How can a business rewrite the rules of its industry ?

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It’s a very common place today to say that the future doesn’t belong anymore to those who master their industry’s rule but to those who rewrite it. Easier said than done. But you’ll find some answers in a book by Hiroshi Mikitan, Rakuten’s founder, in which he explains how he rewrote the rules of his market.

What ?

Marketplace 3.0: Rewriting the Rules of Borderless Business

Who ?

Hiroshi Mikitani, Rakuten’s CEO and founder.

The main idea

Following the rules of a market, comply with local conventions and doing it with talent may help to be a market leader at a given moment but not to be sustainable in a fast changing world. More, the step be be too high and the learning curve too long for a new player willing to challenge the incumbents so he would benefit from changing the rules. So he should rewrite the rules himself, be followed by clients, and move the market to a field where the former leaders will be followers and will have to adapt.

My takes

The book is made of 9 chapters, each one dedicated to a field where Mikitani changed the rules either in the way his company operates, the cultural rules of a very traditionalist country (Japan) or the rule of the market.

I’ll focus on what caught my attention.

• The language rules

In Japan one does business in japanese and whoever knows the country knows that being fluent in english does not guarantee you’ll be understood in the day-to-day life. But Mikitani decided to make english the single official language. Right after he announced the decision (in english), all the signs in the offices where changed and the CEO hold his first board meeting in english 24 hrs later.

If execution is outstanding in country that sticks to its traditions, the “why” is more interesting.

Even if the company was growing abroad, english was the mother language of very few people. But it’s the language of international business and the only common denominator at the group’s scale. But there’s something more.

Japanese is a very hierarchical language, full of social markers and conveys a lot of unspoken in order no to offend anyone. In other words, compared to the direct nature of english, japanese is not an efficient language to do business. Beyond the language, what Mikitani wanted to change was the mindset.

• The rules of power

When businesses speak of empowerment it’s mostly about employees, seldom for clients. At Rakuten, success comes from the fact the company tries to empower both.

Employees first, with a simple vision. Employees must have the means their consider necessary to meet the client’s expectations. Even if it means traveling to the other side of the country to meet with a person producing and selling rice, isolated in the mountain while a rational approach would have been to say that the expected outcome does not justify such an investment.

Then the client. Empowering the client by allowing him to easily customize his site is counter-intuitive for two reasons. The first is that it has a cost in terms of software development and that’s why Rakuten’s competitors wanted everything to be as standard as possible. The second is that empowering the client means that the latter is able to go without services the company could have sold additionally, what used to be the normal in the industry. Rakuten won because they invested more in the product and go without a potential line of revenue.

• Reinvent internet.

What is internet for you ? Technology ? A vending machine ? A network ? For Mikitani it’s a collaboration tool. Building his product on assumptions that were the opposite of his competitor’s helped him to revolutionize his industry.

Collaboration between Rakuten, its clients and the clients of its clients. Collaboration between the seller and the buyer on the marketplace. The sales process have shifted from vertical to circular and collaboration improves the experience of all stakeholders.

Operations, vision, culture….Mikitani explains everything he did and designed to build and grow Rakuten at the opposite of the codes that prevailed.

My opinion

Examples are only worth what they are worth. Rakuten is a japanese company, some points will seem obvious to some readers (of course…since the model works), others won’t.

The major interest of this book if it clearly show that we often try to comply with one industry’s codes, its best-practices, while everything can be challenged. And playing with one’s own rules is often the best way to delight the consumer and create a barrier at the entry of the market for competitors. As a matter of fact if technology can easily be copied, a vision and culture are harder to transpose in another business.