Marketplace 3.0: Rewriting the Rules of Borderless Businessby Hiroshi Mikitani
Hiroshi Mikitani, founder of e-commerce giant Rakuten, has seen the next battleground in the fight for the future of the Internet. Today’s major e-commerce players are quietly building borderless platforms that are overturning the global brick-and-mortar model, and changing the way local businesses think about their customers. But is this good or bad?
Hiroshi Mikitani, founder of e-commerce giant Rakuten, has seen the next battleground in the fight for the future of the Internet. Today’s major e-commerce players are quietly building borderless platforms that are overturning the global brick-and-mortar model, and changing the way local businesses think about their customers. But is this good or bad? Rejecting the zero-sum model practiced by some global retailers, who view the Internet purely as a facilitator of speed and profit, Mikitani argues for an alternate model that benefits vendors, customers, and communities alike by empowering players at every step in the process. He envisions retail “ecosystems,” where brick-and-mortar businesses around the world partner with e-retailers to maximize their customer bases and service capabilities, and he shows why emphasizing collaboration over competition, customization over top-down control, and long-term growth over short-term revenue is by far the best use of the Internet’s power.
Rakuten is already pioneering this new model, and Marketplace 3.0 offers colorful examples of its success in Japan and around the world. Mikitani reveals how the company enforces a global mindset (for instance, by requiring all its employees to speak English, even in Tokyo); how it incorporates new acquisitions rather than seeking to sell them for a quick profit; and how it competes with other retailers on speed and quality, without sacrificing the public good. Marketplace 3.0 is an exciting new vision for global commerce, from a company that’s challenging all the accepted wisdom.
“Marketplace 3.0 is highly readable and largely devoid of the jargon that often mars similar efforts. Mikitani gives a well-considered argument for why Rakuten's business model should be the way of the future...Mikitani's vision for the next stage of the online revolution and his conviction that internet companies have a responsibility to drive change for the better may be an inspiration to aspiring digital entrepreneurs.” Financial Times
“When [Mikitani] writes about the future of e-commerce, marketers would do well to heed his advice.” The Dallas Morning News
“A Japanese e-commerce guru tells how to succeed in online business by breaking all the rules… In this upbeat debut, [Mikitani] describes his maverick business philosophy, aimed at challenging conventional wisdom and empowering sellers to create lasting relationships with customers.” Kirkus Reviews
“Mikitani shares the secrets, beliefs, and drive that fueled Rakuten's meteoric rise to success… [he] weaves an inspiring entrepreneurial story and presents a thought-provoking case for breaking rules.” Publishers Weekly
“For anybody seeking to understand how to build and scale a company in the new global economy, Hiroshi Mikitani's Marketplace 3.0 provides a compelling guide to Rakuten's success. From Rakuten's early days as an Internet Mall to detailed insights on leveraging social media and providing a path for managers, Mikitani takes you inside the CEO's office with this thorough breakdown of what goes into today's successful global business.” Dick Costolo, CEO, Twitter
“Mikitani is one of the world's great Internet entrepreneurs. He possesses one-of-a-kind insights on the intersection of e-commerce and globalization. In Marketplace 3.0, he describes his vision of the future in compelling fashion and shares his unconventional but hugely effective strategies for competing in a 'borderless business' environment. Highly recommended!” Reid Hoffman, co-founder & chairman of LinkedIn and co-author The Start-Up of You: Adapt to the Future, Invest in Yourself, and Transform Your Career
“Hiroshi Mikitani provides exactly the right advice at the right time. His fascinating story of building Rakuten into a global e-commerce giant offers profound and practical lessons for any leader who wants to master the new rules of global competition while also improving the state of the world.” Rosabeth Moss Kanter, Harvard Business School Professor and author of Confidence and SuperCorp: How Vanguard Companies Create Innovation, Profits, Growth and Social Good
“Hiroshi Mikitani is one of the great truly global thinkers in the the business world today. The ideas about leadership, service and commerce in Marketplace 3.0 are profoundly elegant and immediately actionable.” Phil Libin, CEO, Evernote
“Japanese executives aren't known for bucking the establishment. Hiroshi Mikitani is a rare exception at a time when rebellion is most needed.” Bloomberg BusinessWeek
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Rewriting the Rules of Borderless Business
By Hiroshi Mikitani
St. Martin's PressCopyright © 2013 Hiroshi Mikitani
All rights reserved.
