Chapter 1: THE LEGACY
By many standards, he didn't look like a great leader. Early pictures of Konosuke Matsushita show an unsmiling young man whose ears stick out like airplane wings. He never grew taller than rive feet rive inches nor weighed more than 135 pounds. Unlike his rival Akio Morita at Sony, he was neither charismatically handsome nor internationally recognized. Unlike most well-known Western politicians, he didn't excel at public speaking, and in his later years his voice grew increasingly frail. He rarely displayed speed-of-light intellectual skills or warmed an audience with hilarious anecdotes. Nevertheless, he did what all great leaders do -- motivate large groups of individuals to improve the human condition.
When he died in the spring of 1989, his funeral services were swamped with a crowd of over twenty thousand. In a telegram of condolences to the family, the president of the United States called him "an inspiration to people around the world."
His legacy is daunting. After World War II, Matsushita was one of the central figures who helped lead the Japanese economic miracle. Through Panasonic and other brands, the firm he founded supplied billions of people with household appliances and consumer electronics. By the time of his death, few organizations on earth had more customers. Revenues hit a phenomenal $42 billion that year, more than the combined sales of Bethlehem Steel, Colgate-Palmolive, Gillette, Goodrich, Kellogg, Olivetti, Scott Paper, and Whirlpool.
On some dimensions, his economic achievements exceed those of much more famous entrepreneurs -- including Henry Ford, J. C. Penney, and Ray Kroc (see the exhibit on page 5). Yet because his name is not on the products, like Honda or Ford, because he was not an American in the American century, and because he never aggressively sought media attention outside of Japan, he is still largely unknown beyond his native land.
His incredible successes generated billions of dollars in wealth which were used not for villas in France but for the creation of a Nobel Prize-like organization, the founding of a school of government to reform Japan's political system, and a number of other civic projects. During his later years, he wrote dozens of books, studied human nature with a small group of research associates, and prodded his government to do more for the citizenry.
There are those who accumulated larger personal fortunes. There could be others who built even bigger enterprises or who made equally large contributions to their countries. But overall, it is difficult to find 20th-century entrepreneurs or executives with a longer list of accomplishments. And as an inspirational role model, he is without peer.
The small actions so defied stereotypes of rich and powerful industrialists that they became the subject of folklore. A typical story: in 1975, Morimasa Ogawa and rive other division general managers were invited to have lunch with their firm's founder. At this point in Matsushita's life, he had already been on the cover of Time magazine and was regularly being reported to pay more income taxes than anyone else in Japan. Because Ogawa had little contact with The Great One, he looked forward to the luncheon with both excitement and some trepidation.
The setting was a restaurant in Osaka. The six men met shortly past noon. After greetings and small talk, everyone ordered steak. Matsushita had two glasses of beer while telling stories about the business and the history of the company. When all six finished the main course, Matsushita leaned over to Ogawa and asked him to find the chef who cooked his steak. He was very clear on this point: "Not the manager, the chef." Ogawa then noticed that Matsushita had only eaten hall of his entree.
Preparing himself for what could be an extremely awkward scene, Ogawa found the chef and brought him to the table. The cook arrived looking distressed, for he knew that the customer who had summoned him was an exceptionally important person.
"Is there anything wrong?" asks a nervous chef.
"You've gone to all the trouble of broiling the steak," says Matsushita, "but I could eat only hall of it. It's not because it's not good. It's quite delicious. But, you see, I'm eighty years old and my appetite isn't what it once was."
The chef and rive other diners exchange confused expressions. It takes everyone a few seconds to realize what is happening.
"I asked to talk to you," Matsushita continues, "because I was afraid you might feel bad if you saw the half-eaten steak back in the kitchen."
Even the most rapacious businessmen occasionally show a kind side, usually as a manipulation. What is remarkable about Matsushita is the sheer volume of theses acts which, in combination with his many accomplishments, the public loved. Surveys showed that he was more admired than movie stars and professional athletes.
In an age when successful business executives throughout the world are sometimes looked upon with suspicion or even contempt, he died a national hero in Japan.
Konosuke Matsushita was born at the very end of the 19th century. During his youth, he experienced much hardship. When he began working for himself in 1917, he had 100 yen, less than four years of formal education, no connections to important people, and a history of family trauma. Yet his small and poorly financed firm flourished under the guiding hand of an increasingly clever merchant entrepreneur.
