Traditional VS International

The Law of Family Heritage in Japan -- “The Leading Power in Family Business”

Featuring a huge number of family enterprises with impressive longevity, Japan is the so-called “leading power in family business”. According to statistics, there are 6,000 family enterprises with an entrepreneurial history of longer than 100 years in Europe, 800 in the US and more than 30,000 in Japan. Some of the “secrets” of these businesses’ longevity are common to other successful family businesses. For example, Japanese family enterprises start grooming the successor early on in childhood, and most arrange for the successor to “practice” in other big companies before taking the helm at the family’s own company. But some of these secrets are more individualized. For instance, the Tsukamoto Group, led by Tsukamoto Kisamon, has survived for more than 150 years by relying on loyalty to traditional culture and ancient family principles. Meanwhile in the ITOKI Corporation, with a history of over 120 years, the present leader Yamada Masashito praises the value of modernized and international concepts in business management and family heritage.

Tsukamoto Group: Following Tradition

The 150-year-old Tsukamoto Group bears prominent traits characteristic of the Jinjiang merchants (also known as Oumi merchants) who emerged in the 16th century during Japan’s Warring States Period. These merchants are the origin of Japanese-style management that appeared later, which features a business philosophy of “trilateral benefits” for buyer, seller and society. The concurrent pursuit of trilateral benefits is the fundamental philosophy of the Jinjiang merchants.

In addition to using this philosophy, the Tsukamoto Group has relied on following family precepts over the generations, allowing it to manage family succession effectively for more than one hundred years. In the eyes of the Jinjiang merchants, it is also very important to pass on their business concepts and philosophies to their descendants.

The Tsukamoto has three of these precepts, or family mottos. First: “A family accumulating kindness and charity is bound to receive extended blessings”, which is a saying from the Chinese Book of Changes. Chinese traditional culture has also taken root and sprouted in Japan, exerting its influence on several generations of Japanese.
The second precept states that “effort matters more than talent, and habit more than effort”. Jinjiang merchants hold that talent can bring temporary luck and unremitting efforts can help one become rich and fulfilled in life; but only by cultivating good living habits handed down in the family through successive generations can prosperity be secured for future descendants.

The third family teaching of the Tsukamoto involves 30 cans of pencil stubs. “Those pencil stubs were left by my father at work. He got up at 3 o’clock every morning to read reports and documents from all branches of the business and to write down different instructions with pencils of 3 different colors,” Tsukamoto Kisamon said. “Whenever I see those pencil stubs, it feels as though my father is still alive, reminding me to work harder every day and focus on the business without any distractions, just as he did.” Tsukamoto Kisamon believes that family precepts can take many forms, such as the pencil stubs that have taught him the importance of time, money and spirit.

With regard to the Tsukamoto Group and Tsukamoto Kisamon, the succession of the family enterprise cannot be separated from the business philosophies of the Jinjiang merchants, such as the pursuit of trilateral benefits and the teaching of various family precepts beginning in childhood. The Tsukamoto Group sincerely believes in the power of traditional culture for grooming successors and managing business, which it is striving to spread and develop.

ITOKI Corporation: Adopting International Practices

ITOKI Corporation was founded in 1890. The current head, Yamada Masashito, was once a banker; after marrying his wife (a third-generation descendent of ITOKI’s founder), he assumed control of the company. It continues to thrive today, more than 120 years since its founding.

In the opinion of Yamada Masashito (a graduate of Harvard Business School), all companies are to some extent similar to family businesses, because they were all originally founded by talented individuals, as can be seen in the cases of Google, Apple and Microsoft. However, 95% of successful companies disappear in 10 years while only 5% can survive decades of fierce competition. Yamada Masashito believes that the key to winning long term lies in the selection of executives for the company. These choices will decide whether or not the enterprise can continue its development.

It is quite natural that the founder of a family business would prefer to select the successor from within the family. However, rigid adherence to this idea can easily bring disaster to the enterprise. A successful business manager needs to demonstrate excellence in many areas, which is not possible for everyone to achieve. If the business is fortunate enough to have someone in the family who qualifies for the position, he or she can be groomed for succession. But if not, the founder should be proactively begin to seek candidates from outside the family. The prospects of the enterprise will depend on whether (and when) the family can make the right decision.

Yamada Masashito has identified certain qualities that the business’ successor must possess. First of all, he or she should demonstrate the judgment to place the most capable person in the most suitable position, getting the best out of the company’s employees. One cannot manage an entire company alone: it is important to have the support of capable staff. Therefore, the ability to select people with the right talents is of crucial significance.

The second qualification is a spirit of selflessness and self-sacrifice. When making key decisions, the successor should be selfless enough to put himself and his personal interests aside, which is indeed very difficult since people are eager to pursue more money and happiness for themselves. However, to manage the whole enterprise, one needs to demonstrate this ability and spirit at the crucial moment, making decisions for the sake of the company, environment and society as a whole.

Last but not least is the capability to create and innovate. A good leader should be results-oriented. The knowledge taught in schools is far from enough for an outstanding administrator. He needs to digest what he has learnt and transform it into real outcomes. The ability to turn ambition into reality is also essential to a business leader.
As Yamada Masashito says, the succession of ITOKI Corporation is based on merit rather than favoritism. He has brought many western business philosophies into the time-honored Japanese enterprise, making it more modernized and internationalized with every step.