Japanese Corporate Restructuring- a first hand account 
Mr. Yasuyuki “Tex” Abe, President and CEO, Sumisho Electronics

There was a time in corporate Japan when extensive overseas experience was not necessarily viewed as an advantage by company management. Particularly at the more conservative Japanese corporations, the selection of CEO for example, was most often based on seniority and head-office experience more than anything else. Too much time overseas could actually hurt one’s chances of becoming CEO because of the perception that such managers tend to become more “foreign” than “Japanese” in their thinking. At least that is the way things used to be, according to Mr. Tex Abe, President and CEO of Sumisho Electronics. Mr. Abe has been President and CEO of Sumisho since June 2002 before which he spent approximately 15 years overseas working mainly in the US for Sumitomo group companies. Most recently he was president and CEO of the Silicon Valley venture capital firm Presidio Venture Partners, which is backed by Sumitomo Corporation. Before that, he worked in New York City, Los Angeles, and Houston (where he got the name “Tex”) in various roles including project development and management, project finance, corporate management, full turnkey contracting, and major equipment sales and marketing. Mr. Abe recently discussed the challenges of reforming Sumisho using the skills acquired in Silicon Valley at a seminar entitled “Applying the Best Practices of Silicon Valley in Japan?“ arranged by Stanford’s Asia/Pacific Research Center. This month's Bridge Builder features a summary of Mr. Abe’s discussion surrounding the challenges and lessons learned at Sumisho.

Mr. Abe introduced himself by explaining that he was picked to be CEO not in spite of his relative youth and overseas experience but because of it. Back in 2002 when Mr. Abe was promoted to the position, the company was in need of corporate reform and looked to Mr. Abe’s unique experience and enthusiasm for a solution. What they got was a wide range restructuring initiatives designed by Mr. Abe to streamline the company and make it more profitable. Mr. Abe saw that the company was organized by function, making it difficult to ascertain profitability. So rather than having several cost centers and one big profit center, Mr. Abe organized the company around business groupings each with its own P&L. The next step was to accelerate the reintegration of various IT related group companies back into Sumisho. Mr. Abe believed that it would be more efficient to have the companies in-house rather than as separate companies. So by April of 2004 the company had effectively become a flat organization, thereby dramatically increasing the workload on the CEO- all part of the plan, according to Mr. Abe who says he realized he needed to be more involved. The results: Sumisho went from being a 4 company entity with 5 units to being 1 company with 16 strategic units and 3 regional offices. Mr. Abe emphasized that a key part of this restructuring was the movement of people throughout the organization. Along that movement came an emphasis on team-building and pay for performance initiatives (a common Silicon Valley trait).

Mr. Abe mentioned that there were some key success factors behind the launch and completion of his reforms. The first item was the cooperation of his predecessor. Mr. Abe described how unusual it was for such a young overseas executive to be appointed CEO and how the previous CEO could have been resentful. But rather than become a barrier, the previous CEO became a supporter which truly smoothed the transition. The second factor was the support of the major shareholders without which he would have never been able to implement his reforms. The Q&A session of Mr. Abe’s talk focused on his opinions with respect to other Japanese companies and Japanese corporate culture in general. When asked if he thought Sumisho’s reforms and initiatives were typical of Japanese companies today, he replied the Sumisho is still the exception not the rule. But he believes that some day most major Japanese corporations will need to go down this very same path. 

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