Decluttering in the Service Industry — Philosophy: “Uphold the Principle of Sound Assets”

This time, Inamori* spoke about the above motto in Kyocera philosophy.

What Inamori said is quoted with “”.

 

“ Probably I guess you have done below adjustment.

Even if a product is technically sellable, once it has sat in the warehouse for three years, it usually ends up being sold for next to nothing.

Such unsold inventory or impaired assets must be written off by the business owner through periodic reviews. These write-offs are not just theoretical—they are the adjustment , which many business leaders actually carry out.

But when do they choose to write things off? The answer is: when the company is making a profit. Since profits are subject to taxation, business owners try to reduce their taxable income by writing off unproductive

inventory or assets.

On the other hand, when the company is not making a profit, they refrain from writing these off—because doing so would push them further into the red. In this way, business leaders adjust their financial statements by writing off or holding onto such impaired assets based on what suits their current situation.

However, what’s truly important here is this: writing off impaired assets should not be done based on one’s accounting purpose. No matter what the profit situation may be, one must always strive to keep only healthy assets on the books.

If you continue to manage your business in this financially sound manner, you will have a buffer when economic downturns arrive. For example, even if you are only making a 3% profit, there’s a vast difference between 3% on clean assets and 3% on a balance sheet weighed down by impaired ones. This difference becomes starkly apparent during a recession. ”

This example may be drawn from the manufacturing industry, but in truth, I believe it is just as crucial for those in the service industry.

So how should a service-based business go about “keeping only sound assets”—in other words, decluttering?

I believe it starts with reevaluating the following three points:

 

 

 

Let me walk you through each of these points with specific examples.

 

1. Are we taking the actions that are truly necessary?

” ‘Business is built on trust, ‘and ‘Trust comes first’—we often hear these expressions. But what do they really mean? Consider the Japanese character for “profit” 儲け. It is composed of two parts: “信” (faith or trust) and “者” (person or follower). Put together, they form “believer.” In other words, if you have believers, you will generate profit. The most profitable example might be a new religious group—without having to sell or promote anything, donations just come in. That’s why it all comes down to creating believers. ”

(From the Inamori Digital Library)

→　In the service industry, it’s common to run campaigns or offer discounts as a form of promotion.

These actions are often seen as necessary in order to get customers to learn about us or our services. However, I believe it is important to pause and ask ourselves: “Is it truly necessary?”

Are we doing it for genuine business needs, or is it just self-satisfaction—or perhaps a way to say, “Well, I tried everything,” when results don’t follow? We must examine our motives carefully.

I know a lawyer who sends out a weekly email newsletter without fail. Through it, we’ve come to understand his personality, way of thinking, and values. As a result, that lawyer is always on our shortlist of lawyers when the need arises.

Efforts like writing a regular newsletter may seem pointless at first glance, but over time, they quietly help others understand who we are and what we stand for. In that sense, I believe they are extremely valuable.

 

2. Are we maintaining relationships with the right customers?　

“ When I took on the leadership role at Japan Airlines, many assumed that the airline business was a massive capital-intensive industry—after all, it requires an enormous fleet of aircraft and a wide range of equipment for operation and maintenance. But I came to see it differently. I believed it was, in fact, the ultimate service industry—where the most important thing was ensuring that customers felt genuinely pleased to fly with us.

The key to this, I believed, was the interaction between frontline employees and customers. Without creating an experience that made people think, ‘I want to fly with JAL again,’ there was no way we could expect more customers, or any improvement in our business performance. ”

(From the Inamori Digital Library)

→ In service industries like ours, we must keep seriously asking the question—“What truly benefits the customer?”

This is especially true in knowledge-intensive services such as coaching or counseling, where the customer’s ‘real satisfaction and fulfillment‘ must be our core value.

It’s easy to win someone over by saying things that sound pleasant or reassuring. That can help build rapport on the surface.

But we also need to ask ourselves: What are the real challenges the customer is facing? What truths must be communicated—even if they’re reluctant to hear those points?

And, though it may sound presumptuous, we must sometimes point out what the customer needs to overcome in order to live a better life, be a better person, or feel fulfilled. I believe this kind of honest guidance is also part of genuine service.

This includes being willing to say things that are uncomfortable—things that might make the customer dislike us. Still, they must be said, directly and with neutrality.

At the same time, we must be careful of ‘inter-dependency dynamics’ in client relationships.

If a customer is driven by an attitude of “taking” from the service provider—or if they show a strong tendency toward emotional dependency—it may be necessary to maintain a healthy distance with them.

 

3. Are we retaining the staff members who are truly essential?

” As I continued to grow and evolve, I had shared everything I had learned—just as I mentioned earlier—with my employees, step by step, each time.

Some of them studied diligently and patiently stayed with me through the process. These staff were not foolish. Those who couldn’t keep up had already left, whether because they lacked intelligence—or even because they were too clever.

The ones who stayed with me—that’s what made them exceptional eventually became Kyocera management team members. That’s why I entrusted them with leadership roles. I simply couldn’t imagine the organization without them.

Once a company reaches a certain size, there are leaders who begin recruiting executives from outside. Some go so far as to fill all key positions with external hires.

This is extremely dangerous.

It may be acceptable to bring in outsiders for about half of the leadership roles, but the other half must be filled by people who grew within the company—those who endured hardships alongside you.

You must count on them. ”

(From the Inamori Digital Library)

→ I believe what Mr. Inamori is saying here is this:

Those who absorbed Inamori’s spirit—those who allowed it to shape their very character—are the ones who remained.

This is especially relevant in the service industry, where the character, abilities, and mindset of each individual matter greatly. That’s because service-based work requires ongoing training and development. And that training demands significant resources.

It is often said, and supported by the Pareto Principle, that in any group, there will always be people who contribute and those who do not—and that a certain percentage will consistently fall into the latter category.

However, we now live in a time when AI and digital tools allow us to dramatically improve efficiency. In this context, if we wish to remain profitable, we must constantly revisit a fundamental question:

“Do we have the right people, in the right roles, doing the right things?”

 

To conclude, the idea of “sound assets” in the service industry should be examined through three lenses—regardless of whether the service is paid or unpaid:

 

These are the three key dimensions we must continue to reflect on.

 

 

* Mr. Kazuo Inamori, the founder of Kyocera, KDDI (one of the top tele communication companies in Japan) and the top of revitalization project of JAL. As a well-known Japanese entrepreneur, he has been sharing his experiences and management know-how with managements of small to middle companies in Japan.

 

Further queries or doubts, please email to ytomizuka@abrilsjp.com

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