Englishnization at Rakuten

A journey for globalization


Englishnization at Rakuten: A journey for globalization
Englishnization at Rakuten
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I. CEO Mikitani, who changed Rakuten’s official language from Japanese to English

Rakuten was established in 1997 as an online marketplace called Rakuten Ichiba. Since then, it has evolved into an e-commerce company representing Japan.

  • Using a business to business to consumer (B2B2C) model, Rakuten Ichiba provides a platform for companies, manufacturers, and service providers to run online stores. For example, electronics dealers sell products from Sony, Nintendo, Hitachi, etc. to customers who join Rakuten Ichiba.
  • Rakuten generates revenue by receiving monthly commissions, advertising fees, and service fees from these vendors or a percentage of their total sales.
  • As a broker between sellers and buyers, Rakuten has no inventory except for some items (books, records, etc.). Rakuten competes with Amazon, Yahoo and other online businesses in Japan.
  • Rakuten attracted about $2.5 billion in investment through its IPO in 2000 and four rounds of equity offerings, growing into Japan’s largest e-commerce company with over 80 million items and 37,000 registered sellers in 2010.
  • Rakuten grew into a large corporation operating over 30 businesses, including e-commerce, travel, web portal and media, stock, banking, telecommunications, credit cards, and sports management.

Under the strong leadership of its CEO, Rakuten chose English as the company’s sole official language.

  • After becoming Japan’s largest e-commerce company, Rakuten entered the global market through continued mergers and acquisitions (M&As).
  • Hiroshi Mikitani, Chairman and CEO of the Rakuten Group, banned his 7,100 Japanese employees from using the Japanese language, changing the company’s official language to English, the global lingua franca, aiming to develop Rakuten into not only Japan’s, but also the world’s top e-commerce company.
  • Mikitani launched this policy to compete in the global market by running high-level executive meetings in English. Japanese employees were given a two-year preparation period. Failure to obtain a certain level of qualified English score by the due date resulted in various personnel disadvantages, including demotion and dismissal.
  • Mikitani emphasized the necessity of an official company language for the sake of smoothly communicating with newly incorporated foreign affiliates, passing down Rakuten’s tips for success to them, and engaging them in standardized strategies.

Mikitani was convinced that globalization was essential for Rakuten’s survival and growth and that “Englishnization” would be the foundation for globalization.

  • Mikitani was convinced that this was the only way to maintain growth rates high enough to enter the global market. Starting with Taiwanese companies in 2008, Rakuten started to make inroads into foreign markets. Rakuten also worked with Baidu to open an online mall in China, and acquired online distributors from France and the United States to enter the European and North American markets.
  • Mikitani aims to expand its overseas operations so that its overseas sales exceed 70% of the group’s total revenue. It is advancing to other countries such as South Korea, Thailand, and England, through M&As and establishment of joint ventures (JVs).
  • Rakuten is building a successful Rakuten ecosystem by maintaining branding and membership benefits for its various lines of business, like e-commerce, travel, banking, and stock in Japan. Mikitani intends to expand its success in Japan to countries around the world.
  • Rakuten also seeks to attract talented personnel around the world by innovating corporate culture through Englishnization.

Mikitani hopes the change in Rakuten will be a catalyst to improve Japan’s increasingly domestic economy and culture.

  • Mikitani—who had experienced the global market since childhood through his father, the first Japanese scholar to study at Stanford, Harvard, and Yale—has the vision and mission to improve the conservative and isolated attitude of the Japanese people and the rigid social atmosphere.
  • Mikitani is trying to solve this problem with an entrepreneurial approach. Most Japanese companies competing in the global market are export-driven manufacturing companies such as Toyota and Sony. Mikitani seeks to change the constitution of the Japanese economy by making Rakuten a role model.
  • Mikitani thinks working in English will be an opportunity to get rid of Japan’s cultural and linguistic barriers. He believes that by using English, where power dynamics between conversation participants are not as pronounced, the vertical corporate culture of Japanese companies will be reformed, as well as communication problems between its Tokyo headquarters and its subsidiaries. In doing so, he predicts that Rakuten’s corporate culture will become befitting of a global corporation.

II. The “Englishnization” that shocked Rakuten’s employees

CEO Mikitani implemented his Englishnization policy in a top-down management style without prior consultation.

  • After looking at the language acquisition skills of the Indian and Chinese workforce employed by Rakuten, Mikitani came up with an idea for making English the company’s official language. Without any further conference, he announced that the board of directors meeting next Monday morning would be held in English.
  • Mikitani went up to the podium and announced to all of his staff: “I want English to become the official language of this company.” Most of the Japanese employees had strong aversions to English, and some had so little interest and experience outside of Japan that they did not even have passports.
  • The growing number of foreign employees and some young Japanese employees responded favorably to the decision. Some employees predicted that this would not last long, recalling the past experience of Mikitani suddenly implementing new policies and promptly canceling them. However, they panicked after learning about the policy that linked their annual salaries to their TOEIC scores.

There was a lot of anxiety among the employees, and, in the early days of implementation, a lot of confusion and inefficiency in the company.

