What Japan can teach us about creating a future-fit business
How are Japanese businesses structured differently which allows them to successfully survive economic downturns?
If you start a business these days most people would expect that your intention is to grow it as quickly as possible, build a significant asset to value and then sell it on to a bigger company for a massive profit.
Modern business terms like exponential, scale, flip & unicorn are commonplace these days in golf club locker rooms.
For many the focus is purely on making as much money as possible within the shortest space of time.
But in Japan the intended purpose of many businesses is very different.
Japan is home to some of the world oldest businesses - some of which have been going for hundreds of years.
“If you look at the economics textbooks, enterprises are supposed to be maximizing profits, scaling up their size, market share and growth rate. But these companies’ operating principles are completely different,” said Kenji Matsuoka, a professor emeritus of business at Ryukoku University in Kyoto.'
“Their No. 1 priority is just carrying on,” he added. “Each generation is like a runner in a relay race. What’s important is passing the baton.”
'Japan is an old-business superpower. The country is home to more than 33,000 with at least 100 years of history — over 40 percent of the world’s total, according to a study by the Tokyo-based Research Institute of Centennial Management. Over 3,100 have been running for at least two centuries. Around 140 have existed for more than 500 years. And at least 19 claim to have been continuously operating since the first millennium.'
'To survive for a millennium, Ms. Hasegawa said, a business cannot just chase profits. It has to have a higher purpose. In the case of Ichiwa, that was a religious calling: serving the shrine’s pilgrims.'
'Those kinds of core values, known as “kakun,” or family precepts, have guided many companies’ business decisions through the generations. They look after their employees, support the community and strive to make a product that inspires pride.'
Japanese small businesses do make profit, but keep significant cash reserves on-hand just in case there is trouble on the horizon (then they can at least still afford to pay salaries). They avoid growth as much as possible, keep debt at a minimum and tend to hire family members to keep the payroll modest.
These are businesses that are built for the long-term and are not swayed by the glitz and glamour of making a quick buck.
Hisako Ueno
Erin Griffith