REWRITING THE RULES OF LANGUAGE
OUR JOURNEY TO ENGLISHNIZATION
Think back to your student days, to your adolescence. Think back to what you studied during those years. Your schedule probably included math, science, literature, history. It's also likely you studied a foreign language.
In your language class, perhaps you learned basic conversation — phrases a tourist would use. Perhaps you even read some literature written in that language or studied the culture. At some point, you achieved proficiency in the subject, then left it behind.
Now, these many years later, imagine you came to work one morning and the boss announced that the entire corporation would be converting every aspect of the business to that language, dimly remembered from your teenage years. Right now. Today. Your native language was out; the foreign language had replaced it.
How would you feel after hearing that announcement?
Even if you were a straight-A student back in your school days, you'd probably be pretty shocked. I know. This is what I saw on all of my employees' faces the day I announced, in 2010, that Rakuten would embark on a journey I call Englishnization. I told my seven thousand employees — mostly native Japanese speakers — that we would stop what they had been doing all their working lives and immediately transition to doing business in English.
I made this announcement in English. I held that day's board meeting in English. Within twenty-four hours of my announcement, all the signs in the headquarters, from the elevators to the cafeteria, had been switched over from Japanese to English. Word rippled from Rakuten headquarters in Tokyo to the global offices in France, the United States, and Taiwan. I was 100 percent serious. Rakuten would have a new official language.
I knew my announcement would be met with skepticism and even bitterness. A fellow Japanese CEO even called my plan "stupid." Japanese executives do not generally criticize one another in the press, so the fact that they printed it was a huge indication of just how controversial my idea was.
I accepted the blowback, but I didn't let it change my mind. I knew Englishnization was not just a good idea but a critical move. I was not just making a change; I was making a save. This had to be done, and done quickly. The future of Rakuten and the future of Japanese business were at stake. I could even see that the progress of globalization — the way by which the world will do business as one — rested on this concept moving forward. I was not deterred. Englishnization is a radical idea. It is so unprecedented, I needed to invent a word to embody it. But it is far more than a communications strategy. I launched it to disrupt a doomed process and replace it with a faster, more global, and more borderless functionality. In this chapter, I will take you through my thinking, Rakuten's experience, and why even after all that has happened, I believe that Englishnization is not just smart, but necessary. And not just for Rakuten, but for society at large.
Why not Chinese? Many more people on the planet speak Chinese.
I didn't choose English based on the number of English speakers in the world — although it is significant. I chose English for several other reasons.
The first has to do with a business trend. English is the common language of global business. When speakers of all languages come together in commerce, English is most often the language they share. This is especially true in finance and engineering. Many top performers in these industries came up through English-language schools and universities. They likely came from many countries with many different language traditions, but the language of the lab, the conference room, and the trade show was English. They were doing business in English all over the world. Except in Japan.
As an island nation, Japan had managed to create its own linguistic bubble. While Japanese students were required to study about six years of English in middle and high school, they were never pressed to continue the study, and as a result, few adults could converse in English. Certainly, few Japanese were ever asked to conduct complex or demanding workplace tasks in English. Because Japan's own economy is substantial, most of its citizens can go through their business lives communicating only in Japanese. It has been that way for quite some time.
But globalization changed that matrix. The world was moving to a more borderless economic experience, and Japanese companies, clinging to Japanese language, were being left out. I could see that clearly from the executive perch. We were not communicating with the necessary speed and effectiveness, because we were insisting on a workplace of Japanese language. Just the act of translation added time to any process. It was time we no longer had. When I looked beyond the borders of my company and my country, it was clear we could not afford to sit out the global trend.
There is another reason, one more entwined in the intricacies of the two languages, that led me to English. Japanese is a language steeped in hierarchical structure. In Japanese conversation, there is often a power relationship unfolding. Speakers may need to clarify age, academic background, and bloodline — all through word choice, sentence structure, and the give-and-take of conversation. This is a part of the language that Japanese speakers are very aware of and engage in every day.
English, on the other hand, is a language with few power markers. By using English, I believed we could break down barriers and work more quickly. The move would be more than just linguistic; it would be cultural. Using English would allow us to take advantage of two key functions of English communication — speed and utility — and of a language that is not restrained by cultural norms.
MY OWN HISTORY WITH ENGLISH
Englishnization was not born out of my personal affection for the language. I do not hold it above other languages as better or more beautiful. English, for me, has always been a language of utility.