  • More than two-thirds of the head office employees expressed anxiety over the Englishnization decision. The average score of Japanese students on the TOEIC is lower than that of North Korea, the lowest among East Asian countries. Valuing dignity, Japanese people also find it very uncomfortable to lack proficiency when speaking English in front of others.
  • In particular, senior employees at the company find it difficult to learn a new language at their age. Additionally, employees such as engineers and domestic sales representatives whose work is not directly related to English, accuse the Englishnization practice to be a way of forcing resignation.
  • As English takes precedence over other skills, side effects have emerged. For example, work ability is now being evaluated based on English fluency rather than project content, and English-speaking employees now frequently lead decision-making.
  • Operational inefficiencies have increased, including greater time and cost for in-house documentation and meetings compared to writing them in Japanese. In addition, due to English barricading in-depth discussion during meetings, delays occur frequently from organizing and sharing notes (also in English) after the meeting.
  • Some Japanese businessmen criticize that a Japanese company comprised of Japanese employees using English as their official language is a stupid thing to do.
  • Employees of Rakuten’s overseas bases expect that Englishnization will increase transparency and speed of decision-making within the organization, as well as break down barriers between branches of office.

In the early days of implementation, employees’ English skills were hardly improved due to the lack of adequate support from the company. Then Rakuten started offering a variety of support programs for its employees.

  • After 18 months of implementation, performance measurements showed that only a few employees had improved their ability to speak English.
  • The company thought that its employees would study on their own by listening to tape recordings or reading books. The Japanese employees had difficulty organizing sentences, and conversations between employees were only getting shorter, showing none of the anticipated improvements.
  • Mikitani, believing that older employees would be able to learn a new language through the same ways they studied English as children, did not provide adequate support.
  • Although employees agreed on the purpose of and the need for Englishnization, they needed support from the company. After measuring performances, Mikitani now supports its employees by organizing various education programs such as English classes, online lectures, mobile applications, and individual tutoring.

III. Rakuten’s Englishnization, deemed successful thus far

Many East Asian companies that tried to make English the official language ultimately failed after years of attempts.

  • LG Electronics in Korea is the most prominent example of this. LG Electronics started setting the foundation for making English its official language in 2002 and declared 2008 to be the first year of implementing its plans. From its headquarters, the company began writing its reports, product manuals, global business materials, emails, official letters, and work forms in English.
  • In addition, the company operated various supplementary programs, such as providing practical English education programs to its employees and requiring English proficiency tests for new recruits.
  • However, due to transitional side effects such as an internal communication breakdown and poor performance following the financial crisis of the late 2000s, the company gave up its Englishnization in 2010.
  • Korean conglomerates such as SKT, Doosan, and Samsung Electronics, which pursued or considered introducing Englishnization around the same time, also failed. Nissan of Japan, which had pushed for Englishnization after its merger with Renault, enforced it only in limited areas. In this way, most companies realized their limitations.

Rakuten is the first Asian company to succeed in making English its official language.

  • As its attempt and successes in Englishnization were highlighted in media outlets around the world, Rakuten both enjoyed free publicity and succeeded in building an innovative brand fit for an e-commerce company.
  • The average TOEIC score of employees at Rakuten rose from 530 in 2010 to 800 in 2015. Rakuten is successfully changing its corporate culture, encouraging other Japanese companies such as Uniqlo and Bridgestone to try Englishnization.

With Mikitani’s strong leadership, Rakuten is continuing to pursue Englishnization and rapidly growing in the global market.

  • Englishnization has allowed Rakuten to not only attract more customers from overseas markets but also facilitate multiple M&As and eventual integration.
  • Rakuten is extending each affiliate’s successful services and business know-how through active and effective information exchange. In addition, Rakuten clients have been able to obtain information from both their local Rakuten affiliates and Rakuten’s global ecosystem, which is transforming Rakuten into a bona fide global company.
  • Mikitani is continuing to promote Englishnization based on his belief that English will broaden and develop his employees’ views and his vision of making Rakuten a global company.
  • Rakuten currently attracts outstanding personnel around the world, with 80% of the engineers employed by Rakuten’s Japanese offices being foreigners, and 90% of its data scientists being foreigners.

IV. Implications

The two lessons we can learn from Rakuten are the following:

Lesson #1: Only the clear vision and continuous support of a leader can change the culture of the organization.

  • Most companies that attempted Englishnization experienced similar transitional side effects, and the reason that Rakuten succeeded was because of its strong leadership that was not swayed by employee resistance.
  • By firmly pursuing a clear vision (becoming a global enterprise) and concrete measures of achieving that vision (improving corporate culture and encouraging information exchange through Englishnization), Mikitani focused his employees in one direction. He also set clear goal points and compensation criteria to motivate them.
  • Rakuten provides various in-house learning programs to its employees who struggle with English. It also provides opportunities to present in English in front of other employees and conducts peer evaluation of said presentations to encourage continuous improvement.

Lesson #2: Setting intermediate targets and managing Key Performance Indicators (KPIs) are essential to objective achievement. It is also important to actively listen to external advice when problems arise.

  • The first 18 months of Englishnization were actually a failure. It only made employees more stressed while failing to improve both their practical English skills and the overall corporate culture.
  • After a large-scale survey and interviews, Mikitani realized that the approach that worked for him did not work the same for his employees, and started providing in-house English lessons and other necessary support. He was able to achieve this current success through the active participation and efforts of Rakuten employees.

Talk to your Ringle tutor about Rakuten, and also receive feedback on your English usage.

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