IF YOU ARE VISITING JAPAN AND WISH TO EXPERIENCE its heritage then you can stay at the oldest hotel in the world- Nisiyama Onsen Keiunkan in Yamanashi, Japan, operating since 705 AD and operated by 52 generations of the same family. If you want to tuck into Japanese sweets, then head for Ichimonjiya Wasuke- a sweet business in Kyoto operating since 1000 AD. If this is not enough and you still wish to drink something historic then walk inside Sudo Honke, the world’s oldest brewer serving since 1141 AD.
Why am I mentioning some quite old heritage businesses of Japan? What do I want to convey? Just continue reading this eye-opening article and very soon you’ll know.
The world report on the health of startups says that about 90% of startups fail and failure is common during years 2 to 5. The Indian startup story is a replica.
A report by the IBM Institute for Business Value and Oxford Economics observed that 90% of Indian startups fail within the first five years.
Sounds gloomy and dramatic, but unfortunately is true. Less than 5 years is the longevity of maximum businesses. So today any business that survives even for two decades or more is considered as a wise old company.
A study that analyzed thousands of European companies found a life expectancy of just 12.5 years.
This is indicative of a larger trend: Companies are dying younger and younger. The word longevity in the modern business world is becoming rare.
And yet, surprisingly some businesses survive for many generations. In the world of business, Japan is something of an exception. Japan amazingly is home to some of the world’s oldest companies. Believe it or not, Japan has over 30,000 companies that have been doing business for over 100 years.
In fact, there is a specific Japanese term for companies that have survived for more than a century. They are named as “Shinise” firms- literally meaning ‘old shop’.
In fact, a Bank of Korea report way back in 2008 found that of 5,586 businesses in 41 countries that are over 200 years old, 56% (3146) are in Japan.
If that’s not amusing, Japan has nearly 500 plus businesses over 300 years old, nearly 200 companies over 400, and last but not least some 40 companies with a history of 500 years.
Japan is also home to eight of the world’s ten oldest businesses, including Kongo Gumi founded in the year 578 (Guinness Book of World records). But in 2006, after an amazing run of 1429 years, the company ran out of money and was absorbed by a large construction company.
This extraordinary longevity of businesses has attracted researchers to carry out in-depth studies of the factors behind the amazing life cycle of survival and growth.
Their findings offer some great lessons for other businesses on crisis survival, including the current one triggered by the Covid pandemic.
What’s the secret behind the desirable Japanese business longevity?
Can they teach other businesses?
These enviable questions prompted the Bank of South Korea to carry out a study to understand the secret.
In another study students from the GLOBIS University observed some 69 companies which were over 300 years old. They too discovered some key traits and characteristics which allow these businesses to not only survive but even thrive for centuries.
The Adoption Practice of Mukoyoshi.
Another reason is a unique custom practiced by Japanese business owners. Most of Japan’s oldest businesses are “family-run” where like wealth business to is passed down from one generation to the next particularly to the eldest son.
So, what’s new in this? It happens everywhere.
Agreed, but what if there is no son to inherit a business, or what if the natural choice is less-than-capable to successfully run a business? How do business owners always manage to have a boy to ensure succession?
Well, there is a catch.
They have a solution: adult adoption practice.
A business owner could adopt a son, get married into the family, and then go on running the business displacing natural progeny.
This widely practiced and accepted custom of legally adopting adult male heirs into the family bloodline ensures an unbroken succession for the business’s longevity. Today, the majority of Japan’s adoptees are males, many of whom are adopted by the business owners and then put in management positions.
Through a technique called “Mukoyōshi,” a business owner with no male heirs to his company can legally adopt his daughter’s husband who then takes the family’s surname. There goes a Japanese saying, “you can’t choose your son’s, but you can definitely choose your son-in-law.”
Many Japanese companies with household names such as Toyota, Nintendo, Panasonic, and Suzuki have adopted this practice.
In an interesting study in 2011, it was found that the business performance of adopted heirs was far better than those run by blood heirs.
Now, what if the adopted male turned out to be a failure in his leadership role? Even in this rare case, the adopted heir can be disinherited, and another heir can be adopted to take his place.
How do family businesses survive when there are no sons to take over?
In Japan, this ancient practice has provided a unique solution for this age-old question.
This concept has become more relevant today as Japan is struggling with the falling birth rate and many parents just have a daughter.
Some entrepreneurs have made a successful business out of this custom by starting matchmaking websites where women look for a husband who is willing to be adopted by his wife’s family.
Deep Commitment to Values and Traditions.
Yoshinori Hara, dean and professor at Kyoto University, who once worked in Silicon Valley says that Japanese business’s main emphasis and focus is on sustainability, rather than the generation of quick profits. This according to him is one of the leading reasons behind so many companies’ long life.
