How Rakuten’s Shift to English Transformed Its Culture
A conversation with Harvard Business School professor Tsedal Neeley on the strong connection between language and globalization.
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Harvard Business Review
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In 2010, Japan’s largest E-commerce platform, Rakuten, was rapidly expanding into global markets when CEO Hiroshi Mikitani made a surprising announcement: to ensure the organization’s worldwide success, he changed Rakuten’s internal language to English. That meant that all meetings, emails, and other communications would be conducted in English, and the company’s employees had two years to become proficient in the language or be demoted.

Today we bring you a conversation about the thinking behind Mikitani’s mandate and the results it achieved with Harvard Business School professor, Tsedal Neeley. In this episode, you’ll learn about the early challenges that accompanied such enormous upheaval, including loss of productivity and employees who questioned the relevance of the new mandate. You’ll also learn how the shift to English shaped Rakuten’s long-term working culture and productivity. This episode originally aired on Cold Call in November 2017. Here it is.

BRIAN KENNY: 59 miles southwest of Baghdad along the Euphrates River marks the spot of the ancient Mesopotamian city of Babylon. Thought to have been the largest city in the world in the 18th century, it was a center of commerce and culture. As the Bible tells it, the city was founded by Noah’s descendants, who in the years following the great Flood united as one community, even speaking the same language. Together they achieved great things and their ambition knew no bounds. So they decided to build a tower tall enough to reach the heavens as a self-tribute.

But no surprise, God had a different idea, and with one mighty blow, He struck the tower down, scattered the Babylonians to the corners of the earth and caused their tongues to speak different languages. The lessons of the Bible notwithstanding, it’s intriguing to think about how different the world would be if we all spoke the same language. Today we’ll hear from Professor Tsedal Neeley about her case entitled, “Language and Globalization: Englishnization at Rakuten.” I’m your host, Brian Kenny, and you’re listening to Cold Call.

SPEAKER 3: So, we are all sitting there in the classroom.

SPEAKER 4: Professor walks in and…

SPEAKER 5: And they look up and you know it’s coming.

Speaker 6: Oh, the dreaded cold call.

BRIAN KENNY: Professor Neeley teaches MBA students and executives at Harvard Business School. Her research focuses on the challenges that global collaborators face when attempting to coordinate work across national and linguistic boundaries. She’s also the author of a new book, the Language of Global Success: How a Common Tongue Transforms Multinational Organizations. That’s really at the heart of what we’re going to talk about today. Tsedal, thank you for joining me.

TSEDAL NEELEY:

Thank you for having me.

BRIAN KENNY: It’s great to have you back on the podcast. We had you here last year. So we’re here today to talk about a completely different topic, and this is the centerpiece of your book, is the ideas that are coming from this case. So, I want to get into both the ideas that are in the book as well as in the case since they overlap a lot. But I’ll ask you just to begin by doing what I always ask faculty to do, which is tell us who the protagonist is and what’s on their mind.

TSEDAL NEELEY: Fabulous. So, the protagonist in this case is the CEO, celebrity CEO, Hiroshi Mikitani of Japan’s largest online retailer who mandated one single language for his entire organization in order to globalize rapidly and then panics a little bit. Did he do the right thing? He told them that they had two years to clear a language proficiency test or face demotion. Was that the right thing? Is he going to have to demote everyone? This was a huge, huge publicly visible strategy that he enacted. What does he do now?

BRIAN KENNY: Yeah. How did you hear about this? How did you learn about what he was up to?

TSEDAL NEELEY: It’s interesting because my work starting from my doctoral training at Stanford 15 years ago was looking at language and globalization. So it wasn’t long before we found each other. He did this, and soon after he wanted to get a little bit of insights from me and I wanted a case. So it was a match made in heaven.

BRIAN KENNY: Now, Englishnization is a hard thing to say. Is that a real word? What’s the story with that?

TSEDAL NEELEY: That is a real word that he coined and has trademarked.

BRIAN KENNY: Wow.

TSEDAL NEELEY: And in a sense, it’s a tough word, and I hear that all the time, just like you experienced it. But the word in a sense shows that there’s a transition to English and how an organization can go through that transition, and ultimately it’s a global strategy.

BRIAN KENNY: One of the first things I thought of when I saw the case was why English? Why not Chinese? We keep hearing we should all learn to speak Chinese or we should all learn to speak Spanish. But why did he decide that English was the way to go?

TSEDAL NEELEY: He decided that English was the way to go because he is in step with worldwide trends. English is the unequivocal business language of the world. In fact, approximately 60% of global companies have an official common language, which is English. And this has been the case now for some 30-plus years. We’ve had many, many common languages, or as we say lingua francas in Latin, over the centuries, but English is the one today, and it is the fastest spreading language in human history.

BRIAN KENNY: I found that really surprising.

