Driven by 'Chi'
Tadashi Yanai is pushing Uniqlo to conquer the world. As Japan's No. 1 fashion brand invades Taiwan, CommonWealth Magazine travels to Tokyo for an exclusive interview, to uncover the Uniqlo effect.
Driven by 'Chi'By Sheree Chuang
From CommonWealth Magazine (vol. 457 )
Tokyo in early September, just after a typhoon has hit Japan. My first encounter with Tadashi Yanai, the chairman, president and CEO of Uniqlo brand owner Fast Retailing Co. Ltd., takes place on a Friday afternoon at his office in Tokyo's bustling Roppongi district.
Despite his diminutive stature the 61-year-old comes across as a man of great physical strength. "He looks very strong and powerful," is how most Uniqlo employees describe their very first impression of the boss.
Yanai stands just 160 cm tall and is slightly built. A salt-and-pepper spiky crew cut underlines Yanai's dynamic personality. Yanai's firm, sonorous voice reveals a strong will and determination. Yet belying his toughness, Yanai wears a light pink dress shirt.
Yanai's demeanor stands in stark contrast to his physical appearance.
Throughout his life Yanai has stuck to a go-it-alone attitude. When he left his hometown in the Kansai region of Japan in the late 1960s to study at the School of Political Science and Economics of Tokyo's prestigious Waseda University, the student movement against Japan's Security Treaty with the United States was just taking place. Universities went on strike, and classes were cancelled for some 18 months. As a result, Yanai did not get to study a lot, instead whiling away the time watching movies and hanging out in Mahjong parlors.
After graduating from university, Yanai hung around for a few months, then grudgingly worked at a supermarket chain for ten months until he was fed up enough to leave. After that he returned to his hometown of Ube in Yamaguchi Prefecture to take over his father's business, a small-town tailor shop, which in twelve years he would decide to shift to casual wear.
On June 2, 1984, Yanai turned 35. At that time the Japanese economy was still going strong and leading the world. While Japanese consumers were all after famous brands, Yanai opened his first Uniqlo store for inexpensive casual clothing in Hiroshima, not far from his hometown.
In a massive flyer campaign, Yanai announced that the store would sell 50,000 pieces of clothing at a standard price of 1,000 yen per piece. Yanai had sourced the clothes from wholesalers, focusing on low price and good quality.
As a result, customers lined up in long lines outside the store on opening day. Eager to get their hands on the bargain goods, the crowd pushed and shoved inside. By 8 p.m., when Yanai rolled down the store's steel door earlier than scheduled, nothing was left. The same happened when Uniqlo opened its flagship store in Shanghai on May 15 this year. The crowd went on a shopping frenzy, so that the store had to close doors before the official closing time.
Twenty-six years ago Toshiyuki Ueki, now general administration department director at Uniqlo, was working at the Hiroshima store while preparing to retake the university entrance exam. At the time Yanai left a deep impression on him: He gave clear-cut instructions and thoroughly supported his employees. "I thought to myself, ‘So this is what's called a boss and a leader'." As Ueki recalls, the young Yanai was very straightforward in his work. He would immediately make changes to inferior products, or sell them at a discount to clear out inventory.
From Small-town Business to Global Empire
Twelve years after taking over his father's tailor shop, Yanai founded the Uniqlo Empire to compete with the world's seven leading apparel specialty chains, such as Zara from Spain, the Gap from the U.S. and Hennes & Mauritz from Sweden.
Citing the late May issue of Japanese business magazine Diamond Weekly, Yukimi Oda, a retail analyst with Morgan Stanley Japan, notes that Uniqlo now ranks number five among the world's top seven apparel chains in terms of revenue, number four in terms of operating profit, and number three in terms of stock market value.
In March 2009 Yanai was featured on the cover of Forbes Asia magazine as Japan's richest man. He still topped the list of Japan's richest this year. In 2009 Uniqlo posted revenue of 685 billion yen with annual profits reaching 108.6 billion yen, representing a 24-percent increase over the previous year. As other major Japanese companies such as Toyota Motors and Japan Airlines continue to operate in the red in a recession-hit economy, Uniqlo stands out like a lone rose in full bloom.
Therefore, Yanai's name is now mentioned in the same breath as legendary post-war executives Konosuke Matsushita, the founder of electronics giant Panasonic, and Kyocera founder Kanuo Inamori. More than 500 corporate leaders just voted Yanai best CEO for the second year in a row, ahead of Toyota Motors president Akio Toyoda, in an annual poll conducted by Sanno University.
More than Just Casual Wear
But Yanai takes aim at loftier goals.
He is determined to make Uniqlo the world's No. 1 apparel specialty chain in the world by 2020. In order to achieve that goal, revenue will have to jump tenfold in the coming decade to a whopping 5 trillion yen. Ordinary profits will have to grow from the current 134.5 billion yen to 1 trillion yen to make Uniqlo the largest clothing retailer on the globe.
In the future Uniqlo will expand its product range beyond casual wear. In fact, the company has already quietly entered the lingerie, business suit, and shoe markets.
Some observers also predict that Uniqlo will not restrict its activities to the fashion industry. A store outlet is a powerful tool, affording the potential for a broad range of services. Just like the 7-Eleven convenience stores in Taiwan, if you have a store, you can sell anything.
The Japanese media are describing Uniqlo as "Japan's most vibrant company." If the company is to meet its 5 trillion yen revenue target in ten years, some 3.5 trillion yen of this revenue needs to come from overseas markets, and about 1.5 trillion yen must come from China. That is why Uniqlo has launched four global flagship stores – the first three in New York, London and Paris – opening its fourth, and largest, in Shanghai, with a floor space of 3,300 square meters, on May 15 this year.
