DIRE STATE: Once upon a time, Panasonic was one of the
largest electronics brands in the world making everything from TVs and appliances to batteries
and phones.
They were the pride of Japan alongside Sony and Toshiba throughout the mid to late 1900s
as they recovered for the devastating ruins of World War 2.
But, the 2000s haven’t been so nice to Panasonic.
They’ve shut down their communications business, much of their TV business, and even their
LCD business.
They’ve been forced to sell off many of their assets including their security business,
their semiconductor business, and most notably their entire $3.5 billion stake in Tesla.
Things haven’t been looking much better internally either.
Panasonic’s revenue has fallen by over 40%, their gross profit has nearly halved, and
they’ve written off tens of billions of dollars worth of losses.
As such, their employee count has shrunk by over a hundred thousand people within the
past 13 years.
Honestly, the only thing at Panasonic that hasn’t gone straight down is ironically
their stock price.
But this isn’t all that much better anyway as the stock has basically just been going
sideways for the past 30 years.
And, when you account for inflation, you’ll see that Panasonic stock is actually down
66% over the past 30 years.
Seeing all this, I decided to check the bankruptcy probability for Panasonic.
Usually for big tech companies, the probability is less than 1%.
For more distressed companies like GoPro, the number is usually in the low double digits.
So, with that in mind, do you wanna guess how much it is for Panasonic?
Maybe 70 or 80%?
Well, it’s straight up over 100%.
This is something that I’ve never seen before.
So, odds are that unless a miracle happens or the Japanese government steps, someone
who’s already drowning in debt, Panasonic is as good as dead.
But what happened?
As far as I can remember, there was never really any pivotal moment for the company.
They kind of just slowly lost steam over the course of decades right?
Well, there’s actually a lot more to the story as much of Panasonic’s demise can
be attributed to them forgetting about their roots.
So, join me as take a look back at the rise and fall of Panasonic and try to pinpoint
what went wrong.
ALWAYS KEEP EXPERIMENTING: Panasonic's fall from grace shows how even
major corporations can falter when they lose sight of their core strengths.
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But anyway, taking a look back, the story of Panasonic dates back to November 27, 1894
to a man named Konosuke Matsushita.
Konosuke was born to a poor rice farming family and was the youngest of 5 daughters and 3
sons.
By the time that Konosuke was just 4 years old, his father would end up losing their
entire family farm as he speculated on the rice exchange.
Having lost everything, Konosuke’s father would head to the city to find a job but that
wasn’t enough.
Pretty soon, young Konosuke himself would have to start working at just age 9.
He would start off at a Hibachi store before moving on to a Bicycle store, but while the
circumstances weren’t that great, these jobs taught Konosuke a great deal about the
business world.
How to attract customers, how to keep them happy, how to keep employees loyal, and most
importantly, how to walk away with a modest profit.
During these long days of work, Konosuke would start seeing streetcars pop up across Osaka
and this would convince him that the future of business had to do with electricity.
So, at age 15, he decided to leave his gig at the bicycle shop and join the Osaka Electric
Light Company.
As a natural hard worker, Konosuke would rapidly rise up the ranks and become an inspector
by the time that he was just 22 years old.
It’s crazy to think that he already had 13 years of work experience, 7 of which were
in the electrical business by the time that he was just 22.
All of this hard work had allowed Konosuke to escape the depths of poverty but Konosuke
had far larger ambitions and this is when he was start budding heads with management.
In his early 20s for example, he would design an improved light socked and pitch it to his
supervisor.
But his supervisor would simply dismiss the idea claiming that it was useless and would
go nowhere.
Invigorated by these remarks, Konosuke would decide to quit his job and try his hand at
business.
And with that, he would set up shop inside his tiny 2 room apartment with his wife and
brother in law in June of 1917.
If this was a Dhar Mann video, Konosuke’s new light socket would end up going viral
and he would end up buying out his old employer and stick to to his old supervisor.
But unfortunately, it’s not and unfortunately, Konosuke’s light socket didn’t go anywhere
anywhere.
In fact, things were so bad that he would have to sell the few valuables that he had
just to get by.
Unwilling to quit though, Konosuke continued experimenting and creating new products and
after several months he would finally land on a product that someone actually wanted:
insulation plates for fans.
This product gave him enough money to sustain himself leading to the Matsushita Electric
aka Panasonic on March 7, 1918.
But while things were going decently well with the insulation plates, Konosuke still
didn’t have to heart to just give up on the light sockets.
So, he would revisit and redesign his socket leading to the creation of 2 new products:
an attachment plug and a two way socket.
