Vol.18

Freelancer (Business Consultant)
Tsuguhide Nagase（part 2）

There once was a man known as “The God of Management.” His name was Konosuke Matsushita, the founder of Matsushita Electric Industrial Co., which he established 100 years ago — a company that would later become Panasonic Holdings. One of the messages he left behind before his passing was: “A sound management philosophy is fundamentally timeless.” By “sound management,” he meant an approach that brings happiness to people. In today’s world, where digital technology has permeated every aspect of daily life, some say that “excessive dependence on digitalization makes people unhappy.” In this context, is it possible to carry forward the message that Mr. Matsushita instilled in his philosophy of management? Tsuguhide Nagase is an exceptionally accomplished marketing professional who has held key positions at globally recognized companies and brands such as Instagram, Lipton, and L’Oréal — including serving as the head of operations in Japan. Welcoming him as our guest today, we explored insights into building an authentic brand that can endure for 100 years and discussed the essence of marketing.

(Click here for the first half of the interview.)

“A KPI that truly reflects the essence of things is much more convincing.” (Nagase)

Masakazu Shigeta: When we discussed how to set KPIs for organizational management, I got the sense that you have great taste. You have a unique approach to setting KPIs.

Tsuguhide Nagase: Oh, do I?

Shigeta: A good example is the KPI you set for the hospitality business, including hotel management and Japanese-style inns as part of the regional revitalization project. The KPI increases by one only when three generations of the same family continue to visit the hotel regularly. I was impressed by how you came up with that idea.

Nagase: I base KPIs on the essence of human behavior. When you’re thirsty, you drink tea. So, the KPI set at Lipton is not about how many times the tea is purchased but how often people actually drink it. So how do we know that? We measure it by how frequently it is repurchased. We don’t include the initial purchase in the calculation; we base it entirely on repeat purchases.

The KPIs I set for the hospitality business, for example, reflect the local culture. In one region, there’s a tradition where mothers and daughters go shopping together at department stores, holding hands. I saw them as potential long-term hotel guests who we could build lasting relationships with. Since it would take about 100 years for three generations of the same family to keep visiting the same hotel, it was undoubtedly a challenge. But a KPI that truly reflects the essence of things is much more convincing. I base KPIs on the essence of human nature and behavioral psychology — and that’s the approach I always take.

Shigeta: I feel a strong sense of crisis about the current boom of the perfume market. The domestic market is enjoying unprecedented prosperity. But when I walk down the street, it doesn’t feel like more people are actually wearing perfume. I suspect that many of these products are simply being bought and left untouched at home, far removed from their original purpose of “carrying a scent.” The profit structure of perfumes is built on the assumption that they will continue to be used. If a product is purchased but left unused, it will never be consumed. And without continuous use, there’s no way for us to sustain product development based on the current profit level. Even if some say, “You should develop and sell more perfumes because the market is booming,” all I can say is, “Unfortunately, we can’t.”

——This spring, OSAJI released a new Eau de Toilette themed around a connection with memory.

Shigeta: The Eau de Toilette we released this time is characterized by its subtler fragrance compared to typical perfumes. When someone who doesn’t usually wear perfume starts wearing it, I believe it might feel a bit awkward if a colleague said, “Oh, you’re wearing perfume now?” I thought this might prevent people from simply enjoying perfumes, so we designed it to allow users to enjoy the scent themselves while keeping it barely noticeable to those around them.

At the end of the day, perfumes should be something you wear for yourself. Hearing Mr. Nagase’s idea that KPIs should be set based on the essential relationships between people and things, I thought, “That’s exactly right.” If I may add, once the KPIs are appropriately set, it is essential to consider the financial aspects necessary to sustain the business.

Nagase: That’s one of the most important points.

Shigeta: If it takes 100 years to see whether three generations of a family continue to visit the hotel, and we can’t secure funding for that period, the KPIs are just pie in the sky. Since marketing is inseparable from finance, anyone in management needs to keep the financial side in mind whenever they develop new ideas.

“If you are satisfied with the photos the algorithm provides, you can’t go beyond self-satisfaction.” (Nagase)

——Mr. Nagase, you once served as the head of Instagram Japan. Back then, they positioned the essence of their service as broadening users’ perspectives through pictures and fostering a new form of communication. These days, however, it has become a platform that focuses more on delivering advertisements based on users’ interests. I feel it’s a far cry from their original vision.

Nagase: That’s exactly why I don’t like the current Instagram. The advertising algorithm is too good. If you post or check out photos of ramen, your timeline will likely end up filled with only ads and content related to it. Instagram should be a platform that shows people that there is a wide range of delicious foods and amazing things out there. If you ask me whether what they’re doing now is broadening or narrowing people’s perspectives, I’d say it’s the latter.

But smart young users understand how Instagram works and use multiple accounts. For example, if you want to know what older men are interested in, you can just like everything you think they’d like. That way, you can trick the algorithm into thinking you’re one of them, and it’ll start feeding you related content.

If you are satisfied with the photos the algorithm provides, you can’t go beyond self-satisfaction. What really matters is curiosity and action. Until you connect the two and turn that into a concrete next step, you’ll never build a meaningful relationship with a brand, and there won’t be any meaningful KPIs, either.

Shigeta: Instagram today delivers information solely based on what we’ve searched for. It appears to be pull-based, but in reality, it’s push-based. That approach keeps narrowing users’ interests. I think it’s unethical.

