Hiroshi Mikitani

Hiroshi Mikitani
	三木谷浩史
	Mikitani in 2019.
Born	March 11, 1965 (age 61); Kobe, Hyōgo Prefecture, Japan
Nationality	Japanese
Citizenship	Japan
Education	Hitotsubashi University (BCom, 1988); Harvard Business School (MBA, 1993)
Alma mater	Hitotsubashi University; Harvard Business School
Occupation	Business executive, author
Years active	1988–present
Employer	Rakuten Group, Inc.
Company	Rakuten
Organization	Rakuten; Crimson Group; Japan Association of New Economy
Title	Founder, chairman and chief executive officer of Rakuten
Board member of	Lyft; The Thacher School; Tokyo Philharmonic Orchestra (chairman)
Known for	Founding Rakuten; the Englishnization programme; building Rakuten Mobile
Children	2
Parents	Ryōichi Mikitani; Setsuko Mikitani

Hiroshi Mikitani (三木谷浩史; born 11 March 1965) is a Japanese business executive who founded Rakuten in 1997 and has led it as chairman and chief executive since. He is among the most internationally visible Japanese entrepreneurs of his generation and one of the most persistent critics of the conventions of Japanese corporate life.

Mikitani spent eight years at the Industrial Bank of Japan, interrupted by an MBA at Harvard Business School, and left banking after the 1995 Great Hanshin earthquake destroyed much of his native Kobe and killed members of his family. He has said the disaster convinced him that he wanted to do something to revitalize the Japanese economy rather than finance it from a desk.

He founded MDM, Inc. with three colleagues and US$250,000 of their own money on 7 February 1997, and launched the online marketplace Rakuten Ichiba on 1 May of that year with thirteen merchants and six employees. The design was deliberate: rather than the fixed catalogue pages of a conventional online store, Rakuten gave each merchant control of its own storefront and direct communication with its customers, on the reasoning that Japanese retail is relational and that a marketplace should carry the personality of its sellers. The company was renamed Rakuten in 1999 and listed on JASDAQ in 2000.

Rakuten expanded from marketplace into travel, banking, credit cards, securities, insurance, e-books and messaging, becoming one of the largest internet groups in Asia, and acquired Buy.com in the United States, PriceMinister in France, the Canadian e-book company Kobo, the American cashback service Ebates and the messaging application Viber, alongside minority holdings in Pinterest and Lyft, on whose board Mikitani sits.

In March 2010 he announced that English would become the working language of a Japanese company operating principally in Japan, and gave employees two years to reach a required proficiency or face demotion. The programme, which he called Englishnization, was publicly dismissed as stupid by the president of Honda and became the subject of a Harvard Business School case study in 2011.

He owns the football club Vissel Kobe, which he took over in 1995 after the earthquake left the city unable to support it, and founded the baseball team the Tohoku Rakuten Golden Eagles in Sendai in 2005, which won the Japan Series in 2013, two years after the earthquake and tsunami that devastated the Tōhoku region. He resigned from Keidanren, the Japanese business federation, in June 2011 over its support for nuclear power and its resistance to reform, announcing his departure on Twitter before submitting the letter, and subsequently established the Japan Association of New Economy as an alternative.

Background: Japanese corporate convention

Mikitani's career is best understood against the arrangements of Japanese business that he set out to work around.

The post-war model

Japanese large-company employment developed after the war around lifetime tenure, seniority-based promotion and pay, enterprise unions and a strong preference for internal promotion. Capital was supplied by a main bank within a keiretsu group linked by cross-shareholdings, and a company's obligations ran to its employees, its bank and its group as much as to its shareholders.

The model produced remarkable results through the period of high growth, and its weaknesses became apparent after the asset price bubble burst in 1990. Seniority pay made it costly to hire experienced people from outside; lifetime employment made it difficult to reallocate labour; consensus decision-making by nemawashi was slow; and the entrepreneurial route was unattractive, since leaving a large employer to found a company meant abandoning security that could not be regained.

Japan's subsequent decades of low growth were accompanied by conspicuously few new large companies. Rakuten, SoftBank and a small number of others are the exceptions, and their founders are correspondingly prominent.

