Like Shigenobu Nagamori, many of Japan's new wave of entrepreneurs have emerged from the ranks of Japan's leading corporations. Back in 1973, for instance, Kansei Iwata was working on a color-graphics project at Iwatsu, a large Tokyo-based telecommunications and electronics company. But then the company, severely hurt by the "oil shock," cut back on Iwata's project. Determined to continue on his own, Iwata founded Graphica Computer Corp., and used the window provided by the severe recession to recruit the kind of top engineering graduates who normally would have gone to such large companies as Hitachi Ltd. and NEC Corp.
Using these talented young people as his nucleus, Iwata developed state-of-the-art graphics and image-processing hardware/software systems. More dependent on people than on capital equipment, software has been perhaps the most fertile field for Japan's new entrepreneurs. In addition to Graphica, such young companies as Cosmo 80 and Zuken have emerged as major players in Japan's booming software industry.
Even though they serve a rapidly expanding market, software entrepreneurs like Iwata have had to manage their growth carefully in order to avoid being swallowed up by their usually much larger customers. When NEC's orders for Graphica systems started to increase, for instance, Iwata watched carefully to make sure that Graphica didn't fall into the all-too-familiar subcontractor mold. "I woke up one morning exhausted from the midst of filling out one order for NEC after another," the engineer recalled at his office in a Tokyo suburb. "The money was coming regularly, but I knew I could not go on this way." To remedy the situation, Iwata restructured his relations with NEC. In the past, NEC engineers would come into the office and dictate the product specifications; today Iwata develops his products for market niches, not for any particular company. Although he still does business with NEC, Iwata also sells his software to its leading competitors, such as Hitachi, Mitsubishi Electric, and Oki. This strategy has already paid off handsomely for Graphica, whose 1983 sales jumped 207% and profits a remarkable 470% from the previous year, earning $1.36 million (318 million Yen) on sales of $5.7 million (1.3 billion Yen).