Only Corporations That Can Handle Societal Changes Survive

Isao Tsukamoto left Kanazawa and went to Tokyo, where he founded a company in Akihabara at the age of 24 and developed it into a corporation that is listed on the First Section of the Tokyo Stock Exchange with an annual turnover of 250 billion yen. In this industry, it is said that only 200 of 1,000 companies still remain. Toshio Motoya spoke with Tsukamoto about how his company has survived this long and his thoughts on future business opportunities.

Tsukamoto came to Tokyo and entered the electronic parts industry, where his interest led him to strike out on his own and start a business

Motoya Thank you for taking time out of your busy schedule to join me on Big Talk today.
Tsukamoto Thank you for inviting me.
Motoya We are both from Ishikawa Prefecture. Kaga Electronics’ consolidated sales are roughly 250 billion yen, so I think you are the most successful businessman from our prefecture. Of course I have known your name for a long time, but I thought you were much older than I am.
Tsukamoto I thought you were older, too (laughs).
Motoya We both had that impression, yet when we actually met we learned we are the same age (laughs).
Tsukamoto I was born in September and you in June, so you are three months older than me.
Motoya I started my business in 1971 at the age of 27. You did so three years earlier in 1968.
Tsukamoto I was 24 years old. I started the business by myself in February and converted it to a joint stock corporation in September. I wed my wife, who is five years younger than me, in December. This year is Kaga Electronics’ 49th, so next year will be our 50th anniversary. I feel like we should celebrate our golden wedding anniversary (laughs).
Motoya Your company achieved sales of 10 billion yen three years before mine did – APA Group reached that level in 1983, while Kaga Electronics did so in 1980. I think it’s wonderful that you came to Tokyo by yourself, founded a company, and developed it into such a great corporation.
Tsukamoto I started my company in Tokyo because I hated studying and liked to have fun. Kanazawa Municipal Technical Highschool’s Department of Electricity had a fairly low acceptance rate, yet I managed to get in. My father said I would never have trouble finding a job, but I quit after just one year. At that time, around one third of the people in my grade started working after junior high school. Many of my friends from junior high became working members of society; they treated me to meals and we had fun together. I wanted to make my own money so I could have fun as soon as possible. I asked my uncle, who was working in Tokyo, for help. He introduced me to an electronic part manufacturer in Nakano, so I went to Tokyo to work there.
Motoya My father was a businessman who managed a factory. He became sick right before I entered elementary school and passed away when I was in my second year of junior high after a long illness. My father closed his factory after he fell ill, divided it into small units, and started renting them out. When I was in elementary school, I helped him by collecting rent, passing out flyers advertising rentals, and other tasks. After he died, I was aware that I – the oldest son – was the head of the household. I knew I had to earn money on my own, so I did a range of small ventures like bicycle parking. All of these are connected to my business today. If my father had been healthy, I would probably have gone to college, found employment at a company, and quietly worked until the mandatory retirement age as normal. My father’s early death was unfortunate, but to me it ended up being a lucky thing – I believe it was the primary factor of my success. From his sickbed, my father often said that future homes would be made of plywood and synthetic building materials. If he had lived a long life, I think he would have been further involved in the residential housing industry. Considering that, I feel like my father showed me the way to my current business that started with residential housing.
Tsukamoto It sounds like you experienced a great deal of hardship.
Motoya It didn’t seem so difficult at the time. After finding a job in Tokyo, you quickly struck out on your own. What led you down that path?
Tsukamoto I worked at an electronic part manufacturer that only handled one product. I was in sales, and when I went to the wholesale stores that were our business partners, I saw that they sold thousands of products. I thought it would be interesting to work with all of those, which is why I started a trading company in Akihabara that carried electronic parts. I didn’t have any money to become independent, so I borrowed 200,000 yen from my family. I think the location of Akihabara ended up being the key to my success today.
Motoya It is true that Akihabara is a town of electricity, from appliances to electronic parts.
Tsukamoto Today Akihabara is an international digital center, and has also been transformed into a hub of Japanese subcultures like anime and maid cafes.

