Yaohan chief extracts success from failure

Fallen supermarket king provides business consultation on the Internet

by Asako Murakami

OSAKA — It is considered difficult and extremely unusual in Japan for those who have failed once in businesses to have a chance to succeed again.

Kazuo Wada speaks about his new business recently in Osaka.

However, Kazuo Wada, the former chairman of collapsed giant supermarket chain Yaohan Group who lost billions of yen when his company went bankrupt, is challenging that notion by starting a new business at age 71.

Wada took over his parents’ vegetable and grocery shop in Atami, Shizuoka Prefecture, and turned it into the Yaohan supermarket and department store chains, which operated in 16 countries. He quit his post as the group’s chairman in 1997 to take responsibility for Yaohan Japan Corp.’s bankruptcy, with liabilities amounting to 160 billion yen.

After retreating from the public eye for some time, Wada set up Venture Business Fund Inc. in May in Iizuka, Fukuoka Prefecture, to provide business consulting on the Internet. He is also going to open private classes this month to teach university students and young entrepreneurs free of charge about business management.

“What businesspeople, especially those startups, are seeking now is not a bunch of success stories but ways to set up new businesses after failing in the previous one,” Wada said in an interview. “They want to learn from experiences of failure.”

In fact, Wada’s 50-year business career has been a roller-coaster ride of failures and successes. In 1950, when he was 21, his parents’ vegetable shop in Atami was completely destroyed by fire. After reopening the shop and expanding it into a regional supermarket chain in the 1960s, Wada launched a supermarket in Brazil in 1971 — Japan’s first supermarket in the country. Although business was good, high inflation attributable to the oil shock forced the closure of all the chain stores in Brazil in 1976.

“From that failure, I learned there are certain risks that accompany doing businesses in other countries,” Wada said. “Based on that experience, I was able to expand my chain stores to other countries.”

Although his business enjoyed a heyday in the early 90s — a record 1.07 million customers flocked to a Shanghai store on its opening day in 1995 — business in Japan started to crumble. Since 1990, Wada and his family had been living in Hong Kong, where the group’s headquarters had been moved, and Yaohan Japan was being managed by his younger brothers Terumasa and later Mitsumasa. Terumasa Wada was later to be found guilty of dressing up financial statements.

“I was conceited,” the elder Wada noted as one cause of the failure. “I was in Hong Kong, developing a strategy of expansion, and relied too much on my brothers with Yaohan Japan’s management.”

After leaving his post as chairman of the Yaohan Group, Wada stepped away from his high-profile life and read a number of books on world leaders’ recoveries from failure. It made him realize they all succeeded by learning from and making use of experiences of failure, he says.

That led him to start his new business consultation venture. In 1998, Wada set up a small firm in Tokyo and lectured businesspeople around Japan. He met a young entrepreneur from Iizuka, whose dream of turning the city into an “Asian Silicon Valley” moved Wada deeply. He decided then to set up his company in Iizuka and provide business consultation on the Internet.

Iizuka, which once thrived as a coal mining town after World War II, hopes for an information technology revival that would take advantage of human resources at nearby Kyushu Institute of Technology and Kinki University’s Kyushu School of Engineering. In May 1999, the city signed a joint research project with Stanford University’s language and information research center.

“I decided to move to Iizuka because the people there welcomed me. I see many similarities between me and that city, as it is trying to recover from economic difficulties after experiencing prosperity as a coal mining town,” Wada said. “I also want to contribute to the development of the city by making my company successful.”

He wants his firm to be listed on the Tokyo Stock Exchanges’ Mothers market within three years. During the first 100 days since opening May 15, his home page — www.wadakazuo.com — received about 20,000 accesses. Wada tries to answer each question within 24 hours of receiving it, making his answers short and precise. While consultation on the Net is now free, he plans to charge money beginning next year.

For a venture business to succeed, it should try to become the “only one” company of its kind in its field, Wada said, adding that he only sought number one in terms of quantity in his Yaohan days.

“My business consultation is unique as it is based on my experiences. Not many people have turned a small grocery shop into a company with total sales reaching 500 billion yen a year and then failed,” Wada said. “I also have vast experience doing business abroad.”

What makes him want to rise to the challenge once again after such a big failure is his belief that he can always start from scratch, learning from the spirit of his late mother, Katsu. She was a model for the heroine of the hit 1983-1984 TV drama series “Oshin,” in which a small girl from a poor farming family in Yamagata Prefecture went through numerous hardships until achieving business success. The series had a huge following in other parts of Asia where it was broadcast.

Echoing the series’ theme, Wada said, “Whenever I failed, my next achievement was bigger than the last.”