Okamura, Tadashi 1938–

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Tadashi Okamura
1938–

Chief executive officer and president, Toshiba Corporation

Nationality: Japanese.

Born: July 26, 1938, in Tokyo, Japan.

Education: University of Tokyo, Faculty of Law, 1962; University of Wisconsin, MBA, 1973.

Family: Married Hiroko (maiden name unknown); children: two.

Career: Toshiba Corporation, 1962–1973, held general positions within the company; 1973–1989, worked in instrument and automation division; 1989–1994, general manager of marketing and planning; 1994–2000, vice president and director; 2000–, president and chief executive officer.

Address: Toshiba Corporation, 1-1 Shibaura 1-chome, Minato-ku, Tokyo 105-8001 Japan; http://www.toshiba.co.jp.

■ Before entering the world of the computer age, Tadashi Okamura studied under the prestigious Faculty of Law at the University of Tokyo. He came to work at Toshiba in various positions before heading to the United States to earn a master's degree in business administration from the University of Wisconsin in 1973. He received praise in his early years with the company for overseeing several shifts in the technology market. When he was appointed the chief executive officer of Toshiba in 2000, the company was facing many difficulties. Okamura took over and continued the efforts of the former CEO. However, he also began making drastic decisions to raise profits and remain current in the ever-changing technology market. The economic downturn in the industry impacted Toshiba's profit margins, but with Okamura's efforts at diversification and opening up production outside of Japan, some of the downward trends were averted.

BUILDS CAREER IN MARKETING AT TOSHIBA

Okamura moved up the ranks at Toshiba over four decades before earning the top slot of chief executive officer. One of his first positions with Toshiba involved overseeing a shift from analog to digital technology in a gear control for heavy manufacturing. His success earned him the position of communications director as that division turned from telecom to Internet-based devices.

As vice president Okamura headed the Information and Industrial Systems division, a very high-profile section of Toshiba. Industry insiders placed Okamura in the category of business leaders in Japan who had learned the electronics business in the 1960s and 1970s, when Japan ruled the electronics market.

When CEO Taizo Nishimuro began planning for his retirement in early 2000, he asked Okamura, then vice president, to take over for him and to continue his plan for restructuring the company. Nishimuro fought for four years to institute the plan. A high-profile lawsuit in 1999 brought troubles to the company and left Nishimuro struggling for support for the reforms resisted by the older managerial employees of the company.

As a result of the lawsuit, Toshiba suffered a net loss of $262 million, partially because of the $1 billion settlement with a U.S. company on a class action suit over defective disk drives in laptops sold in the United States. In two years the company lost nearly $400 million because computer memory prices dropped and Toshiba's share in the worldwide laptop market plummeted.

Okamura and Nishimuro hoped that the latter's retirement would push some of the more resistant managers also to retire, leaving Okamura the freedom to implement the changes. Almost immediately after taking over, Okamura began cutting costs and focusing Toshiba on investments for the future to sustain growth.

Okamura took the negative profit statements and the negative press coverage in stride. He credited his predecessor with having set the course for him to follow. He told Forbes magazine, "It is like driving a big limousine. [Nishimuro] had the slow job of turning it around; all I had to do was put my foot on the accelerator" (January 8, 2001).

IMMEDIATE CHANGES MADE

When Okamura was appointed by the board of directors in 2000, he told BusinessWeek, "In each area, I was in charge when there was a major shift, so I'm not worried by the changes I see today" (July 24, 2000).

With such competitors as NEC and Fujitsu already ahead of Toshiba in slashing costs and forging ahead with new acquisitions, Okamura looked forward to the challenge of making Toshiba an equal competitor in the marketplace.

The first change Okamura made at Toshiba headquarters symbolized what he hoped the company portrayed to the world. He had employees dismantle satellite and fast-breeder reactor models that had greeted visitors to the Tokyo headquarters since 1984. Okamura told BusinessWeek, "Power plants and satellites are no longer symbols of where Toshiba is headed" (July 24, 2000).

As Okamura took over Toshiba, Japan was in an economic upswing after a lengthy recession. Toshiba's profits had been dwindling for three years, unlike those of its Japanese competitors. However, Toshiba was still overcoming its payout of $1 billion to disgruntled customers. As a result, Okamura moved decisively to bring the company into competition with rivals who had been paring down inefficient divisions while Toshiba fought the lawsuit. Okamura began his changes by revamping the computer chip portion of the company.

In 2000 sales of cell phones and chips were booming, and Okamura moved quickly to take advantage of the upswing in the market. Analysts noted that Toshiba was already ahead of its competitors with its memory chip, which retained data even when electricity might be lost. Even though other companies offered the same type of chip, Toshiba was one step ahead because its chip was specially suited to large memory items, such as the photographs in digital cameras or the music downloads on an MP3 player. The ownership of this patent put Toshiba in an advantageous position as Okamura took over leadership because other companies wanting to use the large-memory chip would have to pay a licensing fee to Toshiba. Analysts predicted that owning this license would put Toshiba in a very strong position in the market, particularly with the upsurge in sales of digital cameras and MP3 players.