The internet in Japan

Japanese consumers adopted mobile internet earlier than any other national market, through NTT DoCoMo's i-mode service launched in 1999, and Japanese e-commerce grew rapidly. But the market developed in relative isolation: services were designed for Japanese users, in Japanese, on Japanese handsets and standards, and the resulting products did not travel, a pattern known as the Galápagos effect.

Rakuten's international acquisitions from 2010, and the Englishnization programme that accompanied them, were Mikitani's response to precisely this problem: an attempt to build a Japanese internet company that could operate outside Japan, which required first that its employees be able to work with people who did not speak Japanese.

Early life and education

Mikitani was born on 11 March 1965 and raised in Kobe, in Hyōgo Prefecture.

His father, Ryōichi Mikitani, was a professor at Kobe University and chairman of the Japan Society of Monetary Economics, and was Japan's first Fulbright Scholar to the United States, teaching for two years at Yale; the family lived in New Haven, Connecticut, from 1972 to 1974, when Mikitani was a young child. His mother, Setsuko, was a graduate of Kobe University who worked for a trading company and had attended elementary school in New York.

His paternal grandfather was a businessman active in New York and a co-founder of Minolta. His paternal grandmother was born into a noble family that had lost its position, and raised Mikitani's father alone while running a tobacco shop; through her, Mikitani claims descent from Honda Tadakatsu, one of the Four Heavenly Kings of the shogun Tokugawa Ieyasu.

His sister Ikuko is a physician and his brother Kenichi a professor of biology at the University of Tokyo.

The two years in Connecticut left him with English at an age when few Japanese children acquired it, and the family's academic and international background distinguished him from the salaryman culture he later entered.

He graduated from Hitotsubashi University in 1988 with a degree in commerce.

Career

Banking

Mikitani joined the Industrial Bank of Japan in 1988, then among the most prestigious employers in the country, and remained until 1996, with a break from 1991 to 1993 to take an MBA at Harvard Business School.

The Kobe earthquake of 17 January 1995 killed more than 6,000 people and destroyed much of the city where he had grown up; his aunt and uncle were among the dead. Mikitani has said repeatedly that the experience changed his assessment of what he was doing with his life, and that he concluded he wanted to help revitalize the Japanese economy directly rather than lend to it.

He resigned from the bank in 1996, a decision that in the Japanese employment context meant relinquishing a career that could not be resumed, and founded the consulting firm Crimson Group.

Founding Rakuten

Mikitani examined a range of business models through 1996 and settled on an online shopping mall.

He founded MDM, Inc. on 7 February 1997 with three co-founders and US$250,000 of their own capital, and launched Rakuten Ichiba on 1 May 1997 with thirteen merchants and six employees. The name Rakuten derives from the rakuichi rakuza free markets of the sixteenth century, established to break the hold of guilds on commerce.

His conception was a hybrid of eBay and Amazon: a marketplace centred on the exchange between buyers and sellers rather than a retailer holding inventory. The distinctive design decision was to give merchants control of their own pages, tools to build them and the ability to communicate directly with customers, in contrast to the standardized product listings of American platforms. The resulting storefronts were dense, elaborate and, to Western eyes, cluttered; they also reproduced the personal relationship between shopkeeper and customer that characterizes Japanese retail, and merchants preferred them.

The company was renamed Rakuten, Inc. in 1999, and Mikitani listed it on JASDAQ in 2000. He has been president since the founding and became chairman in 2001.

Expansion in Japan

Rakuten extended from the marketplace into a wide range of adjacent businesses, most of them linked by a common membership and, from 2002, by the Rakuten Super Points loyalty programme that became the group's principal instrument for moving customers between services.

The group came to include Rakuten Travel, one of the largest Japanese hotel booking services; Rakuten Card, among the country's largest credit card issuers; Rakuten Bank and Rakuten Securities; insurance operations; Rakuten Kobo in e-books; and the Tohoku Rakuten Golden Eagles baseball club.

By 2017 Rakuten had more than 14,000 employees, over 42,000 merchants on its e-commerce sites, sales approaching US$6 billion and more than 100 million members in Japan, a membership approaching four-fifths of the national population.

International acquisitions

Mikitani redirected the company outward from 2010, acquiring Buy.com in the United States, later Rakuten.com; PriceMinister in France; the Canadian e-book company Kobo, which became Rakuten Kobo; the American cashback service Ebates, later Rakuten Rewards; and the Cyprus-based messaging application Viber, which became Rakuten Viber.

