Does it take the founder to maintain—or rediscover—the ? The answer is no, but the question raises an important point about the challenge of sustaining the core strengths and values that power a company’s success as it grows to scale. ‘s Mentality
The truth is, professional managers run most large companies, not the original founder. Early leaders define a growing company’s bold mission, identify its most important markets and relentlessly focus the entire organization on delighting its most important customers. But very often, it falls to a successor to maintain the company’s true course as it matures and encounters the many forces that naturally threaten to slow its momentum.
Tadamitsu Matsui, the chairman of Japanese retailer MUJI, found himself in exactly that position when the company began to stumble in 2000 after almost two decades of remarkable focus and growth. Matsui wasn’t one of MUJI’s founders. But his story presents a rich example of how non-founders can turn a company around by channeling the founding principles that led to its original success.
As a company drifts off course, founders and non-founders alike must ask themselves several key questions: What did the company do best when it was most in tune with its markets? How can it return to that simple, repeatable model as it expands? And what adjustments to the model are necessary to cope with changes in competition, technology and customer expectations?
MUJI, which is short for the Japanese phrase meaning “no brand, quality goods,” has always been steeped in simplicity. It began in the 1980s as a supplier of private-label products for Japan’s Seiyu supermarket chain. The company grew during the 1990s as an independent company devoted to using low-cost, often recycled materials to make thousands of household goods and apparel products that are stripped-down to their most essential form—cardboard stereo speakers, for instance, or apparel made from excess thread. Bucking the Japanese consumer’s love affair with luxury brands, MUJI made simplicity and functionality a design statement and carved out a unique “low-cost chic” niche that it began to export to urban markets around the world. Long before it opened its minimalist stores in the US, several of its products were hot sellers at New York’s Museum of Modern Art store.
In the early 2000s, however, MUJI began to lose its distinctive appeal with customers. As Matsui explained in a recent conversation, increased competition from other low-cost retailers like Uniqlo led to undisciplined expansion that detracted from the company’s core principles of low-costs and simple, innovative design. New products drifted off concept and failed to stand out. As MUJI opened new stores and expanded others, its stripped-down retail concept began to lose consistency. The overriding problem, Matsui said, was that MUJI had become focused on itself and its internal processes, not the market or competitors.
The answer, he said, lay in educating the organization—especially the front line—on how to recapture the “MUJI philosophy.” His first step was largely symbolic: He gathered the company’s merchandisers together and lit a bonfire with a large pile of unsold products to drive home in dramatic fashion the idea that things needed to change.
The secret to MUJI’s low-cost approach, Matsui determined, was not just simple products but also the ability to identify and eliminate waste throughout the organization—from the supply chain to inventory to the retail floor. The problem was, MUJI lacked the tools to root out these inefficiencies and relied instead on the haphazard judgment of individual merchandisers. Matsui saw it was crucial for cost management and consistency to become nonnegotiable aspects that could be repeated over and over again as the company grew. To get there, he instituted a standardized supply-chain management system, a standardized store-layout plan and other templates that themselves applied the company’s minimalist ethic to operations and the front line.
Putting the customer first became another nonnegotiable. To role-model the behavior they expected from the organization, Matsui and his management team made a point of changing their own behavior. Weekly executive meetings, for example, became forums for airing customer comments and complaints with a mandate to solve issues then and there. Matsui required that every executive, including the CEO, stand at the headquarters entrance each morning to greet employees as a reminder of how the company should treat its customers.
MUJI’s recovery has not followed a straight line. But its new discipline has lead to a new phase of healthy growth. In design capitals like New York and San Francisco, in fact, MUJI stores have so captured the imagination of hip, urban consumers that the company can charge significantly higher prices abroad than it can in Japan.
Matsui recaptured MUJI’s Founder’s Mentality by turning the company into what we call a Great Repeatable Model. He redefined what was essential to the company’s core value proposition and institutionalized it. MUJI can now benefit from its scale and scope in multiple markets. And it hasn’t had to sacrifice its founding energy, focus and imagination.
Photo credit: tshein