What does it take to build a global operation out of a traditional infrastructure?
Carsten Fischer is among the best placed to know. As Shiseido Co. Ltd.’s recently named corporate executive officer and chief executive officer of its international business division (and its former corporate advisor), the German executive has brought his own brand of diversity to the conservatism of the 136-year-old global beauty powerhouse based in Japan.
“Shiseido is so known in its home country, it’s really part of the fabric of life in Japan, but it has and always has had a decisive global outlook,” said Fischer.
That goes back to the roots of the company, whose founder, Arinobu Fukuhara, in 1872 brought Western medicine to the Japanese market, when Chinese medicine was still accepted by the mainstream. (Today, 50 years after starting to export, Shiseido’s products are sold in more than 70 countries outside of Japan where they generate 40 percent of its revenues.)
Looking at the marketplace in general, Fischer said, “The business of beauty is in a state of tremendous change right now: The world has become somewhat smaller every day, and this affects our business daily. The market has become increasingly borderless, as are categories, countries, retailers and competitors.
“Emerging markets, like India, China, Eastern Europe and Central Asia, have begun to open up their economies to the world,” he continued. “The new players have added new power to the whole globalized marketplace and shaped the economics and politics of the century.”
Other changes come from the technological front, too.
“A new generation is growing up creating communication with devices,” he continued. “Customers have more and more choices today, and they have become more used to having it their way. And they like the power of choice they exercise.”
Fischer said it’s therefore key for the beauty industry to understand and serve consumers in a personal way.
This story first appeared in the May 30, 2008 issue of WWD. Subscribe Today.
“We need to understand their desire to enrich their lives with the best of foreign products and ideas, new technologies and practices,” he said. “We need to see our customers as part of a developing world culture that will participate in online communities, share information through blogs, message boards and other nontraditional channels.”
Despite a seeming melding of worldwide cultures, it’s key to understand cultural differences in order for beauty firms to succeed, he said, pointing, for instance, to how American firms tend to have more of an entrepreneurial spirit than their European counterparts. At the same time, European companies have more of an entrepreneurial spirit than Asian firms, whose company structures can often be highly corporate.
“As companies go West, individualism will be key corporate practice, and as companies go East, it will be more social,” he said, adding decision making differs from East to West, as well. “In the West, it will be more principle-based, and issues are decided by top management; in the East, decisions result from group decision making. External views, such as those of shareholders, are a very important part of a Western company’s decision-making practice, while an Eastern company will tend to place more values on internal views.”
Fischer believes Asia poses great challenges for multinationals for numerous reasons. For one, in many areas, including China, Japan and Korea, strong labor laws still make lifetime employment commonplace — a phenomenon different from what western executives are accustomed to. Also, people in the East make decisions based on saving face, and new business contacts stem from long-standing relationships, for instance, he explained.
“Another point of difference is that Asian customers are very demanding,” said Fischer, citing as an example the fact that Japanese consumers insist on high quality but never want to pay high prices for it. “And finally, there is the language.”
That’s not to say Asian companies haven’t succeeded on other continents or that American companies haven’t become market leaders in Asia, he said.
“Right now, I think we are living in a world of endless opportunities,” explained Fischer. “So what steps can a company take right now toward building true globalization?”
For an international, high-performance organization, a strong foundation must be built based on strong corporate values and principles, plus technical competence, he said.
“Preserving your corporate culture as you grow is critical to maintaining the essence of what brought you success in the first place,” he counseled. “The key is to bring that corporate culture to life wherever you are. At Shiseido, we are very clear about our corporate culture and define our reason for existence the same way in every language, in every country.”
The company has begun providing a global leadership program for its management through a Swiss business school.
“There are different types of leadership in different cultures,” he said, adding that, for example, in Japan, some ceo’s are so-called ‘servant-leader’ types, which are reminiscent of the samurai, who sacrifice themselves for an ideal. “This type of leadership is increasing in Japan, and it seems to be bearing fruit. But on the other hand, there is a negative side to it: It operates on less evolved leadership skills.”
Fischer lauded Shiseido’s ceo, Shinzo Maeda, as an effective servant-leader who is passionate about change and winning.
“He has upgraded the corporate governance structure, which is very difficult to do in a very traditional company,” said Fischer. “He has also been successful in bringing external views into the company, yet verifying accountability to external stakeholders.
“Management must not only build a clear vision for the company, but it must communicate that vision to people, so that everyone on every level understands and internalizes the company’s goals,” said Fischer. “Also, results always should be reviewed, analyzed and measured based on data usage, which seems to be self-evident in a western society, but let me tell you, it’s not for a Japanese company.”
Shiseido also diversified its leadership team so that it’s not solely based in Tokyo. At the same time, it has focused on internationalizing its headquarters.
Subsidiaries, too, should be sharing their ideas to benefit the entire organization, he said. At Shiseido, for instance, one program that has turned into a best practice involves employees suggesting ways to improve the company. Since implementing the program in Japan in 2006, Shiseido has received about 100,000 ideas, and the company is currently introducing the system overseas. “We are encouraging employees to think locally and act globally, envision the subsidiary as part of the home organization,” he said.
Fischer said that in Japan there is a danger of what’s called “the Galapagos effect.”
“The Japanese market is kind of like the Galapagos, having evolved in a way that can only operate in Japan,” he said. “Have you ever heard of people complaining that BlackBerry doesn’t work in Japan? Well, the Japanese communication system is a good example. They developed their own system that is not compatible with foreign communication.”
Also concerning communication, he said that the Japanese language can be another barrier to international growth. Fischer explained that Japanese, if not fluent, tend to be reluctant to speak English, even if it’s a language where the “why” and “how” of things are more easily expressed than in their native tongue, due to how the language is constructed.
“It’s not just the matter of speaking the language; it’s about how we think,” continued Fischer. “Using English as a common language not only makes us clarify our thinking regarding communication and objective, but it enables our internationally based mangers and executives to participate more actively in discussions and decision making.
“In a nutshell, we are stirring the ecosystem of the Galapagos up a little bit to create reach and visibility around the globe,” he said. “The rewards globalization holds for us are just beginning to reveal themselves.”
Fischer said that as he assembles the pieces of the international puzzle, he is reminded of a quote from the writer Anaïs Nin that says: “And the day came when the risk it took to remain tight in the bud became more painful than the risk it took to blossom.”
“This is where Shiseido is at this moment,” said Fischer.