My first direct exposure came at age seven, when I lived with my parents in Connecticut. My father was a visiting scholar at Yale University. I entered an English-speaking school environment with three English words: yes, no, and bathroom. We lived in the United States for two years, and as children do, I quickly picked up the conversation skills of my schoolmates.
When I returned to Japan with my family, my conversation skills faded and I became like most Japanese students: proficient in technical written English — in grammar and spelling and written conventions. But the speaking skills, not especially valued in my surroundings, I lost. It wasn't until university, when I set my sights on going to the United States to study business in graduate school, that I focused my efforts on improving all aspects of my English skills. I did it because I had a goal I wanted to achieve, and English was a necessary tool to achieve it. When I developed Englishnization for Rakuten, I went through the same process. But instead of setting a goal for myself, I set it for the entire company.
MY AHA MOMENT
While the development of my English skills may have been gradual, my vision for Englishnization was not. It hit me with such clarity and intensity that I did not spend time researching and reviewing it. I simply moved forward.
I had been thinking about how we could become a more successful global company. I was thinking about the huge language barrier that had developed between our headquarters and our offices in subsidiaries outside Japan. The more we expanded in the world, the more often this language barrier became an issue. In 2005, Rakuten purchased the major U.S. affiliate-marketing company LinkShare Corporation. We moved into Taiwan in 2008 and Thailand in 2009, establishing Internet shopping malls in each market much like Rakuten Ichiba in Japan. Business was going well, but I couldn't help but think that we could be operating more efficiently than we were. It began to creep into my thinking that our inefficiencies were rooted in our use of language.
Take training, for example. Say that we want to have a staff member from one of our overseas subsidiaries or affiliate companies come to Japan to learn about the Rakuten Ichiba business model. In such cases, it used to be that we would have them speak with the people in charge of each department in Japan through an interpreter. The placement of an interpreter between the two parties slowed the pace of mutual understanding. There was no sense of speed, and beyond that, the interpretation made it difficult for the two sides to feel that they were working on the same team.
This worked against the core themes of our company. As we expand, the entire workflow of each member of Rakuten is completely integrated into our IT system. That might not surprise anyone, given that we are an Internet company. But what I mean is that, unlike in the past when we communicated with telephones and fax machines, these days all our communication is done via email or our in-house social network.
Yet as we were striving for full integration, we were hitting a language barrier. Even though I can communicate over the Internet with all the group companies — not just in Japan but subsidiaries abroad as well — in the past, employees overseas received my messages through interpretation or translations. In the reverse direction too, the messages from abroad would be translated from English into Japanese and passed on to the employees in Japan. This took time and effort. Despite having an infrastructure in place that should have allowed us to communicate with one another instantaneously, we weren't making effective use of it.
What's more, I could look ahead and see that this issue would grow only more problematic. I knew that if we were to continue to create original services, we would need to hire the best and the brightest from all over the world, not just those from Japan. The Japanese language made that difficult. I couldn't stand the idea that we would be forced to abandon hiring a promising candidate just because they couldn't speak any Japanese. And at the same time, I knew we needed to increase the number of employees in the company who could speak English. The more I thought about it, the more concerned I became. Up until that point, I had thought that we could continue to do business in Japanese and that, if anything, we didn't even really need English. I was so sure of this that I had even ordered foreign employees at Rakuten to take Japanese lessons. But as we shifted toward a stage in which we would need to get serious about overseas expansion, I realized that the ability to communicate in English was an absolute necessity if we were to operate globally.
The solution came to me as I watched individuals we had recruited from abroad make the transition to Rakuten. As we became more global, more people from other countries and other language traditions joined our firm, and I began to see that what we, in Japan, considered an insurmountable challenge was not viewed the same way in other cultures. I was impressed, for example, at the speed with which engineers we hired from India were learning Japanese. Within months of their hiring, they were conversant. I could see now that smart, motivated individuals could achieve proficiency in a new language in a relatively short period of time. So when the idea for Englishnization struck me, I seized on this evidence. As a lifelong entrepreneur, I am used to coming up with an idea one day and jumping off the cliff with it the next. I go straight from idea to action. I did not commission a study, organize a research group, or take a poll. If I had asked one hundred people about my idea to communicate in English, ninety-nine of them would have told me I was crazy. But they would have been wrong. And so I did not waste time in discussions that I knew would resist the scope and challenge of my plan. I knew it sounded crazy, but I also knew it was the right answer. Without any preparation, I told my executives that I wanted to do this at our next regular Monday meeting.
