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TALK ASIA

Interview with Japanese Entrepreneur, Hiroshi Mikitani on His Company and Differences in His Business Model

Aired February 2, 2011 - 06:30:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


ZAIN VERJEE, CNN HOST: Forbes Magazine has named him one of Japan's richest men. And, at age 45, he's the youngest on the top 10 list by far. After starting his business more than a decade ago, Hiroshi Mikitani now employs 6,000 people. And, while Rakuten continues to defy Japan's economic odds and dominate the domestic market, it's also making its presence felt in China, France, and the U.S. Harvard graduate, Mikitani wants more -- global domination.

This week on "Talk Asia", we're in Tokyo with Hiroshi Mikitani as the outsider of corporate Japan gives us a rare insight into his unconventional business philosophy and shares his solution to kick starting a stagnant Japanese economy.

Thank you, again, for your time.

HIROSHI MIKITANI, JAPANESE ENTREPRENEUR: Thank you very much.

VERJEE: Let's begin out conversation by talking about something that Rakuten has made a lot of headlines with -- trying to make English the official corporate language by 2012.

MIKITANI: Yes.

VERJEE: Can you explain the philosophy behind it?

MIKITANI: Well, obviously, you know, it's kind of challenging for us, as a service company, to become global. And I think one of the main reasons is communication. At most of Japanese companies, at headquarter level, they use just Japanese. And then, it's going to be very difficult for foreign executives to really feel that they are part of our organization. At the same time, it's very important for us to share the expertise and knowledge across the organization -- across the countries. Because there are so many business we do across the boundaries. So, I think this is the only way a Japanese service company can really, truly become the global organization.

VERJEE: You fully believe it? When we were at the morning meeting --

MIKITANI: More and more.

VERJEE: Yes?

MIKITANI: We have been doing this for, what, like eight months? And more and more, I'm getting more confident. I'm getting more confident about the idea and I'm getting more confident that we can make it happen.

(BEGIN CLIP)

MIKITANI: Good morning everyone.

ALL: Good morning.

MIKITANI: As you know, last week, we had, you know, a global meeting to --

(END CLIP)

VERJEE: In the morning meeting -- you hold it in English. When looking at some of the employee's faces, it looks like there's a bit of growing pains -- as if they don't quite understand everything. What are some of the challenges in trying to become an English only -- English language only corporation?

MIKITANI: Well, you know, the other reason why I think we are doing this is I believe that most of Japanese, if they spend a reasonably good amount of time learning; we will be able to communicate in English. If you think about how many hours Japanese study English -- from junior high to universities -- it's about 3,000 (ph) hours. So, I think they have the fundamentals. But I think they are almost there, but we need to break through. So, I think if they study about, you know, 700 to 1,000 hours more, I think they will be able to communicate.

(BEGIN VIDEO CLIP)

(END VIDEO CLIP)

VERJEE: Is it a little extreme to say that you want to get there by 2012? A little quick?

MIKITANI: Maybe, yes. But, you know, we set aggressive goal. I don't think we're going to get there, so we will push it very hard. And this is internet business. We don't have much time. If you think about global competitions, there are so many strong players -- global players, local players. And we need to compete against them. And Anglicization (ph) is part of it.

VERJEE: It's really touched off a lot of discussion here, within Japan, and in many of the business people in the community. The CEO of Honda, even, very loudly and publicly said, and this is his quote: "That it's stupid for a Japanese company to only use English in Japan, where the workforce is mainly Japanese".

What do you say to the business community within Japan who feels that way?

MIKITANI: Well, at Honda and others, that's why they're different. They are product-based manufacturing company. Their, you know, main strategy is to export the final product. Our business is to provide service to the corporate clients as to the end user. So, the nature of the business is totally different and, if you want to become successful in other countries, we need to internationalize our headquarters.

VERJEE: Speaking of headquarters, the manual here -- I guess you'd call it the manual -- the Rakuten --

MIKITANI: A sort of philosophy book.

VERJEE: It's a philosophy book?

MIKITANI: Yes.

VERJEE: It's not really the corporate manual?

MIKITANI: No, it's more about the, you know, our sort of mission and values.

VERJEE: The one thing that really struck me here is the code of conduct, which I guess is not that unusual for many companies. But, it is a little unconventional. For one is, "the cheerful greeting is a basis of communication". What's the philosophy behind that?

MIKITANI: It's, you know, if you think about internet companies, you know, most of internet companies are a little bit, you know, anarchy. And very liberal. And that's good part. So, we also believe having a polite sort of courtesy among our employees and to our client is very important. Because we are a technology company, but at the same time, we are a service company.

VERJEE: The other one that really interested me is code of conduct number two -- "cleaning is a precious moment to go back to basics".

MIKITANI: Right, right, right.

VERJEE: Tell me about that.

MIKITANI: Oh, we have this five-minute cleaning time Monday morning, right after the Monday morning meeting. Everybody, including myself, need to clean up their desk for two reasons. One, we need to sort of make sure that we throw away the information we don't need and also we want to make sure that we feel this is our home -- that the office is our home.

VERJEE: You clean?

MIKITANI: I do.

VERJEE: You wipe down your desk every Monday morning?

MIKITANI: Yes, I do. I wipe the legs of the chair and I've been doing this for, what, 60 years -- 50, 60 years.

(BEGIN VIDEO CLIP)

(END VIDEO CLIP)

VERJEE: Coming up: From startup entrepreneur to self-styled billionaire, we go back to where it all began for Hiroshi Mikitani.