His counsel from that period was market oriented and very pragmatic. "Treat the people you do business with as if they were a part of your family. Prosperity depends on how much understanding one receives from the people with whom one conducts business....After-sales service is more important than assistance before sales. It is through such service that one gets permanent customers....Don't sell customers goods that they are attracted to, sell them goods that will benefit them....Any waste, even of a sheet of paper, will increase the price of a product by that much....To be out of stock is due to carelessness. If this happens, apologize to the customers, ask for their address, and tell them that you will deliver the goods immediately."
As both be and his firm grew, so did the scope and breadth of his ideas. By the early 1930s, pragmatic advice became increasingly intermixed with broad philosophical statements about the purpose of business enterprise, human nature, and more. "The mission of a manufacturer," he told employees in 1932, "is to overcome poverty, to relieve society as a whole from the misery of poverty and bring it wealth. Business and production are not meant to enrich only the shops or the factories of the enterprise concerned, but all the rest of society as well." He never talked narrowly about maximizing shareholder value as the proper goal of an enterprise. He did speak often about generating wealth, but for the benefit of everyone, not just owners, and even that idea was tempered by an emphasis on the psychological and the spiritual.
"Possessing material comforts in no way guarantees happiness. Only spiritual wealth can bring true happiness. If that is correct, should business be concerned only with the material aspect of life and leave the care of the human spirit to religion or ethics? I do not think so. Businessmen too should be able to share in creating a society that is spiritually rich and materially affluent."
The horror of World War II increased greatly his concerns about government. One of his last big ideas was to try to help develop a new generation of Japanese politicians by means of education. The concept was simple and extremely idealistic. Create a small, independent graduate school of government. Stress vision, integrity, the broader view, and rational policy analysis. Encourage alumni to run for elected office with the hope that over a long period of time they would become successful and alter the very culture of politics.
He built the Matsushita Institute of Government and Management (MIGM) on rive acres of land in Chigasaki City. The first class entered in April of 1980. As of mid-1993, 130 students had graduated. In the July 1993 national elections, twenty-three MIGM alumni ran for seats for the national Diet, the equivalent of the U.S. Congress. Most were members of new Japanese political parties and almost all were under forty years of age. They ran against incumbents from the LDP, the party that had been in power since shortly after World War II. In the United States or nearly anywhere else, most of the young challengers would have been defeated easily. But in the summer 1993 elections, fifteen of the twenty-three MIGM graduates won seats in the national legislature.
Masahiro Mukasa worked with Matsushita for nearly twenty-five years. His comments are not unusual among those who knew the man well.
"In Japan there are various orders that are conferred upon individuals by the emperor. KM received some, yet he never developed airs. He always thanked other people in a very natural way. That's what impressed me the most about him. He was always remarkably humble. He behaved as if he held everyone in high esteem. As a result, people who are usually reserved when talking to a powerful individual found it easy to speak with him. KM's demeanor encouraged them to be frank and to tell him what was really on their minds.
"He studied very hard. I think partially because he had little educational background, he listened carefully to what other people told him. He was very skilled at using that knowledge to create his own ideas.
"Despite all the money he made, he never seemed to be impressed by riches. He didn't spend his wealth in a luxurious way. He had a strong sense of morality, and seemed to focus on elevating his mind. He wanted to take a gradual step forward every day, little by little, toward greater knowledge.
"He believed that by improving other people, he could improve himself, that helping other people was like helping himself. These ideas were almost religious beliefs. He thought that without the cooperation of other people, he would not be able to achieve his goals. He always gave that impression to everyone he met. Without you, we would not be as successful.
"He was a very idealistic person, and I enjoyed working for him very much. He was more than an outstanding executive. He was a great man."