Unlike Konosuke’s original light socket, these new sockets would gain steam almost
immediately which brings us into Konosuke’s first principle: always keep experimenting.
Even if your first idea doesn’t work, it’s more than likely that some iteration of it
would.
In fact, Konosuke felt so strongly about this that he would keep a pencil and paper by his
bedside.
This way, if he got any new ideas in his sleep, he could jot them down and put them to work.
Anyway, the momentum of this new socket allowed Konosuke to move his operation to a larger
two story house and scale his workforce to 20 employees, marking the beginning of Panasonic’s
monumental run.
GREAT PRODUCTS DON’T SELL THEMSELVES: Moving into the 1920s, things were going much
better.
Panasonic had turned into a legitimate local business but that isn’t to say that the
road ahead was always smooth.
In fact, Konosuke would find himself in another difficult situation with his next product
itself.
What hurt the most with this product was that going into it, Konosuke was sure that it was
gonna be a banger.
It was one of those ideas that he got while sleeping and woke up thinking: Eureka!
What was this product you ask?
Well, it was a simple bicycle light.
Battery powered lights were already a thing but they were completely impractical as they
only lasted 2 to 3 hours.
So most people, including Konosuke himself resorted to using a candle lamp when biking.
Frustrated by this reality, Konosuke would spend 6 months designing a bullet shaped bicycle
lamp that was truly revolutionary lasting 30 to 40 hours.
Excited, Konosuke would strike deals with a bunch of wholesalers and stock stores all
throughout the city but to his utter disappointment, not a soul would buy these lamps.
Why you ask?
Well, because people had already made up their mind that battery powered lamps sucked.
Konosuke kept holding out hope that the strength of product would shine through in this overlooked
market but it never happened.
To make things worse, the Great Kanto Earthquake would strike in September of 1923 which destroyed
much of his sales partners.
But by now, I think you know that Konosuke never quits. 4 years later, he would come
back to the bicycle lamp market with a square shaped lamp.
Nothing much had changed internally, but Konosuke’s approach to selling these lamps was completely
different.
For starters, the light was an odd square shape, something that people had never seen
before.
This was very much on purpose.
It was to emphasize that this light itself was nothing like people had seen before.
Konosuke also bought out newspaper ads that read "National Lamps: Buy for Your Assurance,
Use for Your Benefit."
And to round it all off, Konosuke would hand out 10,000 samples to stores without any sort
of obligation.
The result?
Well, Konosuke would end up selling 30,000 units per month by the end of the first year
itself which brings us into Konosuke’s second principle: good products don’t sell themselves.
Just because you have a good product doesn’t mean that people will line up outside your
door wanting to buy.
Even a good product requires an even better marketing campaign.
Having realized this with the bicycle lamp, Konosuke would vow to never let marketing
screw over a good product.
And with that, he would completely restructure the company in 1929.
He would create 4 succinct divisions, one for each of their major product categories:
electrical sockets, batteries, bicycle lamps, and radios.
Each of these divisions had their own national sales department with regional departments
underneath them.
And to top it off, Konosuke would directly link the sales departments with their respective
manufacturing departments.
This way, manufacturing was directly dependent on sales, reducing the likelihood of over
or underproduction.
With this brand new salesforce in place, Panasonic would enter the 1930s with pure dominance
as they grew to be a national player employing over 10,000 people.
But, just as Panasonic was hitting a stride, WW2 would roll around.
DOWNTURNS ARE A BLESSING: There’s really on easy way to put it, WW2
destroyed Panasonic.
Throughout the war, Panasonic struggled to get materials and hire talent as young men
were being recruited to the war.
To make things worse, the company was forced to focus on industrial production efforts
for the war.
Konosuke was hopeful that things would get better after the war but they only got worse
as I think we all know how the war came to an end.
Japan was literally bombed into oblivion which not only destroyed everything that Konosuke
had built but what the entire country had built.
Just when you thought things couldn’t get any worse, General Douglas MacArthur and the
Americans would begin occupying the country and basically take control.
And one of their reform orders was for Konosuke to step down and relinquish control of Panasonic.
Konosuke didn’t even resist but you know who did?
His 15,000 employees who signed a petition to keep Konsuke in power.
They argued that Konosuke was a virtal part of their reconstruction effort and that removing
him would basically destroy the company.
Fortunately for Panasonic, Konosuke’s resignation order would end up getting rescinded allowing
Konosuke to continue leading the company.
But, while Konosuke had somehow managed to keep control of his company, he had lost all
momentum.
