Koichi Hori

Back to Contents of Issue: February 2001

The founder of Dream Incubator -- and Boston Consulting Group veteran -- gives his thoughts on Japanese politics, tariffs, restructuring, and mass media.

by Daniel Scuka and Chiaki Kitada

Koichi Hori
Koichi "K2" Hori is one of Japan's best-known consulting gurus, and his background as a diplomat's son and print journalist helped shape his pro-individual philosophy as well as his English fluency -- both rare in businessmen of his generation. Born in Kobe in 1945, Hori moved with his family on diplomatic postings to England, New Zealand, and the US, and graduated from Tokyo University's Faculty of Law in 1969. He worked as a journalist covering local politics, the economy, and the markets at the Yomiuri Shimbun in the early '70s, and later joined Mitsubishi Corporation on a fast-track path that promised a comfortable career. The company also sponsored his MBA studies at Harvard. But Hori, frustrated by Mitsubishi's entrenched, age-based seniority system, left in 1981 to join the Boston Consulting Group, where he eventually became partner and senior vice president, heading the Tokyo office. He has also written 19 books, taught at Keio, appeared on TV, lectured widely, and generally made a name for himself as a change agent pushing the drones of Japan Inc. toward greater self-reliance and encouraging individual entrepreneurship. In May last year, in partnership with several ex-BCG colleagues, Hori launched Dream Incubator, a new consultancy focusing on Net startups. In July, the firm announced a capital tie-up with US-based Sapient, whose senior managers must be pretty happy with the deal -- Hori's already helped Sapient Japan bag big-name client Mitsui Corporation. J@pan Inc editors Daniel Scuka and Chiaki Kitada met up with Hori at Dream Incubator's new Tokyo Offices. Excerpts from their conversation follow:

On his first job:
I joined the Yomiuri Shimbun, one of Japan's leading newspapers as far as circulation is concerned, if not quality. I started working as a reporter, and was sent to Toyama prefecture, which was the hometown of the newspaper's former president, Matsutaro Shoriki. He's the same guy who started the Yomiuri Giants baseball team -- and later became a big-name politician -- so the paper figured that covering Toyama was very important. I spent three years and eight months there covering crime, society, and local affairs. I'd go to the police station at 8:15 in the morning to attend the nightshift handover, and that's how I'd hear about all the murders and fires -- you'd really find out what was going on. [Laughs.] That was my first professional career.

Eventually, I was asked to write about local politics and the economy, and I got married to my first wife. We had a daughter and a son -- my son is now in his final year at Keio.

Then, I moved to the Yomiuri Shimbun head office in Tokyo, and I covered the economy, the Ministry of Finance, and the TSE. I found out that Japanese journalists are very dull; they're not exciting at all. Basically, they belong to the kisha clubs [government-authorized press clubs that help control the flow of information], and I thought that was very strange -- I didn't like it. I concluded it was time to switch careers.

On his first consulting gig:
In April 1981, I finally joined the Boston Consulting Group. Eleven days after starting at BCG I turned 36, which was a little old to be starting as a consultant. The average in the US is 28 or so, because a consultant typically graduates from college at 21 or 22, works for a few years, and spends two years on an MBA, and that takes you to about 28. So I was pretty old, and a little naive. But I liked the job. It wasn't easy. I don't think I'd become a professional consultant if I were reborn in the next life. But that's all I can do in this one [Laughs.]

For the final 11 years at BCG, I was head of the Tokyo office. By 2000, I was coming up to age 55, and I was thinking about how to help young people and the little guys [start their businesses]. At BCG, you can only help large corporations because the consulting fees are too expensive. Normally, for one report, the fee is $1 million. Don't ask a consultant a question; every time you do, you'll have to pay more! [Laughs.] That is just not affordable for the small companies.

On the origins of Dream Incubator:
I wanted to educate young entrepreneurs. So I thought about starting a small operation, a one-man office. I told my friends at BCG that I was thinking about leaving, and, to my surprise, quite a few said, 'I want to join you.' 'That's crazy!' I told them, 'You're paid very well at BCG, a highly respected corporation. I'm just starting out; my company will be nothing.' I had no sponsor and nothing was guaranteed. I told them I didn't even have an office. But they said, 'We worked very close together for many years, and it was a pleasure; besides, if you start alone, without us, you won't make any money.' [Laughs.] So, about 20 people came with me from BCG. Eventually, the company was OK with it. They've named me as their "Special Advisor," which is the English translation of a title that is only given to retired founders of a company.

