Rakuten, the largest Internet company in Japan, has been on the move since its founding in 1997, expanding from e-commerce into finance, travel, online content, and ownership of professional sports teams. Not satisfied to operate solely within Japan, Rakuten has also leapt into China, the U.S., and Europe through a series of acquisitions and partnerships.
In the last year, Rakuten acquired Buy.com in the U.S. and PriceMinister, the most-visited e-commerce site in France, and opened an online shopping mall in China with Baidu, China’s search-engine giant. In order to achieve its goal of becoming the largest global Internet player, Rakuten is certain to have more acquisitions in store.
Transformation, in other words, is a way of life at Rakuten, which was founded by Hiroshi Mikitani, a former investment banker at the Industrial Bank of Japan, now known as Mizuho Corporate Bank. As Rakuten expands globally, Mikitani understands that senior leaders cannot directly oversee every outpost and new initiative.
Rakuten has developed a core set of management and cultural practices that it expects all businesses to adopt. By 2012, for example, the company will require all employees to be English speakers. It also tries to cross-pollinate best practices across borders and businesses. But otherwise, Rakuten lets local managers manage.
David C. Michael, a senior partner and managing director of The Boston Consulting Group, recently talked with Mikitani about his philosophy for leading a company that is a study in transformation.
How has your own leadership style evolved as you have gone from leading a start-up with a very small group of people to leading a truly global corporation?
I don’t think I have changed much. I’m sticking to basic practices: managing objectively, facing the truth as much as possible, encouraging people, encouraging people to take on challenges instead of blaming them for mistakes, and trying to be as fair as possible.
How do you balance your own time as CEO? On the one hand, you are continually looking at deals and new investments and partnerships. On the other, you have a massive operation to manage.
We have many types of business—e-commerce, travel, finance, online content, and ads. I cannot have hands-on involvement everywhere. I pick a couple of important projects on which I can be reasonably hands-on. For other businesses, I monitor the key performance indicators and the big-picture strategy. But I try to delegate the details as much possible.
Certainly, people must be key. How much time do you spend on people issues, and what does it take to attract the talent that you have?
Obviously, a sense of respect is important. The compensation package is very important too, but that is not all of it. Fostering ownership of the business and creating a sense of team are also very important.
You have embarked on globalization. You have joint ventures in China, and you have made some major acquisitions in the U.S. and Europe. How has that changed the company, and how do you manage those new challenges?
We are trying to stick to our original way of managing. While the corporate language is moving away from Japanese, and English is becoming our corporate language, I think our basic framework is the same.
How do you ensure that?
We took the core components of our management—the corporate culture, our brand concepts, and our basic practices—and put them together into a corporate philosophy. We translated that into Chinese, English, and French. We tell managers to follow the basic framework and the foundation of our corporate practice. Beyond that, I am trying to give management as much freedom as possible. It is a little bit different from most American IT companies.
You are operating in an industry that changes incredibly quickly—we see the iPad, social networking, and so many other rapid developments. How do you keep the organization moving at the right speed? And how do you maintain the right level of innovation?
What we have been doing is sharing expertise across different businesses and countries. For example, if Rakuten Securities does something unique, we basically transplant those activities into other businesses. Although we are in many different businesses, most of the components are the same: Web technology, Web marketing, and databases. There are so many things that we can share. My management style is to enhance communication across business units at all levels—not just the management levels—as much as possible.
We can take the best practices within the organization and transplant them. If I see something going on in one country, we can transfer that to other business units. This is what we call in Japanese yoko-gushi, or horizontal penetration. We also call it yokotenkai, meaning that we transfer one model to another business unit. And now we’re going to do this globally. We are trying to export our expertise to the U.S. and Europe and to learn from our European business as well.
You are embarking upon such dramatic change. What is your vision for where you would like Rakuten to be five years from now?
We would like to create a company with a very high level of corporate management and an organization that will enable us to compete against any company. We need to be very careful not to lose our core values, and that will lead us where we need to be. Obviously, we have very concrete target numbers, but those targets may or may not be met. The numbers are results, not our goals.
In your travels around the world, certainly, you have gotten some sense for the dramatic changes in the business environment overall. Could you comment a bit on what you see as the biggest challenges for CEOs in the next ten years?
In the IT industry and maybe more generally, consolidation is going to happen. You need to think about whether you want to be the acquired company or whether you want to acquire somebody. You need to think about whether you will embrace various styles and cultures or whether you want to enforce your culture in other companies and countries. Our style is that we try to respect the culture of the company we acquire. Even if we build our own business, we try to respect the regional management as much as possible. We want our companies to keep our very basic practices, but many other companies try to force their style and the use of the same brand. Sometimes it works; sometimes it does not.
Globalization will accelerate, and it will be very challenging.