Sunday, June 03, 2007

How a 1400 Year Old Business Ended


Kongo Gumi, a Japapanese temple builder, a great story about a family business that lasted 14 centuries. Yes 14 centuries! Kongo Gumi unfortunately folded in 2006. Here is the story told in Business Week, The End of a 1,400-Year-Old Business .

Here's some interesting points.

The key to their success.

  • So if you want your family business to last a long time, the story of Kongo Gumi says you should mingle elements of conservatism and flexibility—stay in the same business for more than a millennium and vary from the principle of primogeniture as needed to preserve the company. The combination allowed Kongo Gumi to survive some notable hard times, such as when it switched temporarily to crafting coffins during World War II.
How it ended.
  • First, during the 1980s bubble economy in Japan, the company borrowed heavily to invest in real estate. After the bubble burst in the 1992-93 recession, the assets secured by Kongo Gumi's debt shrank in value. Second, social changes in Japan brought about declining contributions to temples. As a result, demand for Kongo Gumi's temple-building services dropped sharply beginning in 1998
And the lessons to learn from this.

  • To sum up the lessons of Kongo Gumi's long tenure and ultimate failure: Pick a stable industry and create flexible succession policies. To avoid a similar demise, evolve as business conditions require, but don't get carried away with temporary enthusiasms and sacrifice financial stability for what looks like an opportunity. These lessons are somewhat contradictory and paradoxical, to be sure. But if sustained success came easy, then all family businesses would have a 1,428-year run.
More reading article: Built to last

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