These companies always prioritize community, family, and tradition over financial gains. In Japan, the culture of respecting tradition and ancestors always take precedence over short-term financial logic. Their unflinching commitment to values and traditions plays a vital role in business sustainability and longevity. This sharp focus on the tradition of continuity and unflagging determination to preserve and pass on the values does not permit them to just die out.
But it’s worth noting that Japan’s cultural norms, values, and traditions though slowly have started eroding in recent decades, negatively affecting and creating problems for the survival of old companies.
Focus on Long-Term Perspective.
Today majority of businesses create and focus on a strategic plan for 5 –10 years. In short, emphasis is on short-term growth and profitability.
But many Japanese companies think quite long-term about 100 or 200 years from now. This thinking attribute changes the way you approach a business. A 200-year-old company wants to look ahead to the next 200 years as a continuation of its business legacy.
This basic emphasis on long-termism makes them more concerned with the firm’s long-term health and welfare than the short-term pursuit of quick profits and wealth.
Omotenashi – Customer Orientation.
Regardless of what industry you’re in, whether your enterprise is small or big and what kinds of products and services you sell, your customer is the most important part of your business. Without the customer, you don’t see any sales and revenue. They are the soul of any business. Isn’t it?
So, another factor, that plays a vital role in business longevity is excellent customer service.
You already knew that, didn’t you?
But customer service is one of the most under-used and valued assets in business. Business longevity heavily relies on repeat and satisfied customers. But good customer service is possible only when you can understand your customers’ needs and wants.
Japanese businesses take it very seriously.
In fact, they have a strong word for it- “Omotenashi.”
Have you heard this word before?
But thanks to Christel Takigawa the Japanese TV personality and bid ambassador whose 2013 speech before the International Olympic Committee likely helped Japan win over the 2020 Olympics host nation this word “Omotenashi” caught everybody’s attention and later became a winner of ‘Japanese Buzzword of the year.
It captures the way in which Japanese hosts focus on understanding the customer details and anticipating their guest’s needs. Japanese business traditionally values this high-level customer service.
Any business that cherishes longevity must vigilantly avoid short-termism and short-sighted focus on profits, which often can lead to ignoring or neglecting customers.
Frugality and Modesty.
Another attribute and pride of Japanese culture is modesty and frugality. In fact, they have taken it to another level and transformed it into an art.
One of the reasons is the deep-rooted belief in culture and religion. The religion Shinto which originated in Japan and numerically is Japan’s largest religion followed by Buddhism.
Shinto mandates its followers to live in perfect harmony with their animated (humans and animals) and non-animated (non-living things) surroundings as they are imbued with their own ‘kami’ or spirit. This means living a simple, modest, and frugal life, not too visually show off or outdo anybody.
Rooted in the Buddhist philosophy of frugality, the Japanese even have a word for the sense of regret they feel when something valuable is wasted.
“Mottainai” often translated as “What a waste” or “Never waste anything worthy” represents the essence of frugality in Japanese culture. This aspect is applied both in running a business and managing one’s own life.
It’s no surprise that the island nation is a world leader when it comes to the 3Rs: Reduce, Reuse, Recycle.
Don’t confuse frugality with stinginess, as the former is just a means of conserving and maximizing available resources for future investment. This cultural aspect fosters a climate of honesty and integrity, the foundations of leadership and key characteristics of a business because it sets the tone for the work culture that you want to create.
Arie De Geus a Dutch business theorist analyzed some centuries-old companies in the world. In his book: The Living Company he writes, “Long-lived companies were conservative in financing. They were frugal and did not risk their capital gratuitously.
In the study by the South Korean central bank, the researchers also looked at the reasons behind the short life span of Korean companies. One key reason they found was the reckless business expansion strategy pursued by Korean companies.
Never Forget Your Core-Competency.
It’s but natural that the companies who have a long history of a few hundred years have survived a lot of events and crises in Japanese history including World War I and II. So, the products and services they have traded in have changed over time, but because these companies were very clear about their strengths and purpose, they were able to survive and thrive.
So, another key secret to business longevity is understanding and sticking to its core competence.
You have all heard about the video game company Nintendo which revolutionized the gaming industry. But do you know that Nintendo started as a maker of playing cards way back in 1889? So, the core competency of the company has always been “how to create home entertainment and fun.” Though the company has changed completely as far as its products are concerned but still manages around its core statement. Isn’t it?
Know your strength and core competency and then keep changing and adapting with the times.
I hope you can extract some business wisdom from the successes of age-old companies that have survived for centuries.
There is much to be learned from the past. It also offers many lessons to today’s businesses who are deeply impacted by the crisis of coronavirus pandemic
If you want your business to live on for centuries, then follow this advice. Who knows, your existing business could well go down in the history outliving many generations.
Do you have any more suggestions or advice on this topic?
Are there any techniques you find useful?
Have your say by adding your opinion and view in the comments box below.