An Obituary for Rakuten China: Excess Pride as a Recipe for Failure
On one side, it was a Japanese giant ready to make its mark on the global stage after its sheer dominance of the domestic market. On the other side, it is the world's largest potential market for online shopping, massive even though the penetration rate is a mere 3% of total retail but growing at a pace unheard of in the brief history of the Internet. There seemed to be some sort of synergy. Its potential meeting ambition, backed up by the trust the Chinese consumers placed in Japanese products combined with what the Chinese see as diminished by still significant wave of that "cool Japan" pop culture.
But the optimistic view of the said synergy simply vanished from day one of what was supposed to be Rakuten's signature move in globalization. Full of confidence in their unparalleled domestic success as builders of an e-commerce giant, Rakuten's Japanese executives set out westward to spread their supposedly superior business model, only to face, in their view, completely undeserved and amateurish scrutiny of their local partners. Refusing to stoop down to the lower levels of interfering yet "clueless" Chinese counterparts, the executives quickly faced a dilemma of glocalization.
In fact, to see the botched Rakuten China project holistically, one would quickly come to realize that success or failure really was never a matter of who had the better business strategy, better business model, or even operational structure. It was not business sense that failed Rakuten, but a fundamental psychological discrepancy. Just like how the company leaders are becoming with regard to its grunt-work employees in Japan, they are going down a sure path of divergence vis-a-vis the partners in China, having completely different dreams while being in the same bed.
And more unfortunately, those different dreams were never clearly communicated for psychological reasons. The murky and almost intentionally disruptive exchange of ideas remained unproductively intermittent and never substantially improved not because of language barriers or even that ambiguous scapegoat called "cultural differences." More to blame were the self-righteous attitude, prevalent in Rakuten and among its Chinese partners, that prevented either side from substantially giving in to the demands of the other in order to create a more unified force necessary to succeed in the new market.
Indeed, to place the blame squarely on the supposedly inflexible Rakuten leadership, as so many Chinese media sources have been keen to do in the past week or so, is simply unjustifiable. The Chinese market is notoriously hard to crack, especially for an online company fighting an unending string of copyright violations constantly heralded by domestic competitors as genuine innovation. The market deals with foreign firms like a piece of chewing gum: chew it thoroughly to absorb every last bit of its good juices and then spit it away as garbage.
And the Chinese media and IT "experts" certainly did not help. From day one of Rakuten's entry into the Chinese e-commerce market, they have been incessantly cursing the company for a destined failure, on the basis of the classic "foreigners don't understand China" line. And because they refused to accept a successful Rakuten China as something not out of ordinary, their unchanging curse became a self-fulfilling prophecy. Such closed-mindedness in the name of socio-cultural exceptionalism simply has no place in a modern market economy open to foreign ideas and investments.
As someone who has had firsthand experience working with the Rakuten China project, the reaction cannot be more than indignation and dismay. The more one was involved in the project, the more one comes to realize that no matter how much competitor analysis or market research is done, there was always something that was never able to be picked up. Those rather straightforward business analyses can never dissect the powerful complicity of conflicting mentalities that exist both within and among different peoples and nations.
As much as people proclaim that Rakuten China's failure is attributable to lack of research and a clear line of command, the reality is that it was never a failure of a business idea that was otherwise brilliant on paper. Its mediocre execution was not caused by any lack of business acumen, but a result of its utter confusion in a a open-pitched battle with socially-ingrained every-day ideologies and identities that cannot be changed over course of few months or years. No amount of interesting business ideas offset the power of divisiveness brought on by such forces.
But the optimistic view of the said synergy simply vanished from day one of what was supposed to be Rakuten's signature move in globalization. Full of confidence in their unparalleled domestic success as builders of an e-commerce giant, Rakuten's Japanese executives set out westward to spread their supposedly superior business model, only to face, in their view, completely undeserved and amateurish scrutiny of their local partners. Refusing to stoop down to the lower levels of interfering yet "clueless" Chinese counterparts, the executives quickly faced a dilemma of glocalization.
In fact, to see the botched Rakuten China project holistically, one would quickly come to realize that success or failure really was never a matter of who had the better business strategy, better business model, or even operational structure. It was not business sense that failed Rakuten, but a fundamental psychological discrepancy. Just like how the company leaders are becoming with regard to its grunt-work employees in Japan, they are going down a sure path of divergence vis-a-vis the partners in China, having completely different dreams while being in the same bed.
And more unfortunately, those different dreams were never clearly communicated for psychological reasons. The murky and almost intentionally disruptive exchange of ideas remained unproductively intermittent and never substantially improved not because of language barriers or even that ambiguous scapegoat called "cultural differences." More to blame were the self-righteous attitude, prevalent in Rakuten and among its Chinese partners, that prevented either side from substantially giving in to the demands of the other in order to create a more unified force necessary to succeed in the new market.
Indeed, to place the blame squarely on the supposedly inflexible Rakuten leadership, as so many Chinese media sources have been keen to do in the past week or so, is simply unjustifiable. The Chinese market is notoriously hard to crack, especially for an online company fighting an unending string of copyright violations constantly heralded by domestic competitors as genuine innovation. The market deals with foreign firms like a piece of chewing gum: chew it thoroughly to absorb every last bit of its good juices and then spit it away as garbage.
And the Chinese media and IT "experts" certainly did not help. From day one of Rakuten's entry into the Chinese e-commerce market, they have been incessantly cursing the company for a destined failure, on the basis of the classic "foreigners don't understand China" line. And because they refused to accept a successful Rakuten China as something not out of ordinary, their unchanging curse became a self-fulfilling prophecy. Such closed-mindedness in the name of socio-cultural exceptionalism simply has no place in a modern market economy open to foreign ideas and investments.
As someone who has had firsthand experience working with the Rakuten China project, the reaction cannot be more than indignation and dismay. The more one was involved in the project, the more one comes to realize that no matter how much competitor analysis or market research is done, there was always something that was never able to be picked up. Those rather straightforward business analyses can never dissect the powerful complicity of conflicting mentalities that exist both within and among different peoples and nations.
As much as people proclaim that Rakuten China's failure is attributable to lack of research and a clear line of command, the reality is that it was never a failure of a business idea that was otherwise brilliant on paper. Its mediocre execution was not caused by any lack of business acumen, but a result of its utter confusion in a a open-pitched battle with socially-ingrained every-day ideologies and identities that cannot be changed over course of few months or years. No amount of interesting business ideas offset the power of divisiveness brought on by such forces.
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