Executive: Japanese firms should adopt Enron business model

Hikaru Yamada, CEO of Sprint Capital and an advisor to some of Japan's largest companies, says that Japanese companies should emulate the example set by Enron on how to adapt old-economy operations to make full use of the new economy. 'The conversion of Enron into an ESP [energy service provider] has been highly successful, and Japanese companies should pool their resources into forming similar groups,' Yamada told OGJ Online in an exclusive interview this week.


TOKYO�Hikaru Yamada, CEO of Sprint Capital and an advisor to some of Japan's largest companies, says that Japanese companies should emulate the example set by Enron on how to adapt old-economy operations to make full use of the new economy.

"The conversion of Enron into an ESP [energy service provider] has been highly successful, and Japanese companies should pool their resources into forming similar groups," Yamada told OGJ Online in an exclusive interview this week. "It would make good economic sense for, say, a steel, an energy, and a securities company to merge in order to provide a whole range of new products ranging from power supply and distribution to energy-related financial products such as derivatives and futures."

Yamada notes that, as traditional economies convert to a new way of doing business, there emerge new and increasing demands for energy and related financial products.

"The IT [information technology] sector in particular is emerging as a major new consumer of energy, and the nature of the industry means that it often requires tailor-made specifications. For example, application service providers are ever more in need of sources of electric power that can be guaranteed to be absolutely stable and secure. This means that they will increasingly move away from the public distribution system and instead set up their own generation facilities.

"At the same time, Japanese companies are becoming aware of the important role financial products such as weather derivatives can play in their business models."

Challenges bring opportunities
Yamada notes that projects such as that to establish a national natural gas pipeline network in Japan will require new industrial alliances but will also provide these alliances with new opportunities to tap into hitherto undeveloped markets.

"What we will see is a progression of development and restructuring in Japan's energy sector, beginning with the electric power sector, moving to the oil sector, and finally, the natural gas industry. At each stage there will emerge new opportunities for those who have been forward-looking enough to take advantage of these developments."

But Yamada warns that this is not just a case of new business opportunities: "This is more than a matter of options. It is essential that these opportunities become a reality. Without them, the Japanese market will always remain an old-style and fundamentally inefficient one."

He adds that, although Japanese companies have begun to adjust their operations, "We are less than half way to converting to the new economy."

This conversion requires not only active investment steps but also a fundamental change in mentality, and this must occur in Japan's bureaucracy as well as its corporate structure.

"That bureaucracy was very successful in turning Japan into an economic superpower, but we are now in a new stage in the economic development cycle," said Yamada. "And it is important that it [Japan's bureaucracy] changes to reflect this�otherwise it will only serve to hinder Japan's transformation into a truly efficient new economy."

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