Japanese “Shinises”: The Art of Staying in Business

In the age where company longevity has reduced dramatically, it is no surprise that the world celebrates the few companies that have managed to transcend a few generations. Statistics are not in favour of such extended life. A study by McKinsey shows that the average lifespan of companies listed on the S&P 500 was 61 years in 1958. Today, it is less than 18 years. McKinsey believes that in 2027 75% of the companies currently quoted on the S&P 500 will have disappeared. Several large corporations have defied the odds and remained in existence over the past decades, but several others have been acquired, merged, or gone bankrupt.

The numbers are, however, more favourable with the smaller companies. According to a report in 2008 by the Bank of Korea that looked at 5,586 companies older than two hundred years in 41 countries,56% of these companies are in Japan. These ancient companies in Japan are called Shinise. A nationwide Japanese survey counted more than 21,000 Shinises that are older than one hundred years as of September 30, 2009. The oldest of these companies is Kongo Gumi, a construction firm that started in 578 AD. Kongo Gumi remained an independent business until 2006. In January 2006, it became a subsidiary of the Takamatsu Construction Group. Kongo Gumi specialised in the construction of Buddhist temples. The company was family-run and passed down from one generation to another. When there is no son to take over the business, a son-in-law adopts the family name and takes over the company’s running.

Many have tried to understand the factors driving these companies’ longevity. Yoshinori Hara, dean and professor at Kyoto University’s Graduate School of Management, says that Japanese companies’ emphasis on sustainability, rather than quick maximisation of profit, is a significant reason so many of the nation’s businesses have such staying power. Innan Sasaki, a professor at the University of Warwick’s business school, suggested that it is due to the culture of respecting traditions and ancestors, combined with the fact that it has been an island country with limited interaction with other countries. These companies have typically remained small and nimble. This has fostered their ability to reorient themselves and evolve over the years. During the world war, Kongo Gumitransitioned to producing coffins because of a decline in the request for Buddhist temples. After the war, demand for temples increased, and the company reverted to construction. Nintendo only evolved into the current global electronic gaming company in 1985. The company started as a playing cards maker in 1889. Over the years, the company attempted different business ventures, including instant rice packaging, a chain of love hotels, and a taxi service. Most of these ventures failed.

Wisdom from African Shinises

I’ll be wrong to say there are no African Shinises, even though few. There are a couple, such as Mauritius Post, established in 1772, Old Mutual Limited – 1845,First Bank of Nigeria – 1894, and Boschendal – 1685. Despite the harsh business environment in most parts of the continent, these companies managed to survive, evolve, and grow. For each African Shinise you see, a thousand others have bid the world farewell. One common trait across these companies is that they prioritised superior consumer experience. Understanding and evolving with consumers is a significant key to their longevity. Consumers evolve and businesses must evolve with them. Kongi Kumitransitioned to producing coffins (using its carpentry expertise) when demand for temples slowed down and death tolls increased due to the war but returned to temple construction. A business can only evolve to the extent to which it remains close to its consumers. If you stay away from your consumers for too long, you will lose touch with reality and continue offering a solution (product or service) that they do not or no longer want.This, combined with an innovative culture,was key to their survival. Innovation adds excellence and pace to a company’s agility. If you want to build the next African Shinese, keep your eyes trained on your consumers – listen to their spoken and unspoken demands. Carry them along on the innovation journey. You would hardly go wrong!