The Secret To Northern's Japanese Success: When In Tokyo...

When Northern Telecom Ltd. installed its first central-office switches in Japan in 1989, the Canadian company's U.S. technicians were fast but not fastidious. Tools were scattered around. Packaging materials got left at installation sites. And while Japanese co-workers switched into slippers before entering the office, the Americans kept on their boots. That style flopped with Japanese customers. Says John D. MacDonald, chairman of Northern Telecom Asia/Pacific: "We managers weren't paying attention to the right details."

Today, Northern has mastered Japanese etiquette and a lot more. Its U.S. technicians are better trained, and the company bows to Japan's grueling technical specifications. It's also matching the competition point for point on quality. As a result, Northern has penetrated deeper into Japan's tough telecommunications market than any other foreign supplier. "We're learning to make it in a market with the highest quality standards," says MacDonald. "That pays off in lower costs and enables us to compete in other regions."

HINTS. Conquering Japan, the third-largest telecom market in the world, is critical if Northern wants to reach its ambitious target of $30 billion in sales worldwide. It could also bring in serious cash. Since Northern's first big contract with Nippon Telegraph & Telephone Corp. in 1986, it has installed 300 small and midsize switches with the former monopoly. Smaller Japanese carriers are snapping up even more advanced systems. And Northern is using Japan as a launching pad for business in Korea, China, and Taiwan. Asian deals produced an estimated $200 million in sales last year. These yielded $17 million in profits, according to Teikoku Data Bank Ltd. Now, says Northern Telecom Japan President Roger Moore, "we're ready to reach a new level."

How? By loosening the grip of NEC, Fujitsu, Hitachi, and Oki, the Big Four of Japanese telecom that account for 94% of equipment sales to giant NTT. Having strengthened its relationship with NTT since the late 1980s, Northern is on an inside track to jointly develop and manufacture a new generation of large digital switches. Neither company will discuss the details. But NTT President Masashi Kojima hints that "if a foreign company can develop a good, general-purpose switch, they could gain significant market share."

Kojima hasn't promised anything to Northern. But the Canadian company has spent years developing advanced features for the North American market, such as software that identifies and denies access to repeat crank callers. Many of these services are not yet available in Japan. And unlike rival American Telephone & Telegraph Co., Northern won't ever compete directly with the Japanese phone giant in voice or data services inside Japan.

Northern also plays the political game smartly in Japan. When NTT was privatized in 1985, Washington lobbied to assure a place for American companies in the newly deregulated market. Northern helped prod Washington into action and then made no secret of the close personal ties between Ed Fitzgerald, chairman of Northern at the time, and U.S. Trade Representative Clayton Yeutter. Later, when the company installed its first digital switch with NTT in 1988, the inaugural call placed during the demonstration went not to Ontario, but to the office of the USTR.

It will be years before Northern can prove it has penetrated Japan in a lasting way. But that doesn't discourage Moore. He believes his company has established the working relationships and credibility that are so critical in Japan. "NTT's vision of the future will require substantial changes," he says. "They know we can maintain a complicated system." After navigating the ins and outs of Japanese culture for five years, Northern looks set to begin enjoying more of the rewards.

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