Kaga Electronics expanded overseas at an early stage and is also involved in the video game and toy industries

Motoya APA Hotel started its overseas expansion this year with a total of 40 hotels; we opened APA Hotel Woodbridge in New Jersey, the United States in November of last year, and have also acquired a hotel chain with 39 hotels in Canada and the U.S. I am planning to expand first into North America and then the Asian market with an eye towards its fast economic growth and large population. Kaga Electronics moved into overseas markets at an extremely early stage. You started with an office in the U.S., so I feel like we have a similar way of thinking.
Tsukamoto In recent years Kaga Electronics does a lot of manufacturing, but its fundamental business was as an electronic part trading company. Our past business model was to sell electronic parts starting in Japan and also in other markets such as Taiwan, South Korea, China, Europe, North America, and Europe. Then we were contracted to manufacture finished products, such as at partner factories, and founded a subsidiary in the U.S. We also sell proprietary brand products such as computer monitors.
Motoya You first went to the U.S. in the 1970s, when few people traveled overseas even for sightseeing.
Tsukamoto A fair amount of businesspeople did, though. That was still the era of the fixed exchange rate system with a rate of 360 yen to the dollar, and the taking out of foreign currency was also controlled.
Motoya I was married in 1970. I got my passport and received a visa at the American Consulate in Kobe. My wife and I took a ship from Kobe to Okinawa, which was still under American control at that time, for our honeymoon. I started traveling overseas frequently, and today I have visited 81 countries.
Tsukamoto That’s amazing! I have only been to 31 or 32. After the U.S., we opened overseas offices in Europe, including the United Kingdom, Czech Republic, and Germany. We have almost 10 offices in China and have also expanded into many other Asian countries such as South Korea, Indonesia, Singapore, Thailand, and Malaysia. Today we have a total of 27 overseas subsidiaries. We have an office in the United Kingdom, which decided to leave the European Union, but I think we will have to consider whether we should maintain this office there in the future.
Motoya I think it’s still possible that the United Kingdom might stay in the EU.
Tsukamoto That may be true. Kaga Electronics started out as a trading company in this way, but now our annual sales in businesses other than electronic parts exceed 50 billion. We handle fields spanning from computers and peripheral sales to entertainment – such as video game software and computer graphics (CG) development – and golf products. For instance, when toys became electronic, our electronic parts were originally purchased by toy manufacturers. Afterwards, Kaga Electronics also started assisting in electronic toy development. Even today, Kaga Electronics still helps with various types of development behind the scenes. Fewer electronic parts are being made for home appliances in recent years, and more for wireless communication, smartphones, tablets, and automobiles. Right now, 60% of automotive parts are related to electrical components.
Motoya It is remarkable how automobiles are becoming computerized. Self-driving systems are also rapidly heading towards practical implementation.
Tsukamoto Yes. Fifty years have passed since I started my company in Akihabara. At that time there were 1,000 corporations in the same industry, but now there are only around 200. Why did so many of these corporations disappear? The times have changed from analog to digital, and things are becoming progressively more complex and compact. We must have a product lineup that is in tune with these changes. Kaga Electronics accomplished this, and corporations that were unsuccessful are no longer around.
Motoya That makes a lot of sense. APA Group has also changed its major products from order-made housing to ready-built housing, rental condominiums, condominiums, and hotels. At present, the hotel business accounts for 80% of our sales. I think what you are talking about applies to every industry.
Tsukamoto That is true. One must have a corporate culture in which the management and employees alike can respond to such changes. Since its establishment, Kaga Electronics has upheld “FYT” as our action guideline. “F” stands for “Flexibility,” which means “Respond flexibly to changes in the market .” “Y” is “Young,” which means “Always think and act young.” “T” stands for “Try,” which signifies “Always remember to take on challenges.” We pronounce this acronym as “Fight,” and it encourages us all to work hard together.
Motoya When my company was named “Shinkai,” my goal was to create an energetic, cheerful, fun Shinkai. I carried out my business like you did, based on the concept of “GATS” (pronounced “guts”).

