Breaking the three-generation curse
The cliche that wealth does not last beyond three generations has long plagued Asia’s affluent families, but Japanese businesses seem to have cracked the code
IMAGINE a business that has thrived for centuries – outlasting governments and surviving countless wars. Few have achieved this as successfully as the Hoshi family, whose traditional Japanese inn, or ryokan, has been operating for more than 1,300 years in Japan. Founded in 718 AD, the Hoshi Ryokan is not only one of the world’s oldest hotels, but also a testament to the enduring power of well-run family businesses.
In an era when family succession crises often dominate headlines – from the family power struggles within South Korean conglomerate LG to the uncertainty looming over Singapore’s richest banking dynasty – the Hoshi family stands out as an inspiring exception. Leading the ryokan for over 45 generations, it has navigated shifting economic conditions and evolving customer expectations.
What is the secret to its longstanding success, and what other lessons can other Asian family businesses learn from “an ordinary Japanese inn” that is, in fact, extraordinary?
Finding harmony
The three-generation curse posits that wealth does not last beyond three generations. This cliche has long plagued Asia’s wealthy families. Fortunes are lost to changing market dynamics, unsound business and investment decisions, or deep-seated family feuds stemming from conflicting interests among family members.
Yet, Japanese businesses seem to have cracked the code, holding out against this longstanding pattern. Today, over 90 per cent of Japanese companies are family businesses, according to the country’s National Tax Agency, with several thousand remaining in family hands for more than a century.
Big private family businesses familiar to many across Asia include the Takenaka Corporation (Takenaka family) and Suntory (Saji family). In 2021, there were around 3.4 million private business enterprises in Japan.
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A core factor for success is the sense of purpose and mission that is deeply rooted in Japanese family businesses, which are often intertwined with cultural and familial values. For businesses like the Hoshi Ryokan, long-term preservation of the business and, by extension, the family name, is considered as valuable as profit-making. This shift in perspective makes it less likely for family members to prioritise selfish personal gains over what is best for the family and the business.
A long-term view that prioritises the preservation of the business thus sets the foundation for more harmonious and seamless intergenerational transitions.
Thinking long term
Another critical ingredient to success is taking a long-term perspective in the business. This means keeping pace with the market and balancing tradition with modernity to ensure the business remains future-proof.
Today’s economic landscape is defined by greater overall risk and rising costs, to which even the oldest businesses are not immune. Businesses that fail to plan risk falling victim to several headwinds, ranging from inflation hurting cash flows to the lack of successors.
The Hoshi family has succeeded where others have failed because it approaches the practice of business with stewardship in mind. We see this emphasised notably in managing the business with a long-term perspective, ensuring it remains viable for future generations.
The integrity and cohesion of the business are as much a family matter as it is a company concern. There are no overlaps; they are simply different aspects of the same underlying principle. Today, the Hoshi family’s stewardship is evident in its meticulous preservation of traditional Japanese hospitality while still paying attention to guest experiences by providing a modern touch.
To make stewardship applicable and practical now, one should identify the core traditional values that define one’s business and find ways to align them with current customer expectations.
For example, Hoshi Ryokan has maintained its traditional hospitality while introducing modern amenities to meet contemporary needs. It has embraced change to meet the emerging preferences of guests.
Cementing what truly matters
Since Hoshi Ryokan’s inception, succession planning has been integral to its strategy, ensuring a smooth transition of leadership across generations. Japanese family businesses prepare successors from a young age, providing them with the necessary skills and knowledge to carry on the legacy and practice. Also, more and more businesses are modernising their succession approaches by including daughters and external successors.
Consider a mentorship-centric approach to succession – extensive mentorship and apprenticeship under the current leadership will help to ensure that future leaders are best equipped for success.
In addition to teaching the nuances of the business first-hand, the mentorship approach should also include a strong emphasis on mental readiness and character development. This would not only ease future leaders into the role more smoothly, but also solidify family values as the bedrock of the business.
Finally, external candidates should be considered, as they can bring fresh perspectives while respecting the family’s values. A candidate might envision a path that is beyond the present way of thinking, and bold new directions may lead to new opportunities.
Drawing up the right blueprint
The Hoshi family’s approach to business offers valuable lessons in purpose, stewardship, and the integration of tradition with modernity. By embracing these principles, family businesses across Asia can navigate succession challenges and ensure their namesake legacies endure.
In an era of rapid change, the ability to blend tradition with innovation will be crucial for the long-term success of such enterprises. The cultural values and traditions upheld by the Hoshi family have shaped the ryokan’s identity and business practices.
The forthcoming succession of Hisae Hoshi as the first female leader marks a significant moment in the ryokan’s history, balancing tradition with progressive change. At the very least, the legacy ryokan continues, and we will get to appreciate its intangible value as lifelong students of business and history.
The writer is managing director of Grandtag Financial Consultancy
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