Source of wealth: retail, self-made
Country of Citizenship: Japan
Net worth: $13.3 billion (march 2013 - source: forbes)
(This interview is published on www.economist.com on 26th june 2010)
TADASHI YANAI is one of Japan's most dynamic and innovative businessmen. After taking over his father's suit shop in 1984 in a sleepy industrial city far from the fashionable capital, he transformed it into Uniqlo, Japan's biggest retailer, and is now striving to make it the world's largest. His success has made him the country's richest person, worth more than $9 billion.
“We really have to transform this company to be successful and compete,” he says. “Before, we manufactured in China and sold in Japan. Now we need to manufacture in the world and sell to the world.” As we discussed with Mr Yanai, achieving this may require a big acquisition, as well as different strategies and management approaches than to those that brought the company its initial success.
|Billionaire Tadashi @ his one showroom|
Arranging an hour-long meeting with him took nine months and around 50 e-mails and telephone calls. Asked afterwards about how he intends to spend his fortune—for instance, through philanthropy—he politely explained that he was not ready to discuss the matter. Here are some brief excerpts from our interview in the boardroom of Fast Retailing, Uniqlo's parent, in Tokyo on June 17th.
To become the world's largest retailer, you can try to grow organically or make acquisitions. What is the right combination?
“We want to grow organically. That should be our main path. For many years we have considered many companies, some with a sizeable network. But let's say we were to purchase a big company; we would have to merge into one entity. That is only possible if the company has very solid management principles and a corporate culture that matches ours. Unless that happens, we would have to change everything. Think about all the energy and manpower it takes to merge two big entities into one! Can we really realise that? That is the way I've begun to think in recent days.
|Tadashi on his work|
“But in all industries we're seeing more and more consolidation, and that is happening in the apparel industry too. So when the opportunity arises, we won't say no—we will jump on the opportunity. But making sure that the corporate culture matches and top management see things in similar way, unless I found a real partner, I don't think I would get into it.
“And [as for] a company with poor financial standing or poor operations: I don't want it just because it's cheap. I only want to buy a leading company. You know, the dilemma is that I want to buy a leading company, a good company, but they may already have very solid principles and they may not want to adjust everything to our way.”
What are your criteria for a deal?
“First, in Europe and America, having chain stores with a solid infrastructure of store networks. I would have them operate a Uniqlo business together with us. Perhaps this store network could operate a Uniqlo brand and their store brand—something like that. So store infrastructure is what I seek the most in the US and Europe.”
|Uniqlo showroom in Tokyo|
What have you learned from your previous experience going overseas that you can apply this time?
“If we were to grow organically overseas, it would be as ‘Japan's Uniqlo' and ‘Japan's Fast Retailing'. To show Japan-ness is quite important—especially in the world of fashion, origin is quite important: where the company comes from. We go to the world and global market as a representative of Japan-ness and Japanese culture. We realise contemporary Japanese culture in our clothing.”
In what way?
“The Japanese are polite; disciplined. And I think the Japanese prefer that type of clothing. And so we produce that type of clothing and sell that clothing. And Japanese have high standards of quality. Non-Japanese are not so uptight about that. We care about high quality and we must keep selling clothes of high quality in overseas markets too, not just the Japanese market.”
You are sometimes criticised for being too hands-on and making decisions that should be done by subordinates. (You're not alone: Steve Jobs hears the same complaints.) How do you respond to this criticism?
“Delegating everything to subordinates, and having the top managers just stay in the back office and focus on administrative work—there are no good business managers [who are] like that. We don't have to take Steve Jobs as an example. Any good business manager will want to pay attention to his shop, his products, his marketing. The full commitment of a top manager is essential.
“Unless they look at the details of day-to-day operations, I don't think you can call them real managers. People often say that the details are everything—that everything shows up in details. So unless top managers are fully committed to paying attention to the details, I don't think you can call such people good business managers.”
|Uniqlo store in New York|
Do you think that this is something that you learned from your father, having grown up in an environment with him as a small-shop owner?