APA Hotel’s more than 10 million members are the source of its success

Tsukamoto When did you start your hotel business?
Motoya Our first hotel was APA Hotel Kanazawa-Katamachi, which was built in 1984 near the scramble intersection in Katamachi, a business district in Kanazawa City. My policy is to learn from future-looking industries, so APA Hotel took measures including the introduction of a reservation concept like that used by airlines and discounts for early booking, which other hotels did not offer. It isn’t imitation if you are in a different industry (laughs).
Tsukamoto I will stay at APA Hotel Komatsu Grand in Komatsu. What number is it?
Motoya It was our second hotel and was built in 1986. I am from Komatsu, and I received requests from locals who wanted me to open a hotel with a banquet hall. However, having many banquet halls or restaurants is not profitable, and APA Hotel’s basic focus is accommodation. In front of that hotel we built APA Hotel Komatsu, which offers lodging only, thinking that two negatives would add up to a positive, and today both are profitable.
Tsukamoto I always stay there when I go to Komatsu City. It looks great since the renovation last year.
Motoya More and more hotels are aging, so we are always renovating one hotel or another. If we put this off, it has immediate effects on the occupancy rate. We are building new hotels in Tokyo and Osaka, but in rural areas we buy existing hotels and turn them into APA Hotels. Many of them were good hotels that were never renovated and so were left behind by the times. We perform these renovations and re-open them as APA Hotels, including 50-inch TVs, which greatly boosts the occupancy rates. Speaking of a future-looking viewpoint, we started installing washlet toilets with Kanazawa-Katamachi, the first APA Hotel.
Tsukamoto APA Hotel’s great features include these TVs, and I also appreciate how you can operate all of the lighting and air conditioning at the bedside.
Motoya Thank you. The people who use these rooms would feel frustrated if they had to walk around the room to turn the lights on and off. Many businesspeople patronize APA Hotels; they check in, have meetings, go for a drink, and then come back to the hotel where they take a bath, watch TV, and sleep. After that, they want a good breakfast. We design our hotels to provide comfort and meet the basic needs of these businesspeople. For example, the TVs and beds are large, and we install large public baths wherever possible. I intended to develop a hotel chain from the start, so we also created a membership system when APA Hotel Kanazawa-Katamachi, our first hotel, was opened. If you become a member and spend 50,000 yen on accommodation, you will receive a cashback reward of 5,000 yen. One reason APA Hotel is popular because, even if a businessperson’s company pays for the accommodation, he or she still receives this money back.
Tsukamoto That’s well designed. The prices and cashback rewards are good, but I think APA Hotel’s large public baths are its most appealing feature.
Motoya Hotels with a certain number of rooms have lower running costs, including water and fuel, with large public baths.
Tsukamoto I had no idea.
Motoya Compared to regular city hotels, APA Hotels are more environmentally friendly and produce just one third of the carbon dioxide gas emissions. The rooms are compact with intermittently operated air conditioners and insulated window curtains in some hotels. Air is mixed into the showers to maintain water pressure while reducing the amount of water used. The baths are oval shaped, which conserves water as well. These environmentally friendly features help cut costs, and APA Hotel has the highest profit ratio in the industry.
Tsukamoto I’ve heard you are opening a large hotel in Hiroshima.
Motoya Yes. On October 6 we will open APA Hotel Hiroshima-Ekimae Ohashi, which has 727 rooms and is of the largest scale in the Chugoku/Shikoku region. Of all the APA Hotels in Japan, the largest number of customers from North America and Europe – including the U.S., Australia, and Canada – stay in Hiroshima. Barack Obama won the Nobel Peace Prize in 2009 for his speech calling for a “world without nuclear weapons.” I predicted that he would visit Hiroshima, the site of the atomic bombing, while he was president, which is why I decided to build a large hotel there. I thought the large number of North American and European tourists would rapidly increase even more if Obama were to visit. I was right on the mark, and Obama did visit Hiroshima this year. We will see if Hiroshima-Ekimae Ohashi is prosperous in the future, but it is in front of the train station and has large baths, so I expect that business needs will account for a fixed portion of the occupancy rate.
Tsukamoto Your hotel in Makuhari will also have more rooms this autumn.
Motoya On October 12 we will have the soft opening of APA Hotel & Resort Tokyo Bay Makuhari’s East Wing, an expansion. This will bring the number of guest rooms to 2007, which is double the initial number. After that we will open a series of hotels at a fast pace including in Roppongi and Yokohama. I am focusing on owning hotels in the Tokyo metropolitan area because we can reduce our taxes through depreciation and enhance our book yield. I have been involved in the hotel business for 32 years, and today APA Hotel is Japan’s number-one hotel chain. APA Group’s expected consolidated sales in November are 106.9 billion yen. I think our main strength is our more than 10 million members. Thanks to them, we can expect high occupancy rates for all of the hotels we build.
Tsukamoto Your members include Kaga Electronics employees.
Motoya Thank you very much!

