After his promotion to Managing Director, Takuya Nakayama took full control of Sega's research and development and operations systems, unifying the Arcade, Console, and Third-Party Content ecosystems under a single strategic front.
The factional infighting that had previously plagued the corporate structure was suppressed by the relentless drive for efficiency and the generous profit-sharing that left no room for such internal conflicts to fester.
In the end, performance spoke louder than any management theory.
"The Human Resources Department previously proposed recruiting management talent from the automotive industry," Takuya Nakayama said, glancing at his father, who was sitting beside him with his eyes closed, resting. "You shot it down at the time."
"Making games is nothing like building cars," Nakayama Hayao replied without opening his eyes. "Car manufacturing relies on standardized parts; game development requires imagination. I put you in charge of R&D because you understand what players want. If we'd hired a combustion engine expert instead, Sega's consoles would be good for nothing but racing in circles."
Takuya Nakayama rolled his eyes inwardly.
After all, it was Hayao Nakayama who had brought Isao Iriuchi into Sega in the first place.
"Your eye for talent is even sharper than Chairman Okawa's," Takuya Nakayama said, playing along.
"Cut the act," Nakayama Hayao snorted. "You can handle the rest of the shareholders and board members yourself. I'll mention it to David at the right opportunity—that should smooth things over."
The David he was referring to was David Rosen, one of Sega's co-founders. Rosen had already resigned from all his official positions at Sega, retaining only an honorary chairman title and living a leisurely retirement in Los Angeles.
The next day, at Sega's headquarters building, in the arcade testing lab.
The office door at the end of the corridor stood open.
Director Takahashi sat inside, reviewing the test report for the latest generation of the Metal Slug arcade version. The series had already reached its third installment.
Compared to the more formal executive offices, Director Takahashi preferred working here.
Takuya Nakayama entered and closed the door behind him.
Hearing the noise, Takahashi looked up and set down the report.
"The President isn't here today?" Takahashi returned to his desk, picked up his teacup, and took a sip.
"He's busy fighting with Director Nakagawa over Kazuki's weekend custody," Takuya Nakayama replied as he pulled out a chair across from Takahashi and sat down. "I came alone today."
Takahashi set down his teacup and chuckled.
Having spent years in the Arcade Department, he was a pragmatic man who despised unnecessary formalities.
Takuya Nakayama's direct, no-nonsense approach to communication was exactly his style.
"Get to the point," Takahashi said, cutting straight to the chase. "Is this about the Q3 arcade cabinet procurement plan, or the R&D budget for the Mode| Series base board?"
"Both," Takuya Nakayama replied, sliding a document across the table. "This is the cost allocation model the Finance Department just completed."
Takahashi opened the document and scanned it for a few moments, his brow furrowing slightly.
"The technical experiment costs for the arcade platform are being allocated at 40% to the console and handheld divisions?" Takahashi looked up. "Do you think the console guys will agree to that?"
"They'll have to swallow it if they don't," Takuya Nakayama said calmly. "The success of the Mega Drive and Jupiter was built on arcade ports propping up early sales. Not to mention that most of the core R&D for these technologies was completed first on the arcade platform before being downscaled to consoles. Without the Arcade Department taking the initial risks, the consoles wouldn't have had the ready-made technology and games. I've calculated this clearly."
Takahashi closed the file and leaned back in his chair.
"You've laid this out very clearly," Takahashi said, looking up at a framed photograph on the wall—Sega's first arcade game, Pong-Tron. His tone was tinged with nostalgia. "In the past, the arcade and console divisions were constantly at odds. They'd argue for hours in the Board of Directors meetings over a single procurement contract. That young man Yu Suzuki almost flipped the console division head's desk trying to get some budget."
"Internal conflict is too costly and not worth it," Takuya Nakayama replied. "Sega's real enemies are Sony and Nintendo outside, not the colleagues in the next office."
Takahashi nodded.
"I plan to make the arcade platform Sega's technological frontier," Nakayama continued. "Polygon rendering, new lighting engines, haptic feedback peripherals... Give you guys free rein. Not every project needs to be a blockbuster, as long as the technology breaks new ground and can be applied to consoles and handhelds. Then the R&D costs won't be a loss."
It's worth noting that this cross-departmental cost-sharing model for R&D was extremely rare in traditional Japanese companies.
For decades, Japanese firms had been constrained by departmentalism stemming from the Lifetime Employment System.
Strict barriers existed between different R&D teams, with technical achievements kept secret. In some cases, even incompatible hardware standards emerged within the same company.
Breaking down this structural inertia required exceptional business coordination and financial control.
Over the past few years, Takuya Nakayama had used the development processes of the Mega Drive and Jupiter, backed by solid sales data, to forcibly establish this new rule.
His solution for Sega's current situation was to combine the standardized cost accounting of the manufacturing industry with the high tolerance for error in the content industry.
After listening, Takahashi tapped his fingers on the table twice.
"Give me the straight story," Takahashi said, looking at him. "Are you planning to take the President's seat?"
"I've already secured Chairman Okawa Isao's approval," Takuya Nakayama replied. "I'll need your help, Director Takahashi, to suppress internal resistance."
Takahashi stood up, walked to the window, and gazed at the street scene outside.
"I don't care who becomes President," Takahashi said, his back to the other man. "My only concern is who can keep these technical people working in peace. I've had enough of those factional squabbles. If you take over and cut down on all the time wasted on bickering, allowing us to focus on our core business, that would be the best outcome."
"Yu Suzuki was complaining yesterday that the new project's rendering efficiency isn't meeting the standards and requires upgrades to the existing infrastructure," Takahashi said, returning to his desk. "If you can fix that, I'll support you without hesitation."
"That's easy. I already have a plan in mind. I'll discuss the details with Mr. Suzuki tomorrow," Takuya Nakayama said, standing up. "However, Mr. Suzuki's hair has been falling out more than usual lately. You should tell him to take care of his health."
Takahashi burst out laughing.
"That kid would happily lose all his hair if he gets to play with something new."
The two men reached an understanding in the office.
No superfluous pleasantries, no insincere niceties.
For pragmatists, a few numbers and a few promises were all that was needed.
Takuya Nakayama stepped out of the arcade testing lab and glanced at his watch.
The votes in the Arcade Department were now securely in his pocket.
Takahashi held immense prestige among the technical staff. By securing his support, he could prevent any internal disruptions within Sega's R&D system.
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