During his youth, few saw Matsushita as above average, much less great. He was a mediocre student. As a young adult in his early twenties, he was nervous and sickly. Yet by the time he was thirty, he was inventing business practices that would be highlighted in the late 1970s by Tom Peters and Bob Waterman.7 By age forty, he had become the kind of visionary leader that has been championed recently by Warren Bennis, Noel Tichy, and others,s After World War II, he created an institution that adapted phenomenally well to rapid growth, increasing technological change, and globalization. In the 1970s and 1980s, he took on additional careers as author, philanthropist, educator, social philosopher, and statesman. Most of all, throughout his life he demonstrated a capacity for growth and renewal that is astonishing, a capability that virtually all experts agree will be more important in a faster-moving 21st century than it has been in a slower-moving past.
Most children learn easily and develop skills at a rapid pace. Many adults learn slowly if at all. On numerous occasions, Matsushita told others that his perspective on all this was well summarized in a poem, the beginning of which reads:
Youth is not a time of life, it is a state of mind; it is not a matter of rosy cheeks, red lips, and supple knees; it is a matter of the will, a quality of the imagination, a vigor of the emotions; it is the freshness of the deep springs of life.
Youth means the temperamental predominance of courage over timidity, of the appetite for adventure over the love of ease. This often exists in a man of sixty more than a boy of twenty. Nobody grows old merely by a number of years. We grow old by deserting our ideals.
His ideals powerfully influenced his actions, but in a way that created a more complex personality than surface appearances would indicate.
After watching Matsushita deal with the chef at the Osaka restaurant in 1975, Morimasa Ogawa concluded that his boss was a saint. That initial impression made an episode that occurred rive years later all the more confusing. At the time, Ogawa's division was losing money. When the chairman paid him a visit, the conversation, according to Ogawa's written account, became very heated.
"I could understand if sales were zero and the deficit was in personnel costs," Matsushita yelled, "but you've got sales of one hundred billion yen and are nine billion yen in the red. Responsibility for running this mess lies with you and the executives under you. The head office must also take responsibility because they recently lent you that twenty billion yen. Tomorrow, I'm going to talk to them about getting it back."
"But Mr. Matsushita, that would mean disaster for us! It's five days to payday. At the end of the month we will owe money for materials and parts. If you take that twenty billion yen back now, we won't be able to pay for them."
"That's right, but I'm not going to lend you any money if you and your colleagues are going to run an operation like this. I'm pulling your loan tomorrow."
"But then we'll go bankrupt!"
"You've got four thousand superb employees working here. Talk it over with them, get their ideas, and come up with a reconstruction plan that will work. If you can get a plan like that together, I'll write a letter of recommendation to Sumitomo Bank for you. With that letter, they're sure to give you a twenty billion yen loan using the land, buildings, and equipment here as collateral. Now, get to work!"
Although few stories like this one have ever been reported, Matsushita appears to have yelled regularly at key executives, occasionally becoming so angry that his face would turn a deep red. The closer people were to him, the greater the opportunity to be reprimanded. Because of both family and corporate ties, no one was more in the inner circle than his son-in-law and successor as president and chairman, Masaharu Matsushita, and no one felt the brunt of KM's anger more. "He could be exceptionally charming to customers and sales agents, but to those of us who knew him best, he was sometimes cold and harsh. Even at home, at the dinner table, we often saw little warmth."
There are other indications that the Matsushita story is more complicated than the usual national hero headline. His emphasis on the greater good and all of humankind is legendary, yet he was a supplier to the Japanese army in World War II and in the late 1960s his firm was accused of participating in an industry cartel which kept prices high in Japan and dumped goods into the United States. For much of his adult life he was surrounded by thousands of admirers, yet in some ways he was a lonely man. He stayed with one woman in a marriage that was successful by most standards for over seventy years, but he also kept at least one mistress for decades and had a second family with her. His demeanor often appeared to have a Zen-like tranquillity and strength, yet during his last forty years he suffered from insomnia and required a sleeping pill every single night.
The Matsushita story resides at least on three levels. The public persona was a great businessman who often behaved like a saint. The private side included screaming, sleeping pills, and a mistress. Deeper than both was a tornado of emotions that carne to be directed by a set of beliefs and convictions that are difficult for the skeptic in all of us to comprehend.
Yasuo Okamoto has written what many consider to be the finest book thus far on KM's company, a best-seller called Hitachi to Matsushita. Says Okamoto: "He was a complex man with a lot of self-control."
