Five Lessons as a Japanese Entrepreneur:

On March 3rd 2004, the Asian Business Club (ABC) welcomed Yoshiro Hori, the founder and CEO of Globis Group to the HBS campus.

Globis started in 1992 as the brainchild of Yoshito Hori, who, while attending HBS, conceived of building a conglomerate that he felt was required to reinvigorate an ailing Japanese corporate culture. The Globis Group today is very much what he envisioned when he dreamed up his business plan.

At HBS, Hori was exposed to values that were very different from those in Japan and he hence found them intriguing. He was particularly influenced by the fact that his fellow classmates seemed to place a higher value on entrepreneurship and creating new businesses rather than working for large corporations. He observed that start-ups in the US benefited greatly from the fertile business environment of this country, where knowledge has value, entrepreneurs are respected, and seed money flows in relative abundance. Based on his observations in the US, Hori identified three major areas where Japan sorely needed to improve: knowledge, people, and capital. He soon found himself formulating an ambitious plan to make a business out of creating such an environment in Japan.

After his graduation from HBS in 1991, Hori founded the Globis Corporation in July 1992 with just JPY 800,000(=$7500), and he held his first class with 20 people in attendance in a small rented classroom in Shibuya, Tokyo. This was the start of the Globis Management School (GMS), the group’s business education department.

Since its founding in 1992, Globis expanded its business to cover five areas including Globis Business School (GMS), corporate training, publishing, venture capital and executive search.

GMS was launched to provide Japanese business persons with the same level of training and support that is offered by graduate management schools in Europe and the United States. GMS was successfull in attracting many outstanding students, largely through word of mouth.

With the Globis Business School, Corporate Management Training, and Management Publishing divisions providing the fundamental infrastructure for people developing management know-how, Hori determined that the next step was to draw upon their experience in investing in promising new businesses. Globis launched the first fund (JPY 540million/US $5million) in 1999 and created a second fund called “Apax Globis Japan Fund” (US $187 million) as a joint venture with Apax group.

These funds are already generating big returns and have been very successful. For example, Works Applications, an ERP package software house, issued an IPO in 2002. Works was selected “the best IPO among emerging companies” by Nikkei. In his talk, Hori stressed that he plans to create “future Sonys or Hondas” and he is already planning to launch a third fund in the coming months.

After 12 years of being in existence, the Globis group now employs 200 professionals, has 8,700 students enrolling each year, has completed 350 corporate training clients, has sold more than 1 million copies of MBA-related books and has made its VC fund among one of the best performing VCs in Asia.

Based on his successful entrepreneurial career, Hori articulated the lessons that he has learned:

First, he described how “stakeholder satisfaction” is key to building a successful start-up. Passion and a sense of mission may be the driving force of entrepreneurship but for sustained growth and development, it is critical to satisfy the stakeholders. Hori realized stakeholder satisfaction through a “service guarantee.” Imagine a scenario where any student in HBS who is not satisfied with the MBA course gets an unconditional refund of his tuition. This is exactly what GMS did. Hori decided to pay back all of a student’s tuition if the student expressed dissatisfaction with the education received. Hori believed that to create satisfaction, the organization needed to be disciplined and needed to deliver on its commitment. He believed that by satisfying stakeholders, brand loyalty is inevitably created through word of mouth.

Second, Hori emphasized the importance of “continuous communication”.

He described how a continuous communication of vision, mission, and culture is essential to creating a strong organization. He said that all entrepreneurs should ask questions such as: Why are you establishing your company? Where is your company going 10 years from now? What is your business domain? What do you value the most? The answers to these questions must be a compelling value proposition for the stakeholders. Equally importantly, the answers need to be effectively and comprehensively communicated to the stakeholders.

Third, Hori said that he believed in “recruiting the best talent to build a great organization”. However, this is easier said than done. Hori gave several tips for effective recruiting. One, he advised that entrepreneurs look for people who resonate with the corporation’s mission and vision instead of hiring those who are motivated by monetary compensation and who will simply move on if they later find a better deal elsewhere. Two, he emphasized that entrepreneurs should not delegate hiring but try to meet every applicant themselves. Three, he said entrepreneurs should communicate what the company stands for, through effective Public Relations.

Hori also gave a few tips on retaining employees. He advised entrepreneurs to to build a just HR system, assign employees to challenging cross-functional teams and provide them with a competent training platform. He exhorted them to create a flat organization and keep communication lines with the employees open by conducting “management by walking around”.

Fourth, commented that “Strategy, strategy, and more strategy!” is a key factor for entrepreneurial success. According to him, five key economies contribute to creating a strong competitive position within the industry:

Economies of scale, scope, speed, branding, and global alliance,all of which create effective barriers to entry.

Fifth, Hori mentioned “continuous self-development” as an important lesson that had learnt. He cited a Japanese proverb: “the company will not be bigger than oneself.” He reminded the audience that “there is no short cut to success. Invest time, energy, and money to develop your own capabilities as a CEO.” He also mentioned how playing a Japanese board game named “Go” had enriched his ability to think strategically.

During the presentation, several key issues were raised by the audience.

A participant asked what Hori’s criteria for starting the business was. One key criterion Hori mentioned was the “network effect”. At Globis, Hori created new value by educating students, creating new textbooks, accumulating knowledge about management, and applying it to the companies in the portfolios of his venture capital funds. Hori emphasized that one should not consider a single business by itself, but one should also investigate the synergy it can create with businesses in other fields.

In short, he said, the “network effect should be considered when evaluating the feasibility of a new business. The network will create a new value.”

Another student asked what the difference was between those who start a business, and those who don’t. Hori said that there are many obstacles in starting up a new company and, thus, it is essential for the entrepreneur to have a high energy level and think positively and logically. As a last word, he emphasized how strenuous effort, continuous study, and experience can create a strong sense of belief in self.