Any normal person would’ve been distraught beyond belief but Konosuke was never the pessimistic
type.
In fact, he was rather optimistic which brings us into his 3rd core business principle.
Good times are good and bad times are even better.
You see, Konosuke believes that downturns are the perfect time to evaluate the state
of a business and reinvent it.
When things are going well, you’re usually scared to do something different and screw
up what you already have.
But, when things are going bad, well you’ve got nothing left to lose so might as well
take a risk and see if that unlocks a whole new level.
And that’s exactly what Konosuke would do.
He would tell his employees to approach the business with the attitude that they had just
opened which wasn’t far from the truth given that Panasonic would start targetting a completely
different market: the global market.
To be honest, Panasonic had no other choice given that the Japanese economy was in no
state to support so many employees by themselves.
So, the entire 1950s was focused on launching western products.
This included Washing Machines, TVs, refrigerators, radios, portable radios, rice cookers, tape
recorders, and ACs.
This was also around the time that the name Panasonic actually came about.
Given the new international focus, they needed an easy English name and they would settle
on Panasonic.
Pan means universal and Sonic means sound, so “Panasonic” was supposed to signify
the company bringing the sound of Japan to the entire world.
And this marked the beginning of Panasonic’s golden era: the 60s, 70s, and 80s but as we
now know, this golden era wouldn’t last forever.
THE BRUTAL FALL: It’s sad to say but Panasonic’s peak basically
aligns exactly with Konosuke’s death in 1989.
Eversince Konosuke died, it has only been downhill for Panasonic and it’s no wonder
why.
They basically completely forgot about the principles that made the business successful
in the first place.
Take Konosuke’s principle of always keep experimenting for example.
Well, after Konosuke’s death, Panasonic completely stopped experimenting and if you
don’t wanna believe me just take it from Panasonic’s website itself.
Here’s all the products they launched in the 50s.
Here’s all the products they launched in the 60s and 70s.
Here’s all the products they launched in the 80s and even 90s.
And here’s all the products they launched in the 2000s.
Yeah, you’re not looking at that wrong, there’s not even a single product listed
on there.
Their last notable product was way back in 98 when they launched digital TVs for the
US.
You can only hit the ball out of the park if you try swinging.
Panasonic has not swung in 25 years.
But not only has Panasonic shied away from new products but they’ve also dropped the
ball on their existing product lines.
You know how we talked about how there was no pivotal moment for Panasonic.
It wasn’t like their products just suddenly sucked or their pricing went through the roof
or anything like that.
The reality is that Panasonic products are still quite great.
But, the thing to keep in mind is that great products don’t sell themselves, and this
is perfectly exemplified by Samsung.
Samsung ranks lower than Panasonic across the board when it comes to product quality,
pricing, and customer service but Samsung is worth over 10 times Panasonic.
You know why?
Because Samsung knows how to market their products whether it’s appliances, TVs, or
smartphones.
Seriously, when was the last time you saw a Panasonic ad?
I bet the answer is too long ago to remember.
Now, when was the last time you saw a Samsung ad?
I bet the answer is too recently to remember.
Basically anytime you’re browsing the web or watching a video or shopping or driving,
you probably saw Samsung branding.
But you probably don’t even remember because you’re so desensitized to it.
With this sort of marketing discrepancy, it’s no wonder why people choose Samsung or LG
when buying a new TV or new appliances.
Good products don’t sell themselves.
Panasonic’s competitors understand this, Panasonic doesn’t.
Something else that Panasonic doesn’t seem to understand is that downturns can be a blessing.
Back in the 40s, Panasonic had lost basically everything but they were able to make it work
by not losing hope and shifting gears.
The early 2000s would’ve been the perfect time to do this again.
Imagine if they were the first person to jump onto the smartphone trend instead of Samsung
or if they were the ones to capitlize on OLED technology.
They could’ve made a name for themselves in the modern tech era.
But instead, it seems that Panasonic has lost hope which is likely the most disappointing
part of all of this.
Whether it was the failed light socket or the bicycle lamp or WW2, one thing that remained
constant was Konosuke’s optimism for the future.
Modern Panasonic on the other hand seems to have lost all hope.
They’re not experimenting, marketing or leveraging the downturn.
It almost seems like they’ve already accepted defeat and are just trying to hold on for
as long as possible and with this sort of mindset, it’s no wonder why the writing
is on the wall for their bankruptcy.
Another legacy giant that’s actually managing make a turnaround is Nokia.
Check out this video to learn more.