The nursing-care business is becoming digital – business strategies should look towards the future

Motoya Watching many different companies, I have seen that companies go under when they aim to maximize profit on sales. The reason for this is simple – if you strive for your company to be worth one trillion yen, once you accomplish that the only thing to do is to aim for two trillion yen. You have no choice but to take on bigger and bigger risks, and the natural result is bankruptcy.
Tsukamoto I agree.
Motoya I have not aimed to maximize profit on sales. Rather, I have tried to make APA Group into a good company. That made me wonder if just having my company be a good one was enough, which is why I started expressing myself in order to make Japan itself into a better country. Everyone in overseas countries praises Japan, yet the Japanese television programs and newspapers only criticize Japan. It would be one thing if they spoke the truth, but most of what they say is fabricated. I thought that people who learned the truth would become more conservative, so I have continued publishing Apple Town and writing essays under my penname of Seiji Fuji. I also started the “True Interpretations of Modern History” essay contest and the Shoheijuku school. The deadline for this year’s contest, the ninth annual one, is in August, and it looks like we will receive more essays than last year. The quality also increases each year, making it difficult for us to choose the winners. Shoheijuku meetings are held in three locations, with a total of more than 160 sessions and over 11,000 students. Because I am involved in both business and the expression of my beliefs at the same time, my business has grown and I feel that more people are highly appraising what I have to say.
Tsukamoto I am also a Shoheijuku student.
Motoya I definitely would like you to give a 10-minute speech at the Shoheijuku!
Tsukamoto Okay (laughs).
Motoya What is your future dream?
Tsukamoto Kaga Electronics’ current president is its third. People have a finite amount of time, but a corporation is limitless. I believe that Kaga Electronics’ type of industry will still be good in the future, but I do feel we should transform ourselves like a chameleon to survive on the global stage. I see medical care, beauty, health, and nursing care as growth fields in this aging society. We have created a team to investigate these fields, and there are various types of potential for applying digital technologies in them.
Motoya For example, what kinds of ideas do you have?
Tsukamoto People say there won’t be enough nurses, so one possibility is efficient monitoring systems that don’t require human effort. I think there are still business opportunities in that realm.
Motoya So you will seize these business opportunities with a future-looking viewpoint. I look forward to seeing what you do! At the end of the interview, I always ask for a “word for the youth.”
Tsukamoto One of my favorite phrases from my mother is, “Do not be negligent; children look to people of every age.” In a company, perhaps you would say, “Do not be negligent; employees look to people of every age.” Direct reports are watching what their bosses do. Even after becoming a manager, one must always have a serious attitude and avoid mixing official business and personal affairs. I also think it’s important to constantly have a spirit of taking on challenges. It’s like the phrase, “I must not be negligent in my life, must not allow the Asunaro Tree to wither.” In particular, I want young people to create immaterial assets like personal connections, business knowledge, and friends. I was able to establish my business without any money thanks to those things.
Motoya I agree. Thank you for joining me today for such a significant conversation.
Tsukamoto Thank you.
 

Isao Tsukamoto
Born in Kanazawa City, Ishikawa Prefecture in 1943. He left Kanazawa Municipal Technical Highschool without graduating and went to Tokyo. There he got a job at an electronic part manufacturer, where his positions included factory work and sales. He founded Kaga Electronics in 1968 and served as its president & COO. The company was listed on the First Section of the Tokyo Stock Exchange in 1997. He took up the position of founder & CEO in 2007.