100 Years of Success
by Hu Yoshida on May 4, 2010
As you likely already know, Hitachi Ltd, our parent company, is celebrating its 100th birthday this year. This is a remarkable achievement which very few companies have attained. This is particularly amazing considering all that has happened to the world in the past 100 years. How does a company survive through geo political upheavals of tremendous proportions, socioeconomic transformations that could not even be imagined 100 years ago, and technology innovation and obsolescence that has accelerated at warp speed from 5 horsepower electrical motors to nano technology and lithium battery hybrid engines?
How it’s done
A 2004 study by Hewitt Associates indicated that the average life span of modern companies is 10 to 15 years. Most of those that survive this critical period close their doors after another 30 to 40 years. Very few companies have survived the past 100 years, and most of those that do are private companies that have focused on a specialty like retail, banking, or a family business like sake making. Even fewer companies have been able to reinvent themselves as markets have evolved and continue to be vibrant market leaders today. One common characteristic of 100-year-old companies is an unchanging set of core values that is demonstrated in action and not in words or slogans. After studying the history of Hitachi, living through a greater part of the last 100 years, and being a part of this company for the last 14 years, here is what I see as the core values that have sustained Hitachi for the last 100 years:
At the beginning of the 20th century, Japan was entering its first industrial revolution while the western world was going through its second industrial revolution powered by abundant coal and petroleum generated power. Being an island nation with no carbon energy resources, they relied heavily on hydro electric power to fuel their industrial revolution and imported machinery from the west. They were dependent on imported electrical motors which were continuously in need of repair due to heavy usage.
In 1910, Namihei Odaira, an electrical engineering graduate of Tokyo University, started an electrical repair shop to support a mining company in Hitachi village. He named his company Hitachi after the name of the village where he began his business. It was an appropriate name for a new venture, since the Kanji characters for Hitachi means “rising sun”. Odaira felt that he could make more reliable electrical motors than the imports that the mining company was using. The first product that he developed in 1910 was a 5 hp induction motor that he was able to sell to this company. This motor proved to be more reliable than the imports and the mining company became Hitachi’s first customer. However, this was Hitachi’s only customer for many years since other Japanese companies still looked to the west for electrical machinery. When World War I began in 1914 the supply of electrical machinery from the west began to dry up. When a major power company could not get delivery of three large turbines it had ordered from Germany, they were forced to turn to Hitachi for help. Hitachi stepped up to the challenge by developing and delivering a 10,000 horse power generator in 5 months. The power company was amazed at the agility and quality of Hitachi’s response and quickly ordered more equipment. Soon other Japanese companies were turning to Hitachi to improve their industrial capabilities and Hitachi quickly became the nation’s largest manufacturer of electrical and mechanical equipment. Hitachi had survived the first critical hurdle in the life span of a company and developed some core values that would sustain them through their next phase of growth.
A focus on core values
One of these core values was a commitment and investment in their people. From the beginning of the company in 1910, Hitachi established an apprentice training program which continues today. Unlike other industrial companies who had no concern for labor during this period, Hitachi invested in its people for long term growth. Even though there were hard economic times following the depression of 1912, Hitachi continued to keep their employees and invest in their training. In that way they were prepared when Hitachi was suddenly called upon to develop and manufacture the power generator which established their reputation in 1915. Hitachi’s commitment to their employees has inspired them to step up to many hard challenges. After a fire destroyed Hitachi’s manufacturing plant in 1920, their employees rallied to rebuild this in record time. The loyalty of Hitachi employees remains as strong today as it was in 1910.
Another core value developed during this period was commitment to research and development. To this end Hitachi established a research department in 1917 which was the foundation for Hitachi’s Central Research Laboratory. Today, the number of patents produced by Hitachi researchers in research laboratories around the world puts Hitachi in the top ten for US patents filed, year after year. A major commitment to R&D has enabled Hitachi to quickly step up to changing business requirements and stay in a leadership position over the past 100 years.
Changing with the times
After the Second World War, as Japan began to recover from the devastation of the war, Hitachi focused on machinery for reconstruction and later consumer goods. Hitachi focused on their customers’ needs and built everything from rice cookers to bullet trains and nuclear reactors. With the development of television, Hitachi established itself as a global brand leader in reliable television systems and components. This focus on customer requirements and quality products was another core value that enabled Hitachi to move past the next critical phase and survive the 30 to 40 year benchmark for longevity.
Hitachi began R&D in computer systems in the 1950’s and developed its first computer in 1957. In 1974 Hitachi produced its first IBM plug compatible mainframe and began to compete in the mainframe market with IBM and Amdahl. Over the years, Hitachi began to develop their own IT technology making everything from operating systems, relational data bases, and high density disk drives. However, most of this was sold in the Japanese market.
Hitachi Storage and Hitachi Data Systems
Hitachi Data Systems was established in 1989 as a joint venture between Hitachi and EDS when they acquired National Advanced Systems from National Semiconductor. This acquisition was intended to provide a greater presence in the United States to compete with IBM. When I joined Hitachi Data systems in 1996, Hitachi was about a $60 billion company and 80% of its revenue still came from the Japan Market. In 1999 Hitachi Data Systems became a wholly owned subsidiary of Hitachi Ltd and things began to change. Up until then Hitachi Data Systems was primarily a reseller of Hitachi mainframes and storage, and the culture was still a holdover from the National Advanced Systems days.
