grant to "researches on promoting harmony between humans and machines" is because Kazuma himself had a human-centric aspects. He thought promoting harmony between "humans and machines" is the best way to realize a better society. By selecting a wide range of ambitious research themes that challenge for the future, the significance of the foundation lies in further advancing the idea of Kazuma's management philosophy: "To the machine, the work of the machine, to man the thrill of further creation".

Including these efforts by foundation, OMRON's initiatives to spread the creation of innovation in the world will continue without interruption.

In the eighth, the final episode, we will introduce stories related to the "public nature of business," as expressed in OMRON Corporate Motto "To improve lives and contribute to a better society," and the foundation of "OMRON Taiyo," a joint venture company functioning as a welfare facility and a private company which was born based on this philosophy.