I thought that we needed a real incubator in Japan. We have VCs, and we have a number of incubators. But these guys are basically providing money or facilities or IT infrastructure in return for equity. That's nothing magic. I learned at Harvard that a venture cannot grow just with money. A company needs a lot more than that, the most important things being strategy, a good business model, and teamwork.

On restructuring versus risutora:
Japan is far behind the Americans for many reasons. In the '90s, America prospered because large companies restructured themselves; they refocused. Look at Intel. It had a hard time in the '80s, and now it's one of the largest profit generators in the world -- because it refocused itself.

Another reason why America prospered was the new companies -- and lots of them. The market cap of all the new ventures that IPO'd on Nasdaq in the last ten years is equal to the market cap of all listed companies in Japan, including the Hondas, the Toshibas, and the DoCoMos -- which is huge! The Japanese economy isn't peanuts, you know! That's what the Americans have created.

If you look at Japan in the '90s, there was trouble. Large corporations didn't restructure, they did risutora, which is quite different. Restructuring's focus is on the business: the strategy and so on. In the US, in extreme cases, if one division was performing well, but the CEO didn't think that division fit into the enterprise's overall strategy, it was sold off. That's restructuring. On the other hand, risutora is simply cutting out the old guys, the 40- and 50-year-olds.

On how Dream Incubator differs:
In Dream Incubator, myself and my people are pretty good at strategy; that's strategy formulation and implementation, like marketing and so on. But this is not enough. You need technology evaluation. That was a big problem. I didn't know how to solve it, but we found a solution: we're getting people from NTT, NTT DoCoMo, and IBM. I've been a consultant for the last 20 years, and they said, 'OK Hori-san, we'll lend you an R&D guy from our central labs for one year -- for free.' And then that guy will rotate, so we'll always have a [fresh guy] from these companies' labs. Plus our own head of technology -- he's a genius -- so we'll have four people working at Dream Incubator in technology evaluation. We'll also have roughly 20 people working on strategy.

But that's still not enough. Some companies need more; they need Web design and IT infrastructure. We can't do that. So I was looking for a Japanese company for a partnership. Unfortunately, what I found as of April-May last year, was that Japanese companies are still not really capable in this field yet; they're not grown up. So I thought, OK -- this is a headache. Further, if I were to do this, I'd have to make an alliance with at least one Web design company, and one IT company, because there's no one company which can do both. That's complicated. That's when I looked at the US and I thought, Gee -- there are companies that can do both. They're called 'SIPS,' or strategic Web integrators, or whatever. I looked at Sapient, Proxycom, Scient, and others. We did a little study, and I decided my first choice was Sapient. I sent them an email asking if they were free to talk -- if they weren't already talking to BCG. They replied yes, and so we went to San Francisco during the second week of June to meet the Sapient people -- Joey Greenberg, the founder, and Bruce Parker, the executive vice president. It was like an omiai -- an arranged marriage, and it was a perfect match.

On "tarriffs":
This market is a closed society -- it's not the formal tariff barriers or non-tariff barriers [that keep foreign businesses out]. It's the mentality of the people -- that's the real non-tariff barrier. In Japan, relationships count for a lot. If you have friends, you'll get a nice welcome. If you just pick up the phone, [you'll have no chance]. Often, Americans don't understand Japanese, and they think they can do anything. They say, 'Hey, I was in Brazil,' or somewhere, and 'I set up a 100 percent--owned subsidiary there; why can't I do the same thing here?' It's very wrong for here. South America is almost a colony of the United States as far as business is concerned, but Japan is not. Maybe it is in politics, but not in business.

On the government's e-Japan initiative:
It won't make a big difference. If there's going to be a big difference, it's coming from business side, not from the public side. I don't think any government in the world can become so powerful as to shape the nation in that way, only by the government's efforts.

On whether Japanese politics will change:
Yes. In the next two years there's a reasonable chance that even the LDP is going to disappear. My logic is that with Mori, the LDP will never win the Upper House Election (scheduled for July). So they have to replace him, but they don't have a good candidate. The LDP's value will decrease sharply toward July. With the exception of the Social Democratic Party and the Communist Party, they are all the same. And they don't want to change.

So unless Americans give us enormous pressure, or we get into real trouble, I don't think Japan is going to change. Now what's the bottom line? We're going to get poorer and poorer and become a loser in the world economy. Within two years that day will come. I don't know how exactly that message is coming out. The LDP will disappear and there will be a major restructuring of political parties. However, that doesn't mean Japan will change its position much.

On (anti)change agents:
I would say the most conservative people in Japan are politicians, journalists, professors and labor unions. Those are the four major cancers I find in this country. Business is a little more flexible.

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