Okamura also kept to the plan set before him to reform the company. His predecessor had begun slashing spending in the year before Okamura took over. Nishimuro cut areas such as energy and heavy equipment, emphasizing instead the smaller technologies in the information sector. Just months before Okamura became CEO, Nishimuro directed 80 percent of the company's research and capital spending to mobile Internet phones, personal computers, chips, and computer monitors. Okamura, sensing the shift in the economic outlook for technology industries, stuck to the plan already instituted.

Within a year of his appointment, Okamura laid off nearly 20,000 Toshiba employees and moved the company away from the commodity chip business. He also invested $2.5 billion in Internet services. He opened negotiations with Time Warner over the installation of Internet content through cell phones. Industry insiders noted that Okamura would have to begin selling off portions of the conglomerate and pointed to Okamura's appointment as an adviser to a special interest group as an indicator that he understood very well the steps necessary to lessen Toshiba's diversification. In 2000 Okamura breakfasted with the former U.S. president George H. W. Bush, who wanted Okamura's guidance for the Carlyle Group with a $750 million fund instituted to buy up pieces of Japanese businesses.

BACK ON TOP AGAIN

Within the first half of Okamura's first fiscal year at the head of Toshiba, the company earned $1 billion in profits, beating out such industry giants such Sony and Matsushita. Toshiba came in second behind Hitachi. Okamura credited Nishimuro's 1999 restructuring plan as the driving force behind the comeback.

Okamura protected the company from too much dependence on one source of profit, even as he continued to get rid of unprofitable sectors. He set up new divisions, which allowed alliances with rivals to reduce risk in the development of technologies. An industry insider compared the system to banks making syndicated loans. The new divisions allowed resources to be shared between the companies, thus reducing the risk of overly investing in one area that might not pan out in the marketplace.

However, analysts predicted in 2001 that Toshiba still faced obstacles in keeping on top of the game because it relied too heavily on Japanese factories, which cost more and kept product prices high within Toshiba. Okamura's plan of attack was not to lower prices but to offer products that came with more product features. In addition, Okamura opened Toshiba's own laptop factory in Shanghai in 2001 and contracted out laptop production to a Taiwanese company.

Analysts criticized Okamura for keeping some of Toshiba's unprofitable divisions, such as the Dynamic Random Access Memory (DRAM) chip sector. They pointed to Okamura's reluctance to lay off employees as being harmful to profits, predicting that his lack of ruthlessness would not help the company achieve higher profits.

TECHNOLOGY SLUMP HAS LITTLE EFFECT ON TOSHIBA

By the end of 2001 the global marketplace had hit a slump in the sale of chips, cell phones, and notebook computers—all items heavily marketed by Toshiba. So even though Okamura started as CEO with a solid upswing, when Toshiba's business year ended in March 2002, the company posted $2.1 billion in losses. As a result, Toshiba fell to 317 on the BusinessWeek list of top global technology firms, down from 254 in 2001.

Okamura expressed confidence despite the dismal figures. He continued to close plants and cut costs. He also cited the increased sales of memory flash chips, LCD panels, DVD players, and laptops—all strongholds in Toshiba's production line.

Okamura asserted that the profits would begin to change because of all the measures he had taken, including pulling out of the DRAM business, despite critics' claim that Okamura had not closed enough of these profit losers.

Although Okamura insisted that Toshiba would continue to draw in profits, analysts refused to give him their full support. In 2002 the yen strengthened while the U.S. dollar weakened considerably. Analysts predicted that if the U.S. economy continued its downward spiral, then Toshiba's sales to that country would also be in danger of weakening.

Okamura worked to balance the uncertain economy in a foreign nation by continuing the restructuring of Toshiba at an even faster rate. At the very beginning of the slump in 2001, he began combining manufacturing units within the company, setting a goal to reduce Toshiba's Japanese plants by 30 percent in two years. Jobs were also cut at the domestic level with a reduction of 12 percent during the same time period.

In addition, Okamura began selling approximately $7 billion of the company's assets. The sale of stocks and real estate impressed analysts as they watched the company make strides in increasing profits.

Akira Minamikawa, a senior analyst with WestLB Securities Pacific in Tokyo, told BusinessWeek Online, "Toshiba is finally changing, and that will help it survive" (August 9, 2002).

Analysts credited Toshiba with doing more than any other electronics company in Japan to cut costs by the end of 2002. Okamura reduced the company's capital outlay to the semi-conductor business and continued to outsource basic production duties to factories in Malaysia and Thailand.

PRESSURE BUILDS TO REVAMP JAPANESE INDUSTRY

By 2003 the giants in the Japanese technology industry were facing a market that demanded a change from the way things had been done ever since Japan had emerged as a leading industrial nation, particularly in the years that some viewed as the glory days of the 1980s and 1990s. In those decades Japan won nearly every battle with global competition.