Prior to 1999 we were known as HDS, trying to emulate the other three letter companies in the IT vendor business. Although we had excellent technology from Hitachi, our culture was that of a reseller and we were struggling to survive those first 10 years. As a joint venture with EDS, the HDS CEO was always from EDS. After Hitachi bought out EDS and we became a wholly owned subsidiary and began the transformation from HDS to Hitachi Data Systems., We had our first Hitachi CEO, Jun Naruse. Naruse was an engineer who had been a successful leader in the RAID Systems Division which develops and manufactures Hitachi’s Storage Systems. He had a simple formula for success: profit equals revenue minus total costs. Another core value of Hitachi is fiscal responsibility. While other IT companies acquire companies right and left to inflate their bottom line, Hitachi’s growth is more organic. As a result Hitachi Data Systems refocused on its core competence around storage and data services, exited the mainframe business, and took an open and collaborative approach to other IT vendors. Under Naruse’s leadership we began our transformation into the Hitachi culture which continued under Shinjiro Iwata and Minoru Kosuge.
Hitachi Data Systems adopted a strategy which called for technical excellence, collaboration, and open standards. Hitachi Data Systems was one of the founding members of the Storage Network Industry Association which was formed to ensure interoperability in a heterogeneous Storage Area Network. Our collaborative approach and product excellence helped us to partner with HP as an OEM and Sun Microsystems as a reseller of our high end storage arrays. To help develop storage software in this open storage networking environment, Hitachi Data Systems recruited Jack Domme from storage services provider Storage Networks Incorporated. Jack infused the company with new talent that helped to build on the Hitachi relationship and create an integrated storage business with the hardware and software development divisions in Hitachi. In 2000 Hitachi established a research lab in Hitachi Data Systems’ Santa Clara headquarters and staffed it with researchers on rotation from their major research centers to focus on storage and data solutions. Since 2000 this small research lab has filed over 300 US patents in the storage disciplines.
While Hitachi does not engage in a lot of acquisitions, they will seek opportunities which complement their core competence. In 2002 Hitachi purchased the IBM disk business and combined it with the Hitachi Disk business to form Hitachi Global Storage Technologies. With this acquisition, Hitachi Global Storage Technologies, Hitachi Data Systems, and the storage hardware and software divisions in Hitachi Ltd, the Hitachi storage business grew to over $9 B with 80% of the revenue coming from global markets outside of Japan. Hitachi is now the only storage company which is vertically integrated from storage media to storage systems hardware, software, and services, backed by a large network of research labs.
Anticipating the acceleration in content and file data, Hitachi Data Systems acquired an active archive company called Archivas in 2007. Using this company as a base, Hitachi Data Systems established a development lab in Waltham Massachusetts to address file and content storage services. The Hitachi Content Platform revenues are growing by triple digits as content data explodes with the increasing use of Web 2.0 and cloud services. Jack Domme has been so successful in integrating the Hitachi Storage business that he was appointed Hitachi Data Systems CEO in 2009, succeeding Minoru Kosuge who moved up to be Chairman of Hitachi Data Systems. To me, the appointment of Jack to CEO was validation of our integration into the Hitachi culture.
Adopting Hitachi Core Values
Adopting Hitachi’s core values has helped Hitachi Data Systems grow during difficult times. Similar to Hitachi’s early history, Hitachi Data Systems, as a wholly owned subsidiary, was launched during the hard economic times of the dot com bust. However, thanks to the scalable switch architecture of the Lightning Storage array from Hitachi R&D, Hitachi Data Systems’ storage was able to consolidate 6 to 8 competitive storage frame to help our customers lower their costs and survive the downturn. As a result we were able to gain market share, and become a major competitor in the enterprise storage market during this time.
During the current decline which began with the housing and banking bust in 2008, Hitachi Data Systems had to reduce costs like everyone else. However, unlike most other companies, we did not do a reduction in force. Instead, our executives took a reduction in pay, and we continued to invest in research and development to support our customers. Hitachi and Hitachi Data Systems technology in the form of storage virtualization and file and content services helped our customers make better use of existing assets and reduce their spend on storage. Today as we come out of this down turn, our customers are in better position to grow their business and Hitachi Data Systems is well positioned to support this growth with future enhancements.
Looking to the Future
In addition to the contributions of Hitachi Data Systems and Hitachi Global Storage Technologies to globalization, other divisions of Hitachi are finding success in global markets like the hybrid electric engines in automobiles and the hybrid train system that is being developed for the 2012 Olympics in the UK. In the last 14 years that I have been here I have seen Hitachi grow to be a $100 B company and increase its global market share from 20% to almost 50%.
Personally, my years spent with Hitachi have been the most interesting and rewarding of all my years in storage. During times of turmoil and economic down turns Hitachi is be able to survive and grow even stronger. The core values that I have observed in Hitachi, commitment and investment in our people, commitment to R&D, focus on customer requirements and quality products, and fiscal responsibility will help it to continue to grow into the next 100 years.
Comments (4 )
Nice and interesting HDS history. Thanks Hu for that.
Good to know the HDS story.
Congratulations on this milestone. My Aunt turned 100 last November and it inspired this blog:
Some interesting stats from 100 years ago:
*The cost of a postage stamp was 8 cents
*The entire population of Las Vegas was 30
*The average wage was 22 cents/hr
*20% of the adult population in the U.S. couldn’t read or write
Imagine 100 years from now!
Excellent summary of Hitachi’s history. This is great reading for all of us to remind ourselves of the core company values and impact in our modern day society.