(COMMERCIAL BREAK)

VERJEE: You managed to do very well, even in the midst of Japan's stagnant economy over the last two decades. Your company is now the biggest e-commerce site. Sales top $3 billion U.S. You have 6,000 employees. Forbes Magazine even lists you as one of Japan's richest men. One of the top 10. And you are the youngest by far. So, how did you do it?

MIKITANI: I don't know. I just, you know, I just -- well, what I can tell you is I didn't follow or import the U.S. business models. We created Rakuten Ichiba model, which is pretty different from our competitors in the United States. And then, after we went public in 2000, we created this system called "Rakuten Economic System".

So, unlike other companies, we have internet bank, internet brokerage, we are the largest on travel. We have a baseball team. Everything works together.

VERJEE: You strike me as someone a little different than many company CEOs who I've spoken with here in Japan. You didn't, though, start out this way. It seems as if, after you graduated from college here in Japan, you joined the Bank of Japan.

MIKITANI: The National Bank of Japan?

VERJEE: Yes. And then you went to the United States. Studied at Harvard University. Did that change your perspective on how you wanted to live your life?

MIKITANI: Well, obviously, yes and no. Because the reason why I started my company and am still running my company is not just to build a, you know, successful enterprise. We want to become the role model and show to the younger people if you really try, you can make it happen.

When I was working for the Bank of Japan, the mission of the bank is how to grow industries -- Japanese industries like automobile, steel, you know, Kimco, and so forth and so forth. But I felt those kind of ages is over. Now, we need to really dramatically change the, you know, the structure of economy in Japan. And IT is going to be extremely important part of it.

VERJEE: So, you felt that from the very beginning of your professional career?

MIKITANI: No -- well, you know, not so, you know, in a complete way. But I had a very -- we had a very big sort of mission from day one, because we knew the internet is going to change everything.

(BEGIN VIDEO CLIP)

VERJEE: They're young, they're energetic, and they have a way of doing business that's very different from their parents. Hiroshi Mikitani crated Japan's biggest online shopping mall. A three-year-old company with annual profits of $2.5 million and growing.

MIKITANI: The thing we need to change is how, you know, Japanese people think about business. They should get rid of this Japanese kind of mentality and become more and more entrepreneurial.

(END VIDEO CLIP)

VERJEE: We profiled your company 10 years ago. You were a very different company then. A small company. A small startup established in 1997 with your friend as an online mall.

MIKITANI: Right.

VERJEE: Five shops, 30 users. How did you come up with this specific idea of this company?

MIKITANI: Well, at that time, everybody was confident that the internet would become very popular, but about internet business, they were very skeptical. But I was so confident that people would start buying products from the internet and -- because it makes sense. It's much more efficient than mail orders or TV shopping or, maybe, even, you know, sending some products to physical stores.

So, my philosophy is whatever makes sense is going to happen sooner or later. So, for me, from day one, I was very optimistic about online shopping industry.

VERJEE: Did you ever think, "This isn't going to work"?

MIKITANI: No, no.

VERJEE: You always knew?

MIKITANI: I am very optimistic. That's why we call it "Rakuten". "Rakuten" means "optimistic".

VERJEE: So, there have been so many successes for the company. Is there anything, as you look back, that you are particularly proud of?

MIKITANI: Well, unlike our competitors, Google, EBay, Amazon, and most of the Chinese internet startups, we never got any fun or money from any VC (ph). We started with our own capital, by our self, with our own business model.

VERJEE: There have been some struggles. Specifically, there is a moment when you tried to take on Japan's establishment. In a very public way. You attempted to buy a television station, TBS. It was very much seen in the public as the young gun, the face of IT in Japan, trying to change Japan Inc. Trying to take media and give it a new model. It didn't work.

MIKITANI: It didn't work, unfortunately.

VERJEE: What happened?

MIKITANI: What happened? Well, you know, obviously, the -- I think the Japanese community, especially the conservative media industry, didn't like to welcome the new blood, whether young or foreign, into the industry. I think they were -- they don't want to open their league. They didn't want to open their village to outsiders.

VERJEE: Did you learn anything from that?

MIKITANI: I don't know. Maybe a little bit. Right? I thought, you know, maybe I need to have a different approach to change this country.

VERJEE: Coming up, we get a special tour around Rakuten headquarters and find a common dish on the lunchtime menu.

(COMMERCIAL BREAK)

VERJEE: -- and what does the -- these posters that we're walking by here?

MIKITANI: We just make some posters that says, "Friday, let's speak English as much as possible" in this cafeteria.

VERJEE: Do you hear English in the cafeteria?

MIKITANI: Yes, yes, yes -- it's Friday.

VERJEE: Fridays?

MIKITANI: Well, you know, on weekdays, we have many, you know, non- Japanese speaking employees as well. Indian, Chinese, Americans -- so they speak English.

VERJEE: So, the employees have to know English or they're not going to know what to eat?

MIKITANI: Well, we display the physical dishes, so they can see and tell what it is, but --

VERJEE: Was this your idea to do that?

MIKITANI: To do it in English? Yes.

VERJEE: Yes?

MIKITANI: Yes. I throw all these crazy ideas.

So that's the server -- our first server.

VERJEE: This is the actual server?

MIKITANI: "Spark Station Five"

VERJEE: "Spark Station Five"

(LAUGHTER)

VERJEE: Do you have a nickname for it, like "Sparky"?

MIKITANI: Yes, yes, yes.

VERJEE: Why did you save this?

(BREAKING NEWS)

(COMMERCIAL BREAK)

END