The group also took minority positions in Pinterest and in Lyft, where Mikitani serves as a director.

The international results have been uneven. Kobo and Viber established durable positions; several of the European and American marketplace operations were closed or restructured after failing to reach scale against local incumbents. The acquisitions nonetheless changed the character of the company, which employed substantial numbers of people who did not speak Japanese, the condition that made the language programme necessary.

Englishnization

In March 2010 Mikitani announced that English would replace Japanese as the working language of Rakuten within two years (in meetings, in documents, in internal reporting and in the cafeteria menus and lift signage) and that employees who failed to reach a required score on the TOEIC examination would face demotion.

The measure applied to a company whose revenue came overwhelmingly from Japan and whose staff were overwhelmingly Japanese. Mikitani's reasoning was that international expansion could not be conducted by a headquarters that could not communicate with its foreign operations; that the best engineers were increasingly not Japanese and would not join a company operating in Japanese; and that a company confined to one language would be confined to one market.

Reaction in Japan was largely hostile. Takanobu Ito, then president of Honda, publicly described the policy as stupid, arguing that it was foolish for a Japanese company to conduct business in English in Japan. Commentators predicted departures, loss of nuance in internal discussion and a decline in productivity.

The programme was implemented. Average TOEIC scores rose substantially, employees were given study time and support, and Rakuten's non-Japanese engineering recruitment increased markedly. Mikitani's position, restated frequently, is that "English is not an advantage anymore; it is a requirement."

The programme became a Harvard Business Review case study in 2011 and the subject of academic work on language policy in multinational firms, and it is the element of Mikitani's career most widely discussed outside Japan. Assessments generally conclude that it succeeded on its own terms while imposing real costs during the transition, particularly on older employees and on the speed of internal discussion.

Rakuten Mobile

Rakuten's largest and most contested undertaking is its entry into Japanese mobile telecommunications.

The Japanese market had been held for decades by three operators (NTT DoCoMo, KDDI and SoftBank) at prices among the highest in the developed world, and the government sought a fourth entrant to introduce competition. Rakuten was awarded spectrum and launched commercial service in April 2020.

The technical approach was unusual and is the reason the venture attracted international attention. Rather than building a conventional network on proprietary vendor equipment, Rakuten built the world's first fully virtualized, cloud-native mobile network, running network functions as software on standard hardware distributed across data centres. The intention was to reduce capital and operating costs by a large margin and to create a platform that could be sold to other operators, which Rakuten pursued through Rakuten Symphony.

The commercial results have been severe. Building national coverage required far more capital than projected, subscriber acquisition was slow against entrenched incumbents, and the mobile business generated losses running to hundreds of billions of yen a year, weighing heavily on the group's finances and its share price. Rakuten raised capital repeatedly, sold down stakes in its banking and securities businesses, and issued substantial debt.

Mikitani has continued to defend the venture as a long-term investment in infrastructure and in a technology the wider industry will adopt. Critics regard it as a capital-destroying diversion from a profitable internet business, undertaken on a founder's conviction and sustained past the point at which a professional board would have stopped.

Sports

Vissel Kobe

The Great Hanshin earthquake of 1995 left the city of Kobe unable to sustain its football club, and Mikitani was approached to take over its operations. He acquired Vissel Kobe later that year through Crimson Group; Rakuten assumed ownership in 2014.

He invested substantially in the club, signing Andrés Iniesta from Barcelona in 2018 and other international players, and Vissel Kobe won the Emperor's Cup in 2019 and the J1 League in 2023, the first league title in its history.

Tohoku Rakuten Golden Eagles

In 2004 the Japanese Pacific League, in financial difficulty, moved to reduce its number of clubs, prompting the first player strike in the history of Japanese professional baseball. League officials approached Mikitani about establishing an expansion team at Sendai.

He founded the Tohoku Rakuten Golden Eagles, rebuilt and renovated the Sendai stadium before the inaugural 2005 season, and served as owner and chairman. The club won the Japan Series in 2013, two years after the Tōhoku earthquake and tsunami devastated the region it represents, a victory of considerable symbolic weight in Sendai.

Sponsorship and Kosmos

Rakuten became the principal shirt sponsor of FC Barcelona from 2017 and a jersey-patch partner of the Golden State Warriors, investments Mikitani described as building brand recognition in markets where Rakuten was unknown.