“Yes, I think so. No matter if you have ten stores, or 100 stores, or 1,000 stores or 10,000 stores, everything starts from one store, and everything starts from satisfying one customer. And every store needs to sustain its own business…Every customer is buying one particular item of clothing or maybe two—but no one buys 10,000 garments. So each each product, each piece in each product, each store and each customer: recognising the importance of that is essential in the retail business.
“My ideal company is a small company with one boss, making his own products and selling everything in his own store. I think that that is ideal. But that is not feasible. That is why I have to delegate to different functions.
“I keep telling this to my staff: you are representing me. You are representing the CEO. What I'm trying to convey is that I want all staff to have a business owner's point of view, or else we will not be successful. Any small business with a good manager is probably operating like this. But the bigger a company becomes, there are often cases found where there is nobody taking responsibility for anything [and] they start to lose focus and details. And that's the danger."
This raises the question of Fast Retailing's next generation of leadership. You have two sons. Have you thought about succession? What are your views on retaining talent?
“Yes, I do have two sons, but I do not want them to take my place: I don't want them to head this company. I am proud of them. They have the skills. But I don't want them to be part of the management team. However, they do own 10% of the company's shares, so I'd like them to be board members. But I don't think they will be involved in the operations of the company. I want the people who grew up within the company to be the operational managers of this company.
“At the moment, we have this institution called FR MIC—the Fast Retailing Management and Innovation Centre, which is our corporate educational institution that we have created. Within this facility we are trying to nurture 100 business leaders, including our current group officers, the top operational officers within the company. And we are going to bring 100 more from outside, so eventually we'd like to nurture 200 top business manager candidates.
“I don't think this company can be managed by one person but with a team of a few people. And I think that out of this pool of 200 people, there are some that can become a member of the top management team.”
To follow up on this, why do you feel it is best for your sons to assume a supervisory role on the board of directors rather than an operational role as executives?
“When studying history, not only of the apparel industry but also other industries, family succession has not yielded good results. Anyone with good skills and proven performance wants to become a top manager. So by simply bringing into this organisation the son of a board member or a president, and giving him the president's position, I think is a big disappointment for staff who are working very hard and yielding results. So I do not want my family to take over my seat.”
You say that no one person can take over Fast Retailing but perhaps a team. Can you elaborate on that?
“Well, I am a founder. So I know every aspect, probably. I know the most aspects. I started out when I was young. I did everything by myself up to this point. So there isn't anybody who has experience as much as I have. Even if he knows what's being done, even if the person really had expertise, I don't know of anybody would really trust what that person says, because he is not a founder—even if there were someone who has experience as vast I do.”
Are you terrified that Uniqlo is going to look like Panasonic after Matsushita-san or Sony after Morita-san, or other Japanese companies who lagged once their founders left—with management by committee and “salaryman-sacho” (hired-hands presidents)?
“Yes, that is the worst of all. The salaryman-sacho is one of the biggest reasons why the Japanese economy went down. They don't take responsibility. And are they fully committed to the business? I don't think so.”
One source of strength in many companies is diversity. Uniqlo looks like many other Japanese companies in that it is almost entirely Japanese, with few non-Japanese or women in management. Does this concern you, and if so, how will you address it?
“That is one of the vulnerabilities that you were talking about [earlier]. However that is a vulnerability of today. But ten years down the road there will be more non-Japanese in our company, and women having the opportunity to work. That is what I mean by the globalisation of our company.”
Let me press you on that, since ten years is a long time in my business. Can I say that in 12 months you will have a non-Japanese or a woman on your board? (It currently has only four Japanese men in addition to Mr Yanai as chairman).
“I can't promise that…But the more globalised we become, it is inevitable that more top managers will be women. Next year or the year after that about half of the people will be non-Japanese, and three years down the road, two-thirds of our new employees will be non-Japanese…Our market is no longer Japan. It is the world. We can't manage the world with Japanese only: Japanese staff and Japanese executives.
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