TSEDAL NEELEY: It’s surprising in a way, and if you think about it, not very surprising. You would think that the business languages of the world are dictated by population, size of populations or where the emerging markets are. But the reality is the lingua francas of the world are designated based on the superpower status of the people that language follows, the British, the Americans, for example, and the structure of the language itself.

BRIAN KENNY:Having been in many other countries around the world, I can almost always find somebody who speaks English. I can find somebody to help me out, and that’s been true in Asian countries and European countries. I was struck in Japan. I had trouble finding anybody who spoke much English. So how prevalent is English in Japan?

TSEDAL NEELEY: Actually, your observation is spot on. And interestingly enough, when Mikitani mandates English for his entire organization, he’s also looking to push the boundaries, the national boundaries of the Japanese society around English and globalization. And although English is part of the educational system, so each Japanese student is exposed to English when they’re quite young, but they never use it. It’s not used in business. It’s not used in cross-border work. But that’s changing rapidly. And he’s been one of the trailblazers in this change. So much so that Prime Minister Abe has tapped him to help reform the English language education in Japan, and they’ve been doing a lot there.

BRIAN KENNY: Wow. Tell us a little bit about both Mikitani and Rakuten. What’s the business all about and what’s he like as a business leader?

TSEDAL NEELEY: So, Rakuten, the company itself is comparable to an Amazon, eBay, Expedia, all of those put together. So, Rakuten has an ecosystem of all of these online businesses and services, and people opt into membership into Rakuten. So, you become a Rakuten subscriber. And you make all of your purchases through them. So, you can buy eggs, wine, plane ticket, and some online banking all through this membership. And they actually have close to 90% market dominance in Japan when it comes to online business.

In terms of Mikitani, he’s a fascinating leader, and I really love the privilege that I’ve had in getting to know him. He is dubbed as the Bill Gates and Jeff Bezos of Japan for his prescience into understanding what technology can do for commerce. He is fearless in his decision-making. Sometimes he would be the only person having a particular vision and pursuing it. His co-founders, his executive team looking and turning the other way, and he feels and has this gut instinct about the future.

He’s extremely bright, the capacity to process a ton of information across many domains. He’s the son of a famous economist, and sometimes you can see him and hear him almost like a teacher, professor, leader when he’s thinking and talk is very charismatic too.

BRIAN KENNY: Yeah. He would have to be, I would think, to lead this kind of an enterprise. The ambition that he has for Rakuten is described in the case. He’s really all about globalization at this point.

TSEDAL NEELEY: Yes. He really is. And this is something that he’s talked about and thought about. I was able to trace it back to him in his thirties.

BRIAN KENNY: Wow.

TSEDAL NEELEY: So, he’s been thinking about it and talking about it for years and years and years and really went all out. In this case, it’s really about that.

BRIAN KENNY: Yeah. And he may have 90% market share in Japan, but Japan’s a relatively small market compared to China and other places where they want to take this business. So they’re engaging, his employees are engaging daily, both with clients and with partners who are around the globe. Can you talk a little bit about the sort of landscape of Rakuten?

TSEDAL NEELEY: Absolutely. And since this case has been written, they’ve expanded dramatically. So they were in about six, seven countries when the case was written, and now they’re really covering the globe partly through their acquisitions, their partnerships, their joint ventures, and in fact, they today are the key sponsors for FC Barcelona’s soccer team.

BRIAN KENNY: Wow.

TSEDAL NEELEY: So, instead of Qatar Air, you’re going to see Rakuten with Messi running around in the Rakuten jersey. And they just inked the deal that was announced recently with the Golden State Warriors, our NBA championship team, where Rakuten is now etched on their jerseys. This is how global they’ve become.

BRIAN KENNY: And that may be a first, I think, for an American sports franchise to have an international brand on their jersey or represented. So that’s a huge deal. Right?

TSEDAL NEELEY: That’s exactly right. And in fact, they were the ones that the Golden State Warriors selected because precisely the fact that they are a global company and a global brand. They opted away from other possible sponsors because they weren’t global enough. So the NBA has this global vision, so now they’re seeking to partner with a global company like Rakuten in order to actualize that global vision. Rakuten couldn’t have done that five, six years ago.

BRIAN KENNY: Yeah, that’s an amazing co-branding play there. Both brands benefit from that.

So, if I’m an employee of Rakuten, I might be based in the U.S., my English is good. I speak English. That’s not the case obviously for other employees. So can you talk a little bit about how this was introduced as an idea, not an idea, I guess was a mandate, right?

TSEDAL NEELEY: It was a total mandate. And what happened was in March 1, 2010, Hiroshi Mikitani stepped up on a podium and addressed 7,000 of his Japanese employees with some 3,000 overseas employees listening in and said, “From this day forward, we are going to migrate to the English language from Japanese.” Employees had two years to clear a language proficiency test or face demotion. There was no turning back. They needed to take up one of their key principles, speed, speed, speed. Englishnization started that very day.