When still a small domestic apparel maker, Uniqlo entered into a strategic partnership with Japanese chemical firm Toray Industries for jointly developing and planning new products. Today Toray provides Uniqlo with tailor-made services, technologies, and logistics teams. Some 100 Toray employees including two section chiefs work at Uniqlo. As a materials developer and manufacturer, Toray reserves two production lines exclusively for Uniqlo in what is widely considered an unprecedentedly close strategic partnership.
Although Uniqlo already has around 800 stores in Japan, Takenori Motoda, director of store development, still keeps scouting for new locations in Japan, supported by a 40-member team. He notes that Uniqlo wants to establish an additional 60 to 70 new stores per year to reach those consumers who have not yet set foot into a Uniqlo store.
Six Secrets of Success
Yanai is eager to push Japanese companies back into the limelight as No. 1 in the world. Yanai's stellar success can be attributed to the following six traits:
1. An early bird, the first to arrive at the office
Despite his hectic schedule, Yanai still allows himself plenty of free time, thanks to his steadfast status as an early riser.
Getting up at 5:30 in the morning, Yanai arrives at his Roppongi office at 7:30 and calls it a day between 4 and 5 in the afternoon. At home he has plenty of free time to think about the next steps the company ought to take, pondering questions such as how he can lead everyone to pursue the same high goals.
2. A bookworm, who finds answers to his management problems in his reading
Yanai has extensively read the writings of Konosuke Matsushita and also loves to read Innovation and Entrepreneurship by the late American management guru Peter F. Drucker. He also demands that employees who train for higher positions in the company read the works of Matsushita and Drucker.
3. A self-made manager who brings out the manager in others
Yanai early on understood that selling products is different from running a company.
Yanai believes a manager needs to take the high ground to set a high target in the far distance. He must be good at deploying resources, be they people, materials or money, allocating and combining them optimally to achieve targets.
He not only trains himself to become a manager, but also demands that his store managers make plans and execute them to achieve their targets.
In order for his company to grow stronger, Yanai needs every single employee to be able to work on their own initiative. "What we really need is people with a pioneering spirit, who are able to do their job with guts and gusto," says Yanai. This is the spirit he demands in fresh job applicants and high-ranking managers alike.
4. Constantly initiates change
Once you have learned how to run a company, you must not cling to an established model, or the organization will become a pool of stagnant water. Yanai demands of himself a constant commitment to initiating change and transformation.
"The purpose of a company's top manager is to bring about change," Yanai contends. He says he often needs to give his employees a glimpse of things to come. "First I'll give some cues to let my colleagues know what I'm up to. Then when the time is ripe, I propose a concrete implementation plan," he reveals.
For example, in 2009 he let Uniqlo staff in on his grand vision for the company's future by announcing his goal of increasing revenue from 800 billion yen to 5 trillion yen in 20 years. By proclaiming targets and dropping hints, he alerts others to current problem points. "Uniqlo has carried out a number of major reforms using this approach," Yanai points out.
5. Hires people who have changed careers midlife and young people with managerial potential
Yanai early on discovered that people who had the courage to change careers in middle age have a certain "Chi." Such people make good employees, because they bring new ideas and inspiration with them.
Yanai is not interested in a clean slate without baggage. He prefers people with a past. Yanai has sharp eyes to find middle-age second-career candidates with a fighting spirit. It's those employees that have forged Uniqlo's unique corporate dialogue and morale.
6. Uses Japan's advantageous position to zero in on new targets
Yanai told participants at the annual forum of the leading economic newspaper Nihon Keizai Shimbun in 2009 that Japan is superbly positioned to succeed in the U.S. market and the rest of Asia, because its basic infrastructure, including people, goods, money and intelligence gathering, is soundly in place. With Japan as the starting point, any industry can make it, Yanai believes. Therefore, companies must not lock themselves inside Japan.
"If you lock yourself in, everything is over," Yanai declared.
How Should Taiwanese Talent Get Prepared?
Following the opening of Uniqlo's first store in Taiwan in October how should Taiwanese who want to join the Uniqlo team get prepared for their jobs?
Pointing to Taiwan's small population and small domestic market, Yanai notes that Taiwanese talent definitely needs to gain experience abroad to become international talent.
He also believes that Taiwanese talent "must give some good thought to what the future of the company really is. They also need to ponder where they want to go in the future."
Asked why he wants rapidly growing Uniqlo to grow even faster and whether employees are not exhausted from this breathtaking expansion, Yanai immediately shoots back: "People who don't want to grow, who don't have any vigor, are no good. They're not up to doing business."
A Company with Chi
Yanai's Uniqlo is a company with "Chi."
Without Yanai's high ambitions, and without him imparting these ambitions to senior managers, staff at headquarters, store managers, and the veteran textile technicians from Japan who handle quality control at the company's factories in China, the Uniqlo success story would not have been possible.
The Uniqlo staff worries most that once Yanai grows old, his Chi will be gone and his successors won't have the same spirited ambition.
However, there is more to worry about than whether potential successors will rise to the task. Uniqlo's targets are so high that the company cannot train store managers fast enough to keep pace with new store openings. Properly training a new store manager takes one to two years. Moreover, within the next decade Uniqlo factories will have to boost their output sixfold or sevenfold. Will this be possible without sacrificing quality? Yanai's global ambitions are sure to be put to the test, and not just once.
In Japan, Uniqlo is already No. 1. Globally, Uniqlo is flexing its muscles as it prepares to meet competitors head on.
Translated from the Chinese by Susanne Ganz