The family business tragedy-Otsuaka Furniture case-

Today, I would like to share my ideas on why the tragedy happened in that family business.

https://www.idc-otsuka.jp/

The followings are the reasons why OtsukaKagu family business was unsuccessful.

1 The old-fashioned corporate mission

Kumiko mentioned their mission was to provide the best quality furniture at reasonable price. Under this framework, the business direction becomes ambiguous when people don’t want to seek quality any longer. Millenniums, or generation Z, or even much older generations feel more comfortable with flexibility. With decent quality of goods, at reasonable prices, and we can be more flexible in terms of our lifestyles. Therefore, IKEA and NITORI have been well-supported by people. If the company set out the corporate mission as “ Seek the people’s comfort with furniture”, or “ Provide the good lifestyles for people”, they could have changed their business direction earlier and recovered their performance.

2 The conflicts over generations among employees

In the company, there seemed to be two generations. We call the generation Dankai, those who were born during the WWII, and had addresses under the “Ampo” period, when the younger generations got extreme left and against having the national army after WWII.

Dankai also enjoyed the Japan’s economic growth period. Almost all businesses there went well due to that economic growth and increased consumption capacity of Japanese. The staffs who worked with Katsu must be the ones of Dankai, who got stuck with their success story, and had been reluctant to change their business styles. This has been seen in every industry in the world, I assume.

On the other hand, Kumiko, who was born around the company’s foundation, has more up-to-dated business sense, which still seems to be relatively outdated given under the as is internet age.

Presumably, younger generations who got involved in business around 1990’s had always been unhappy with the approaches demonstrated by former generations.

From my point of views, both Katsu and Kumiko had the same business mission, as they admitted. However, the staffs, whom each of two leaders had worked with, were completely different and each those leaders had to represent the voice of their teams as a leader.

3 No consensus on the corporate value

Where their corporate value comes from? If someone asks this question, Katsu would say the quality of their goods and services, while Kumiko would say their services delivered from their staffs. This reflects the strategies taken by Katsu and Kumiko.

Katsu established his own brand with his staffs and Kumiko sold Otsuka to Yamada and got alliance with Chinese company.

In this aspect, I feel the western style of family business works better than that of Japanese. Western family business, as long as the company performs and generates more money, its direction is justified. As long as the business performs well, no one can blame that leader. In the Western style business, monetary value has always been considered as the strong principle.

This seems to be hard for Otsuka, but if they had put their value as something financial or benchmark measured by numbers or figures, and no other value they had sought, their business would have survived a little bit more.

4 The separation of ownership from the business

This is something related with the number three. If Katsu had been a so-called Western style corporate leader, after he resigned, he would have remained as an owner but outsourced his business to third party CEO. By pushing him/ or maybe her, Katsu could have expanded the business through M&A or business diversifications. In that case, even as a family top, Katsu could not control that CEO in terms of the business strategy if he/she brings satisfactory results.

Probably, this is a sort of mental and emotional part of Japanese family business. As the business grows, this could be identical as the leader’s personality itself. People intentionally don’t behave any action which can be recognized as self-denial. Rather, unless they change their mindset, people keep avoiding finding the deficit of their actions. If the family simply seeks the money driven value, their lives would be much easier. I personally feel that money driven culture would not be prosperous eternally however, it sometimes works as we must at least maintain a going-concerns for employees or our societies.

5 Lack of family constitution-top down-

When Kumiko regained the CEO position, the voting right released by the first son, Katsuyuki(Yuki), who also joined the family business, was quite effective. The mother of children, Katsu’s wife, had been pushing the son to be the corporate leader. This also resulted in accelerating the battle between Katsu and Kumiko. If the family had had a family constitution where the leadership and responsibility clearly stipulated, either Katsu, Kumiko, or Yuki could have become the family top. Under such top down system, no battle would have happened.

Some Japanese family business have family constitutions. Most of them state the ethical code of conducts, and business strategy or directions, but there are a few of families who clearly states the succession, how to train the next generation, how to succeed, and how the top-down system works.

In summary, those are the fundamental reasons why Otsuka could not survive as a family business.

I personally do not feel that Western style family business system hundred percent correct. Of course, there are a lot of good system in Japanese family businesses. However, Japanese people are those who have well integrated different aspects into one value. Given that context, I feel that Japanese family business could grow strongly and eternally by incorporating some Western system into our own ones.

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

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