WHAT will it take for some family businesses to go on for centuries while others succumb and die early? My quest for corporate longevity continues and my research has led me to the land of the rising sun, Japan.
We are experiencing an era where it is hard enough to keep an organization running for a decade. Therefore, being competitive is no longer a powerful leverage against the onslaught of a volatile, wired and borderless marketplace. With new jargons being invented like disruption, millennial market, IOT (internet of Things), block chain, Yolo (you only live once), the watchword has now pivoted to not just being relevant but resilient. The latter fundamentally means several notches higher than survival.
So how did Japanese family-run businesses not only manage to stay afloat and survive for centuries? Authors Hendrik Schwartz and professor Marc-Michael Bergfeld raised an even difficult and challenging contention: how do you stay relevant and resilient when your business is over 400-years-old and already in the 15th generation? How can you transition to a complex and multi-generational period and get confronted with hundreds of family members, each trying to outdo one another to promote their respective interests?
In their research, the authors clearly concluded that the “Japanese social value system is very different from its Western comparisons and also dissimilar to its continental Asian counterparts.” They pointed out that the Japanese model “entailed strong cultic features and a very strong corporate identity that permeates every aspect of company life and most importantly – and for many people unknown – a substantially different system of family guidance and administration, that has continued to define the nature of Japanese society since the Edo period.”
They went on to identify that the “ie” system, a patrilineal household, is at the core of the traditional Japanese family. It is a very complex kinship unit, a very complex multi-generational family system that is based on primogeniture.
In this particular system, only one child inherits. All of the other children in any generation are expected to eventually leave the family and go establish themselves in some other family or some other social institution. The chosen successor, usually the eldest son, inherits the family, everything to do with the family, and the rest of the children have to find their own way in the world. The “ie” system lineage is important and meticulously recorded. In theory, the “ie” should last forever and in principle never dies as it embodies all of its deceased and future members.
In his book, The Living Company, Dutch business theorist Arie De Geus analyzed 30 centuries-old businesses for common traits and this include several enterprises in Japan. De Geus attributed their success to four commonalities:
1. Long-lived companies were sensitive to their environment and remained in harmony with the world around them.
2. Long-lived companies were cohesive, with a strong sense of identity. No matter how widely diversified they were, their employees (and even their suppliers, at times) felt they were all part of one entity.
3. Long-lived companies were tolerant and generally avoided exercising any centralized control over attempts to diversify the company.
4. Long-lived companies were conservative in financing. They were frugal and did not risk their capital gratuitously.
To be continued...