And then, perhaps even more ambitiously, I set a deadline. Two years from my announcement, all Rakuten employees would be required to score above 600 on the 990-point TOEIC (Test of English for International Communication) exam. Managers would have to achieve a much higher TOEIC score; junior managers would be required to have a score of 650, mid-level managers a score of 700, and upper-level managers a score of 750. Those who failed would risk being passed over for promotion or being demoted.
We implemented Englishnization in three phases.
Phase 1 consisted of assessment testing. This included the TOEIC — a two-hour test of English reading and listeningcomprehension. In many Japanese firms, the testing would likely take place only at the end of the process. But I wanted Englishnization to follow a scientific approach, whereby we first understood our baseline capabilities. Employees with low scores were required to take a computer-administered exam monthly, to inspire them and monitor their progress.
Phase 2 focused on English-language education. We brought in guest lecturers and held other events to engage the staff in the Englishnization process. We encouraged employees to enroll in English-language classes. We also made changes within our company. We changed the signage in the headquarters and the language of documents, both internal and external. I spoke in English to employees no matter where I was in the world — Japan, Indonesia, Brazil ...
Phase 3 aimed to get people using their English skills in the workplace. Evaluators sat in on business meetings to give feedback on usage. Discussions were organized to encourage employees to engage in English with one another.
WHAT HAPPENED NEXT?
The impact of Englishnization began immediately and has not let up. It became a force within the company and has had ripple effects outside our corporate boundaries, even around the world.
The first result came mere hours after my initial announcement. Rakuten had spent the past year making a series of acquisitions and other expansions. We had grown and evolved and introduced a host of new products. But nothing catapulted our brand as quickly and as surely into the spotlight as Englishnization. Immediately we were an international story.
The global media community was fascinated. More than one hundred stories appeared, in outlets ranging from CNN to the Wall Street Journal, as well as leading Asian sources. And as I mentioned, some of my colleagues in Japan were not impressed, and their comments to journalists only fueled the chatter. Englishnization drew more attention than any of our recent overseas acquisitions, no matter how big. My head of media and advertising cheered this jump start to our international brand. He said we hadn't gotten this much positive attention since I'd purchased a baseball team seven years earlier.
Being this kind of story has its pros and cons. It can be a distraction — a focus on just one element of our company, rather than on the organic whole. But it can also be a great positive. With Englishnization, Rakuten's profile rose significantly on the global radar. If we were well-known before in Japan and to our own international partners, we were now far more visible around the world. Englishnization positioned Rakuten as a company ready and able to do business with the global community. We were not an island company in an island nation. We were part of the global conversation. This helped us negotiate deals, attract top talent to our company from the global pool, and become a leading voice in international business.
Englishnization also made us a company to watch. When companies do interesting and cutting-edge things, other firms watch and learn from their experiences. When we launched Englishnization, we became one of those firms. I knew this for certain when my alma mater, Harvard Business School, approached me about making Rakuten and Englishnization the subject of one of its case studies.
Many companies dream of being the subject of an HBS case study. It is a mark of distinction to be singled out as worthy of examination by the best minds in business. When HBS came calling, it underscored that what we were attempting at Rakuten was not just an internal corporate project, but a seismic industry shift. We were not undertaking this experiment just for our own edification, or even our own bottom line. Now we were also poised to be a teaching tool for the world's business community.
Excerpted from Marketplace 3.0 by Hiroshi Mikitani. Copyright © 2013 Hiroshi Mikitani. Excerpted by permission of St. Martin's Press.
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Meet the Author
Hiroshi Mikitani is the founder and chief executive of Rakuten, a leading player in the global e-commerce market, which recently purchased Kobo and Buy.com, as well as acquisitions in France, Germany, and Brazil. He appeared on the Forbes 400 list for the first time in 2006, and today is ranked at No. 182 with a net worth of $5.6 billion. An Internet evangelist, he has more than 350,000 followers of his Twitter feed. Mikitani has been featured in national and international broadcast and print media, including CNN, The Wall Street Journal, Bloomberg, BusinessWeek, The New York Times, the Los Angeles Times, The Globe and Mail, The Economist, and the Financial Times, among others. Mikitani received an MBA from Harvard Business School and today lives in Tokyo, Japan.
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