In 2017 he co-founded the investment vehicle Kosmos Holding with the Barcelona footballer Gerard Piqué, to invest in sport, media and entertainment. Kosmos acquired the commercial rights to the Davis Cup in 2018, restructuring the century-old tennis competition into a week-long finals format, and acquired the Spanish club FC Andorra. The Davis Cup arrangement was terminated early after disputes with the International Tennis Federation and financial difficulties, and Kosmos was wound down.

Public roles

Keidanren and the Japan Association of New Economy

Mikitani joined Keidanren, the Japan Business Federation, in 2004, and resigned in June 2011 following the Fukushima nuclear disaster, announcing the decision on Twitter before submitting his formal letter.

He said the organization was no longer the body he had joined, objected to its support for continued reliance on nuclear power, and criticized its resistance to the reforms he considered necessary for Japan to compete internationally. Keidanren's membership is drawn from Japan's largest established companies and its positions reflect them; Mikitani's departure was a public assertion that the interests of newer companies diverged.

He became the founding figure of the Japan Association of New Economy, launched on 1 June 2012 as a renaming and broadening of the Japan e-Business Association, and serves as its representative director. The association has lobbied for deregulation in areas including online pharmaceutical sales, ride-hailing, corporate governance and English-language education.

Government advisory work

Mikitani has served on Japanese government advisory bodies concerned with industrial competitiveness and regulatory reform, and has been among the more prominent advocates of deregulation and of increased use of English in Japanese education.

Other positions

He is president of Crimson Group, chairman of the Tokyo Philharmonic Orchestra since 2011, a director of Lyft and a board member of The Thacher School.

Writing

Mikitani has written several books setting out his management approach, of which Marketplace 3.0: Rewriting the Rules of Borderless Business is the best known in English. He has also written with his father Ryōichi Mikitani on the Japanese economy, in The Power to Compete, a dialogue between the two published shortly before his father's death.

His management writing centres on a small number of principles: the systematic pursuit of continuous improvement he calls kaizen applied to internet businesses; a discipline of shared, transparent measurement; the weekly all-hands meeting, or asakai, which he has held since the company's founding and at which he speaks personally; and the requirement that hypotheses be tested, practised and adjusted rather than debated.

Philanthropy

Mikitani announced a donation of ¥1 billion, about US$8.7 million, to the Ukrainian government on 27 February 2022, days after the Russian invasion, among the largest individual contributions from Japan and a conspicuous public position at a time when Japanese corporate responses were cautious.

Rakuten and Mikitani made substantial contributions after the 2011 Tōhoku earthquake, and his sustained investment in Sendai through the Golden Eagles has been treated in Japan as a form of regional commitment.

Personal life

Mikitani is married and has two children. He is a keen tennis player and has maintained a public profile unusual for a Japanese executive, using social media directly and in both languages.

He divides his time between Tokyo and international travel, and has been a persistent public advocate of the view that Japan's difficulties are self-inflicted and reversible through regulatory and cultural change.

Assessment

Mikitani's standing rests on having built one of very few large new Japanese companies of the past three decades, in an economy whose institutional arrangements are unfavourable to doing so, and on having done it from a standing start after leaving a secure career at thirty-one.

The marketplace design is his clearest commercial insight. By declining to copy the American model and instead building a platform that reproduced the relational character of Japanese retail, Rakuten held its position against Amazon in Japan, one of a small number of markets where a domestic competitor has done so.

Englishnization is the initiative with the widest influence, and it is generally judged to have succeeded: a Japanese company operating in English is no longer remarkable, and Rakuten's ability to recruit engineers internationally follows directly from it.

The contested question is Rakuten Mobile. The technical achievement, the first fully virtualized national mobile network, is acknowledged, and the losses are very large and have persisted longer than projected. Whether it is remembered as a founder's costly conviction or as an infrastructure investment that the rest of the industry eventually followed depends on outcomes not yet determined.

A broader criticism concerns concentration of authority. Mikitani has been president since 1997 and chairman since 2001, holds a controlling personal position, and has committed the group to a capital programme that a conventional board would have been unlikely to approve. His defenders regard this as the reason a Japanese company was able to attempt something difficult at all.

References

External links