Full withdrawal from floppy disks: a declaration of “back to the core” (1998)

The discipline of the decision to retreat

What makes this withdrawal stand out is that Kao folded a business it had expanded in expectation of growth while it was still, before it fell into the red, doing so with the responsibility of the management made explicit. It is true that surfactant technology was continuous with the manufacture of floppy disks, and that continuity had pushed nearly a decade of investment forward. But that the technology connects does not guarantee the business can be continued. When the product called recording media entered a structure it could not escape — a falling unit price — Kao, rather than being dragged along by technological continuity, moved to the side that withdrew on the business arithmetic of profitability. That a company which had fixed a business conversion through equipment this time fixed a retreat through personnel shows a way of thinking that permits no going back, whether the direction is forward or back.

President Maruta’s offensive decision in 1978 to channel over $597M (¥120bn) of investment into the core business over three years, and this decision to retreat in 1998, can be seen as two sides of one coin. Whether advancing or withdrawing, it hands down the judgment fast and fixes it irreversibly in equipment or in personnel — Kao’s consistent touch appears in both scenes alike. That said, having a discipline for how to fold a business and finding what to grow next are separate problems. How much new demand can Kao, back in its core, dig out of a mature household-goods market? The skill of how it retreats is given meaning only by the size of the business it stands up next.