With the old style no longer working by the 21st century, Okamura endeavored to focus and streamline the giant that Toshiba had become. Analysts agreed that out of all the corporations in Japan, Toshiba had made the most strides in overhauling its operations, which ranged from the manufacture of chips to the operation of nuclear reactors. However, there still remained the worry among industry insiders that the taint of history remained stuck to Toshiba and its counterparts.

Peter Kirkman of J. P. Morgan Fleming Asset Management voiced his concern to the New York Times : "I am reasonably skeptical about the electronics conglomerates because they have lost competitiveness to other Asian countries and their balance sheets are impaired," he said. "They cannot implement restructuring when they employ as many people as the U.S. Army" (August 21, 2003).

Toshiba's falling share of the chip market remained a major concern in 2003. Toshiba's market share dropped from 50 percent to 22 percent in 2003. Companies in other Asian nations and in the United States began outselling Toshiba as costs for manufacturing technological products kept rising within Japan.

With high debts and low stock prices, industry insiders noted that the electronics business in Japan remained just a notch above junk-bond status, a situation that put companies like Toshiba in a difficult position as they still had to remain competitive. Okamura's answer to the dilemma came in a plan to spend ¥350 billion, or $2.9 billion, from 2003 to 2007 on the expansion of next-generation chip production.

Okamura sought to change Toshiba's image from its reputation for a particular product line to that of a company that could do everything associated with electricity. He continued to invest heavily in flash memory chips as demand for the products associated with these items grew. Toshiba partnered with Sony to produce the next-generation chip for the popular PlayStation game console. Analysts predicted that Okamura had made a wise decision as the market for this type of chip continued to soar.

Toshiba also met the growing demands of the 21st-century information age by continuing to produce state-of-the-art laptops rather than venturing into the desktop model computer. Toshiba's laptops remained some of the most reliable on the market, despite competition from Dell and Hewlett-Packard.

Okamura's goal was to shed Toshiba's old-fashioned and conservative image and instead keep the company current with the times and abreast of the potential growth of certain items in a changing age.

Despite Toshiba's efforts to be viewed as a modern company, analysts still criticized the company's insistence on maintaining older lines, including lightbulbs, air conditioners, elevators, and turbines. Instead, analysts believed that Toshiba should dump these sectors, which were viewed as low-margin divisions, letting other manufacturers deal with them.

Okamura ignored those who doubted the wisdom of selling home appliance items in China and in developing countries throughout the world. He determined that sales were strong enough in these places to justify the continued manufacture of domestic goods.

Other strategies in 2003 showed that Okamura kept a strong focus on the future as Toshiba pursued research into developing memory chips that use magnetism to read data faster and consume less energy as well as producing new fuel cells using methanol for laptop computers. Okamura also pursued nanotechnology, a process that changes atomic and molecular particles to create lighter and more durable products. This technology added more memory to many of the products manufactured by Toshiba, such as cell phones and digital cameras. Okamura committed $3.6 billion to research these new technologies over a two-year period beginning in 2003.

Again Okamura's actions were viewed skeptically by analysts, who said that it did not matter how much money Toshiba spent on the research if the company could not recoup the costs almost immediately.

However, Okamura continued to pursue his plan throughout 2003. He explained that he was following the model set by General Electric by getting rid of any sector not performing at the top of its game.

As 2003 drew to a close, Okamura said that he had achieved only 80 percent of the goals set forth in his four-year plan in 1999. He reiterated that he was committed to the plan because not to follow through would mean the end of Toshiba, given the amount of global competition and the changing demands of a fluctuating economy.

MANAGEMENT STYLE

Okamura often depended on the cultural heritage of Japan to guide him through the changes he oversaw while at Toshiba. In particular, the 19th-century Meiji era inspired him most. The medieval sword fighters of this time fought the status quo in Japan in a rebellion that helped create the first industrial power outside of the Western world. Okamura told the New York Times that the stories of these rebels needed to be remembered. "After being isolated so long, these young people had the spirit and energy to go out into the huge world," he said. "The most important thing is that we get back that spirit and energy now" (August 21, 2003).

Okamura was described as a gentle, grandfatherly type who never felt comfortable with the task of laying off employees to increase profits. Whenever he found that he had to cut jobs, he did so with minimal impact on his workers. He offered early retirements rather than layoffs as one measure to remain a benevolent employer. However, analysts said that this type of soft management would not bring Toshiba out of the economic slump, which continued to be a concern in 2003.

A New York Times reporter described Okamura as having "a soft smile and gentle eyes," noting that "he hardly looks like a hatchet man" (August 21, 2003).

VOTE OF CONFIDENCE

In 2003 Toshiba revamped the governance of its management level within the company by instituting the committee system. Goals included operating transparently while redefining managerial and supervisory job descriptions. Also established was a nominating committee that had jurisdiction over appointments within Toshiba.

As a result, the three-member committee nominated Okamura to lead Toshiba for one more year beginning in January 2004. The committee explained that it made the nomination because of Okamura's past record of renovating the company and placing it in a good position to make continued sustained growth.

See also entry on Toshiba Corporation in International Directory of Company Histories.