This book is not meant to be a conventional biography, though it does retain a chronological structure. Instead of establishing an exhaustive historical record, the focus is on Matsushita's long list of accomplishments and what can be learned from his experiences. Any exploration of these issues inevitably leads to a discussion of Japan, but our primary purpose is not yet another study of Japanese management. The main questions explored here are: why is Matsushita's legacy so unusual compared to managers' anywhere, including those in Japan; and how might the lessons of his life inform effective action around the globe in the next century?
KM was very much a product of a particular time and place. If he were miraculously transported to Chicago or Frankfurt today as be was at age thirty, he would no doubt achieve less than he did during his actual lifetime. Nevertheless, his 20th-century Japanese story offers interesting insights about dealing with difficult circumstances generally and excelling in an environment of rapid change. If the next few decades were going to offer a business climate with much stability, those lessons would be of limited relevance. But no credible evidence points to such a benign future. Just the opposite is true.
If the 21st century evolves as an era of increasingly turbulent and rapid change, the Matsushita saga strongly suggests that common business strategies, organizational arrangements, and career paths utilized in the past will not prove very sucessful. The mission-centered, customer-focused, high-productivity, employee-involved, and constantly improving Matsushita Electric from the 1950s and '60s may offer a far better role model than GM, Philips, Sears, or most other well-known businesses during that same time period or even today. An examination of leadership at MEI, which started with the CEO and was pushed deeply into one of the first truly divisionalized organizations anywhere on earth, shows how firms can remain adaptive and outmaneuver rivals in a dynamic environment, even when competitors have more resources at their disposal.
The story of Matsushita Electric Industrial demonstrates how great business strategies, when implemented well, are not just the product of rational economic analysis but have a powerful visceral component relating to personal history. The story of Konosuke Matsushita shows how great leadership is not a static quality but a crucial element that evolves over decades, often built on a base of pain, not privilege.
Perhaps the most interesting finding of all from this study is what does not seem to be associated with KM's astonishing accomplishments: the stereotypical dominating personality of J. D. Rockefeller, the camera-ready charisma of Walt Disney, the inventive genius of Thomas Edison, the financial shrewdness of J. P. Morgan, the privileged background of Akio Morita, the physical presence of Charles de Gaulle, or the educational credentials of Andy Grove. In some ways KM was quite ordinary. Certainly no one who knew him during his youth predicted great achievements. Yet he grew to be anything but ordinary, and the key to his story lies in his phenomenal drive for growth.
From a sickly, heartbroken, and poverty stricken nine-year-old, he learned to be a competent apprentice in a bicycle shop with a sensitivity to the importance of customers. As a young adult, he developed into an up-and-coming employee in the Osaka Light Company and a successful merchant-oriented entrepreneur who used strategies that were far from the 20th-century norm. Instead of decelerating after gaining some degree of wealth and fame, he grew to be a strong business leader, an even more unusual builder of a huge business institution, and finally a statesman and philosopher who far transcended simple economic interests. While others leveled off in their thirties or forties, a consequence of the pain of failure or the arrogance of success, Matsushita continued to learn and evolve.
Certain habits fostered this growth. KM pushed himself and others out of comfort zones, challenged conventions, took risks, assessed weaknesses and failures, sought new ideas, and listened with an open mind. These habits were supported by vast and humanistic goals, ambitions which also grew over time and which placed all his actual achievements in a humbling perspective. Those goals, in turn, emerged from a series of tragedies, hardships that generated intense feelings, fueled big dreams, and inoculated him against the minor downturns in life. The overall pattern is summarized in the exhibit on page 244.
Hardships sometimes create a fierce need to conquer one's environment, a workaholic personality, a value system that justifies ends over means, and an insatiable drive for money and power. But the Matsushita saga is about how tough times produced increasingly large yet humanistic ambitions, a set of growth-inducing mental habits, decades of continuous learning, and then phenomenal accomplishments that benefited millions of people. It is the tale of a revolutionary, of sorts, who spent most of his life swimming against strong currents. It is a slice of 20th-century history, in some sense a condensed version of the entire Japanese story, that is educational in many ways and on many dimensions.
Perhaps most of all, even in a world with nerve ends deadened by conflict, poverty, and the cold light of scientific rationalism, it is a drama that can both inspire resolve and warm the heart.
Copyright © 1997 by John P. Kotter