The Japanese Model Of Family Business Succession: A Tradition Of Longevity

Late July, I had the privilege of visiting Osaka and Tokyo, where I engaged with several family-owned businesses as part of my ongoing research into the Japanese succession model. For the last 20 years, I have been fascinated by how family-owned businesses in Japan have thrived using their model of succession, adoption, and stewardship, their "do well, do good, do right" ethos, and their powerful concept of "beyond self." These businesses offer invaluable insights that can benefit family enterprises operating in Asia and the West.

In Japan, family businesses are more than just economic entities; they are vessels of heritage, culture, and long-term vision. The concept of long-term, generational succession is deeply rooted in Japanese society, and this practice has allowed many Japanese companies to thrive across centuries.

A key factor in the endurance of these businesses is Japan's historical period of isolation, which effectively preserved traditional values and practices from external influences for almost two centuries.

The Edo Period: A Time Of Preservation And Continuity

Japan's isolationist policy, known as Sakoku, was enforced during the Edo period from 1603 to 1868. Under this policy, Japan closed its borders to most foreign influences, with very limited exceptions. This period of isolation allowed Japanese society to develop and maintain its cultural and economic practices with minimal outside interference. For nearly 265 years, Japanese businesses operated within a stable and controlled environment, free from the pressures of rapid industrialization and Western influence that were sweeping across much of the world.

This isolation played a crucial role in the formation of a distinct Japanese approach to business and succession. With a strong emphasis on family continuity and the preservation of values, Japanese businesses were able to build solid foundations that could withstand the test of time. The absence of external pressures meant that these businesses could focus on long-term planning and the gradual, deliberate transfer of leadership across generations.

Legacy Brands: A Testament To Generational Success

Many of Japan's most renowned companies are not only family-owned but have also been passed down through multiple generations. This commitment to family succession has helped these businesses navigate the changing tides of market conditions and global economic shifts.

Suzuki Motor Corporation: Founded in 1909 by Michio Suzuki, Suzuki started as a loom manufacturer during the silk boom. Over time, it evolved into a global automotive giant. Despite the industry's volatility, Suzuki has remained under the control of the Suzuki family, with current CEO Osamu Suzuki being the fourth adopted son to lead the company. His leadership has been instrumental in propelling Suzuki to global prominence.

Toyota Motor Corporation: Perhaps the most famous example of a family business turned global powerhouse, Toyota was founded by Kiichiro Toyoda in 1937. The Toyoda family has maintained a strong influence over the company, even as it grew into one of the world's largest automobile manufacturers. The succession of leadership within the Toyoda family has been carefully managed, ensuring that the company's core values and long-term vision remain intact.

Kikkoman Corporation: With roots dating back to 1603, Kikkoman is a prime example of how family businesses can endure for centuries. The company, formed through the amalgamation of eight family businesses in 1917, has maintained its leadership within the global soy sauce market. Each generation of leadership has carefully upheld the company's reputation for quality and innovation, ensuring its continued success.

Japan's historical period of isolation, combined with its deeply ingrained cultural values, has created a unique environment where family businesses can thrive. The deliberate and thoughtful approach to succession, combined with a focus on long-term stability and the preservation of family legacy, has allowed these businesses to endure and prosper for centuries. As we continue to explore the Japanese model of family business succession, these lessons offer a valuable blueprint for family enterprises worldwide.

"Better to Have Daughters than Sons, for then I can choose my Sons"

This Japanese proverb underscores a profound and strategic approach to succession planning that has been instrumental in the longevity and stability of Japanese family businesses. Traditionally, male offspring are the preferred heirs in family-run enterprises. But what happens when there is no male line to continue the legacy?

In a unique approach to succession the Japanese adopt the Mukoyoshi practice—a uniquely Japanese approach with universal lessons. This tradition allows families to adopt adult males, often sons-in-law, to carry forward the family business. It’s a strategy that ensures the selection of a capable and committed leader, regardless of bloodline, to sustain the enterprise across generations.

The Origins Of Mukoyoshi: A 1,300-Year Legacy

The Mukoyoshi practice has roots that stretch back over a millennium. In AD 717, the god of Mount Haku visited Buddhist monk Taicho Daishi in a dream, instructing him to find a hot spring in the village of Awazu, in today's Ishikawa prefecture. Daishi discovered the spring and instructed his pupil, Garyo Hoshi, to build a guest house there. Garyo Hoshi, in turn, adopted a son, Zengoro, to continue the legacy, establishing what is now the world’s oldest family business—Hoshi Ryokan. For nearly 1,300 years, this hotel has been passed down through 46 generations, often through the adoption of capable heirs when necessary.

This tradition of adopting successors has been a pragmatic solution to a common challenge: ensuring the survival and success of the family business in the absence of a biological male heir. As Mariko Fujiwara, a sociologist at the Hakuhodo Institute of Life and Living, explains, "If you did not have a capable son to succeed, you would try to find a more capable man to marry one of your daughters. It was a very pragmatic decision for the family business to survive."

Japan, with one of the world’s highest adoption rates—over 80,000 annually, predominantly adult men in their 20s and 30s—has seen an entire industry evolve around providing suitable candidates for family businesses in need of an heir.

Mukoyoshi In Practice: Strategic Succession Beyond Tradition

The Mukoyoshi practice is more than just a cultural tradition; it is a strategic business decision that allows families to handpick successors from a broader pool of candidates. This flexibility has been a significant advantage in maintaining strong leadership within family businesses, ensuring that the values and mission of the business are preserved across generations.

Toraya Confectionery: Founded in the early 16th century, Toraya is one of Japan’s oldest and most prestigious confectionery companies. When no suitable male heir was available, the Kurokawa family adopted a son-in-law who demonstrated both business acumen and a deep understanding of the company’s values. This strategic decision allowed Toraya to maintain its leadership in the luxury confectionery market, renowned for its traditional Japanese sweets (wagashi).

Suntory Holdings: Founded in 1899 by Shinjiro Torii, Suntory is one of Japan’s most iconic beverage companies. Over the years, the company has been led by several generations of the Torii family, with the occasional adoption of a son-in-law to ensure strong leadership. This strategy has allowed Suntory to expand globally while maintaining its commitment to quality and innovation.

Lessons From Mukoyoshi For Global Family Businesses

The Mukoyoshi practice, while uniquely Japanese, offers valuable insights for family businesses worldwide. It demonstrates the importance of flexibility and strategic planning in succession, ensuring that leadership is not solely determined by birthright but by capability and alignment with the family’s values and vision.

For family businesses facing similar challenges, the Mukoyoshi model offers a blueprint for success—one where the continuity and prosperity of the business are safeguarded by choosing the most qualified individuals to lead, whether they are born into the family or adopted into it.

About the Author - Enrique M. Soriano is a Senior Advisor for the Wong Advisory Group and this article has been republished with his permission. Find out more by visiting their website here