Family Firm Longevity with Professor Toshio Goto

Yoshiaki Matsumura laid out his family’s business history by informing us that his ancestors started out by importing Taiwanese bananas. At the time, bananas were stable in price but expensive because they were seen as southern fruits that could not be eaten every day. Moth orchids and other flowers were also available in Taiwan. This transitioned into the wholesale distribution of fruits and flowers, so that in his mother’s generation they sold to vegetable and fruit shops. Matsumura entered the retail flower business when he was just twenty-two (22). He expanded into the retail industry by selling in supermarkets and large outlets, before eventually opening flower specialty shops.

Ten years ago, they acquired the flower business of Hankyuhanshin Holdings which was in the red. They turned it around and made it profitable by implementing an innovation in the distribution system. They also started dealing with the Itochu group that owns the Rose Gallery and handles the most high-quality roses in Japan three years ago. To date, the Japan Flower Corporation is 95 years old, but its roots can be traced back to 148 years of business being conducted by the family.

The crisis we face today is the Covid 19 pandemic and Matsumura has been busy, unselfishly trying to mitigate the impact of the pandemic on Japan’s flower growers and florists. Flower sales have dropped by as much as forty percent (40%). Through the Flower Life Promotion Association, Matsumura has helped rescue the livelihoods of those who are part of the flower distribution system. He has helped organize activities by which they have filled temples, world heritage sites and other important venues with over two hundred different varieties of flowers. These activities showcase all that Japan’s florists have to offer and has drawn attention to the plight of the flower industry. Visitors to each venue are encouraged to pick their favorite flowers and take them home. One such activity filled a Buddhist temple with floral arrangements and was visited by more than one thousand six hundred people in just two days. They have helped encourage people to buy more flowers.

Matsumura also highlighted other products of proactive innovation that he has implemented to keep business afloat. He has created a “flowerless” agenda whereby fragrance is extracted from the flowers. He has set up new business departments like the ones for cosmetics and healthcare. He ended his sharing by affirming that the spirit of challenge is in the DNA of his bloodline and that they will continue to implement reforms through time. He vowed to uphold the frontier spirit of his pioneer forefathers and emphasized that to be long lasting, there must be continuous innovation.

Professor Toshio Goto once again took over and informed us that he had conducted a research during the month of May 2020, to investigate the responses of centennial firms to the Covid 19 pandemic. He sent out a questionnaire that received 95 responses. He expressed his surprise at learning that a bigger percentage of them could survive with their cash on hand for six months or more. 27.2% even said that they could last two years. Upon closer examination, he found that these firms are cash rich to maintain liquidity, have high profitability and very low payout ratio in their routine business. He also found out that these business actually expect crises every ten years or so they are prepared.

Professor Goto enumerated key factors for business longevity. He said that they are:

1. Long Time Horizon
2. Controlled Growth
3. Core Competencies
4. Long-term Relationships
5. Risk Management
6. Generational Committment

To show another example of a centennial firm, a page of the New York Times was shown. It talked about a Japanese shop that has been around for 1,020 years. This shop, called Ichiwa, sells rice flour cakes that have remained the same through the rise and fall of empires. Professor Goto explained that this family business is different from the flower business of Mr. Matsumura that has kept innovating and making changes. This shop has instead survived by putting tradition and stability over profit and growth. But Professor Goto clarified that this business is just the same as the flower business in that it exists not only for the owner’s sake. It is for society.

The final message of his talk revolved around the question of what business was for. He agreed that businesses maintain the family and that they provide one with money, but he said that we must look to the examples set by Matsumura and the Ichiwa. You must think of society and the community. The business must be sustainable and help solve social problems. Longevity is created when the business becomes highly esteemed and respected by stakeholders.