Nagase: Yes, what they’re doing is a serious problem.

“It’s essential to think about how to efficiently handle your responsibilities and make time for what truly matters to you, and that’s also how human beings evolved.” (Shigeta)

Shigeta: These days, I focus on how to live a life appreciating coincidence. This is because romanticism only emerges from coincidence.

Nagase: On my way here today, I searched for “Local Chinese Eatery.” Then it showed “Ramen Jiro,” but I didn’t check any other information beyond the shop name. The reason is that I want to have romanticism, as Mr. Shigeta just mentioned. When I actually went there, I found that Ramen Jiro was closed, but I could still eat delicious ramen at another nearby shop. If I had known about the regular closing day of that Ramen Jiro, I wouldn’t have discovered that other ramen shop. It’s your personal taste that invites these kinds of coincidences and magical moments. That way, you build new relationships and create something together. I think my relationship with the ramen shop has already deepened as I talk about it here.

——What is your perspective on the value of digital technology?

Nagase: I believe the role of digital technology is to enrich and enhance analog and firsthand experiences, making them more meaningful. It also helps us better understand what it means to live a natural life as human beings. Only those who truly understand this and act on that understanding can live meaningful, waste-free lives. Although digital technology itself may hold little intrinsic value, using it wisely allows us to enjoy authentic and essential experiences.

Shigeta: I always remind my staff how important it is to quickly finish what needs to be done if there’s something they truly want to do. Time treats everyone equally. That’s why it’s essential to think about how to efficiently handle your responsibilities and make time for what truly matters to you, and that’s also how human beings evolved. Even when I get home, I don’t read books or watch movies until I’ve finished what needs to be done.

The thing is, it’s a great advantage if you can finish your tasks more efficiently with the help of digital technology. These days, you can call a taxi with just a tap on an app—there’s no need to contact the dispatch center and wait for it to arrive. If you can respond to multiple emails by cutting down on waiting time, that’s clearly one of the benefits of digital technology. However, there are still many people who react almost allergically to digital technology, saying things like, “Digital technology makes you stupid.” As children increasingly rely on digital tools, many parents worry, “They’ll end up undermining themselves if they keep relying on them.” If both sets of values can coexist, digital technology can serve as a purely practical tool, offering numerous benefits.

“It may be difficult for Japanese people to realize their true potential in a competitive society.” (Nagase)

Shigeta: Wabi-sabi is one of the most important themes of OSAJI, the brand we’re working on. However, understanding the true meaning of this word is not easy. I studied it by reading books by Leonard Koren, but I still didn’t feel confident explaining it clearly. Recently, though, I came to realize that wabi-sabi is about sentimentality. Sentimentality is something that Japanese people naturally embody, and it’s also drawing growing global interest.

In the most recent volume of our dialogue series, we welcomed photographer Mr. Mikio Hasui. He said, “Japanese people can find emotion in things that decay or the fact that we grow old.” His words left a deep impression on me. Come to think of it, finding beauty in shadow is a distinctly Japanese sensibility. My level of understanding deepened when I realized that the essence of wabi-sabi lies in sentimentality.

——The word “romantic” that you mentioned earlier also carries elements of sentimentality.

Shigeta: Ultimately, romanticism is sentimentality, and vice versa.
The two words have become especially important to me recently, and I believe their true essence lies in wabi-sabi. While watching TV the other day, I came to realize that the reason why Steve Jobs was so drawn to Japanese aesthetics was sentimentality. The iPhone, which people worldwide recognize as having a best-in-class user interface, was born from Jobs’s vision, and it resonates strongly with Japanese sensibilities. I believe the reason half of the world’s century-old companies are concentrated in Japan has something to do with a unique Japanese sentiment: the idea that emotion often takes precedence over logic.

——Mr. Nagase, what do you think about the keyword “sentimentality” in brand building?

Nagase: Sentimental feelings tend to linger in the heart for a long time, and brands can only exist as a continuation of those feelings. I believe continuing that kind of sentimental journey is important not only for building a brand but also for living a meaningful life.

Shigeta: I read a book yesterday that said something like this: while Japanese people often refer to the three decades following the collapse of the bubble economy as the “lost 30 years,” people overseas tend to view that period as preparation for Japan’s next leap forward. Now that I think about it, I believe that’s true. So, what should Japan aim for next? I believe the question is whether Japan can become a truly beautiful and culturally unique Galapagos. Of course, that would require a lot of clarification and definition.

——What kinds of things do you think are unnecessary?

Shigeta: The first is “competition.” At its core, Japanese spiritual philosophy contains no concept of competing with others. In Zen, the foundation lies in not comparing oneself to others. I believe global competition was largely unnecessary for the Japanese people. They should have embraced their Galapagos-like uniqueness. Since the economy cycles as a result of competition, returning to the Galapagos-like state won’t be easy. However, since Japan has fallen behind technologically, perhaps it is better to step away from the race and instead focus on how to become a beautiful Galapagos. I think that is the next goal Japan should pursue.

Nagase: There is definitely a shift in that direction. In education, the emphasis is moving away from competition toward respecting the individual. It may be difficult for Japanese people to realize their true potential in a competitive society.

Shigeta: It’s better to make friends than to compete with others.

Nagase: Oh, we’ve come full circle to the topic of making friends.

Shigeta: Thank you so much for joining us today. I really appreciate your insight.