Now, the Japanese employees struggled and struggled and struggled. In fact, for a period of two years, they worked harder than they’d ever worked in their lives. They were filled with anxiety and they struggled, but that changed. Within two years, they were speaking with their counterparts in English around the world. They were spreading their Japanese corporate cultural practices easily, and it became actually, English became the conduit by which they expressed and spread their corporate culture, which they believe is one of their competitive advantages.

Now, you the American was very excited in the beginning, very, very excited. Within two years, the Americans suddenly experienced culture shock, culture shock because the Japanese could now impose their corporate cultural practices rooted in their national identity to the Americans in new ways.

BRIAN KENNY: Yeah. It’s the careful what you wish for after effect of this policy.

TSEDAL NEELEY: Precisely. You might just get it. You might just get it.

BRIAN KENNY: Now, in the case, and also in the book, you describe the different sorts of profiles of people when this kind of mandate is issued. Can you describe that a little bit? You don’t have to go into great detail, but I think…

TSEDAL NEELEY: Oh, sure.

BRIAN KENNY: Yeah.

TSEDAL NEELEY: So, first you have the Japanese employees who work and lived in Japan, but yet had to take up a new language. So, I call them linguistic expats because they become expats while living in their own countries when it came to language use. The Americans, I call the cultural expats based on what I just described, the fact that they would walk into their offices in New York and in California and be immersed in Japanese culture in new and unexpected ways.

There’s a third group. This group comes from places like France and Brazil and Germany and Taiwan, and they’re neither Japanese nationals or English native speakers. I honestly thought this would be the double jeopardy group when I first learned about this. But it turns out once they climbed the steep English language and Japanese cultural curve, they adapted quickly. I call them the dual expats because they’re neither Japanese or English native speakers, but they have proven to me to be the group that is the most adaptive and has been able to live out the decoupling of language and culture and the mixing and matching of language and culture in very productive ways.

BRIAN KENNY: So, as a manager, if you’re advising a manager on what kind of employees to hire, that sounds like a pretty good criteria, right?

TSEDAL NEELEY: It’s fantastic group that they’re able to detach from their language or their culture and able to operate like true expats in their own countries. That’s what I’ve been talking about since writing this book. This notion of how can we operate like expats in our own countries and have what I call global work orientation in order to better serve our organizations and our customers no matter where they live, no matter what they speak, no matter who they are.

BRIAN KENNY: If we look at the profile of students who come to a place like Harvard Business School, many of them have been able to travel, they’ve been able to experience other cultures, and they’ve become more comfortable in their shoes no matter where they are in the world. So as other businesses are thinking about globalizing, does this indicate that there’s a model here that managers can think about following?

TSEDAL NEELEY: I think there’s an absolute model that managers can follow, and part of it is certainly you don’t have to have been a dual expat in order to gain some of the insights that we saw through the Rakuten case. It’s the attitudes, it’s the behaviors, it’s the norms that they possess that we can package and teach others. And that’s all actually outlined and highlighted in the book.

BRIAN KENNY: Yeah. So you’ve discussed this case in class.

TSEDAL NEELEY: Yes.

BRIAN KENNY: I don’t want to ask you to get into and give away what happens in the class.

TSEDAL NEELEY: Yes, yes. Let’s not do that.

BRIAN KENNY: No, but one question I would have is you teach both an Exec. Ed and an MBA. If you’ve taught it in both, you get a very different reaction from, let’s say, the more senior people who have been in their career for some time versus people who are just beginning their careers?

TSEDAL NEELEY: It’s interesting because the MBAs really look at this case as employees, as the recipients of this language strategy and language mandate. What does it feel like? What could it be like? What does this mean for employees? Executives are blown away from this case because it shows them that you could be bold, that you could be radical, that you need to truly set some clear strategies in order to globalize your organization. And this case ends up being a model for it because we’re able to actually show them a five to seven-year trajectory of the company, what’s happened, how they did this, how they changed, and it becomes a place where people learn. And it’s interesting, oftentimes people are in awe of Hiroshi Mikitani as they learn about the case. He becomes an inspiration to many, many people.

BRIAN KENNY: Yeah. And he may have started a movement that has no end in sight.

TSEDAL NEELEY: I think so. I think so.

BRIAN KENNY: Tsedal, thank you so much for joining us today.

TSEDAL NEELEY: It’s always such a pleasure.

HANNAH BATES: That was Harvard Business School Professor Tsedal Neeley in conversation with Brian Kenny on Cold Call.

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This episode was produced by Anne Saini and me, Hannah Bates. Ian Fox is our editor. Special thanks to Maureen Hoch, Nicole Smith, Erica Truxler, Ramsey Khabbaz, Anne Bartholomew, and you, our listener. See you next week.