【Global Leader Interview】Mr. Ernest M. Higa – Chairman, President and CEO of Higa Industries Co., Ltd.

　I’m a third-generation Japanese-American. My parents were also born in Hawai’i. My grandparents emigrated from Japan to Hawai’i. There are many Japanese-American families in Hawai’i, so I didn’t face too many difficulties. Actually, Hawai’i was very multiethnic and multicultural. Unfortunately, I didn’t embrace my Japanese heritage. I grew up thinking of myself as completely “American,” never “Japanese-American.” I was just an American born in Hawai’i.

　When I saw my grandparents, we only spoke in English. I think that was because they lived in Hawai’i during and after World War II. Japanese-Americans in Hawai’i wanted to prove that they were actually Americans, so they deemphasized their Japanese heritage.

　I grew up largely on Hawaiian food, but also other cultures’ foods since Hawai’i is so diverse. I grew up eating SPAM and all kinds of food!

　I first felt some kind of difference when I went to elementary school in Geneva, Switzerland, in 1962. It was very rare to see Asians in Europe back then. Things were more complicated because, when I grew up in Hawai’i, I spoke Pidgin English, which has a very strong accent. The problem was, outside of Hawai’i, no one can really understand Pidgin English. Many of my teachers assumed that I had a disability because of my broken English. Of course, reading and writing weren’t a problem, but I had to learn proper English. I also had to learn French because I lived in Geneva where only French is spoken while our housekeepers were from Spain so I also had to learn Spanish. Actually, that was one of the only ways Switzerland and Hawai’i felt similar – they both had so many different nationalities.
　I started to develop a sort of identity crisis. All of a sudden, I didn’t know where I was from, whether I was American or Japanese, and I was living in Switzerland where I was quite different. In those days, it was so important to have an identity – “Where are you from? What’s your home?” – I realized in Switzerland that I’m American but did not look like the typical American. But I couldn’t say I was from Japan; I couldn’t speak Japanese. And I certainly wasn’t European. It wasn’t negative nor positive, but it was the first time I realized that I was different.
　Then, in 1964, I came to Japan. Many Japanese people saw me and assumed that I could speak, read, and write the language. When they realized I couldn’t they often assumed I had a disability. I remember, if I got lost, I would try to ask where to go, and they would point to a sign. I couldn’t read the sign or communicate, so it was awkward. That was another kind of crisis, culture shock. I lived in an ex-pat bubble and went to an American school, so I rarely had to learn how to communicate with the Japanese.

　When I was in Hawai’i, I went to ‘Iolani and Punahou Schools, and I attended elementary school in Switzerland. I then attended ASIJ. Before I entered the Wharton undergraduate program, I actually attended Christ’s College at Cambridge, just for one summer semester.

　Really, there were no advantages or disadvantages growing up. But, when I finally finished graduate school and came back to Japan, some difficulties came up. I worked at the family company for about three years, but then my father decided to split the company up between my siblings – one company to each child. This was a good idea, but he had three businesses and four children. I was the youngest, so I became an entrepreneur.
　When you’re an entrepreneur, your main asset is yourself. You have to figure out your strengths and weaknesses. By that time, I realized that my biggest strength was my bicultural upbringing. Until then, I had never thought about my upbringing as a strength or weakness. But, as I started to do business in Japan, I realized that to be successful here, I should try to be as Japanese as possible. I couldn’t speak Japanese until after graduate school. I had to go to Naganuma Japanese School at night while working. I learned the rest of my Japanese on the job, as well as Japanese business culture, as that’s the only way to be successful.

　Well, really about 50% of your university experience should be academics and the rest should be engaging with the university lifestyle. Interacting with so many diverse people, ethnically and economically diverse, was a big change for me. It kind of opened my eyes to the “real world.” Everyone at ASIJ at the time was either a child of ex-pats, multinational businesspeople, diplomats, or missionaries. So, it was a very, very small group.
　I started to learn how to live by myself and embraced my new freedom. This was the 1960s and ’70s, so it was the hippy era. I joined a fraternity. The atmosphere was quite different from what I experienced in Japan.

　I knew that meeting all the different kinds of people was just as important as going to classes. I also realized that the students who attended prep schools in the U.S. also had a strong advantage. They’re geared up for studying at Ivy League schools, so the first year was a lot easier for them. I had to study harder during my first year and didn’t really enjoy the non-academic world of university until my second year. But I still made the Dean’s List.
　I think Ivy League Schools want a well-rounded person, not just a nerd that studies all the time and gets straight A’s. I think ASIJ had that environment. So, I tried to do a lot of things. I was even in a rock band outside of school. I also think my interesting background, being born in Hawai’i, going to Switzerland, and living in Japan might have been an advantage. It certainly made me stand out.

　I actually do. I think it was a very good school for my kids – and they got into very good schools. Certainly, if they went to Exeter or other boarding schools in the States, they might be better prepared academically for university, but what I like about ASIJ is that it’s more well-rounded and exposes kids to many different nationalities. During my time there, I was the captain of the wrestling team, on the football team, on the track team, the vice president of the student body, and the chairman of a social committee. So there were just many opportunities for extra-curricular activities in preparation for especially matriculating to U.S. universities.

　Actually, I didn’t think I would go into business! My father was quite successful in business and we were so different in personality, I thought that I could never do business. I considered three careers – being in a rock band, teaching, or drawing animation. But, having said that, I didn’t really have any strong conviction about studying those. I started studying business because my father wanted me to.

　I went directly to Columbia. After that, I joined my family business for three years. Then, I went independent.

　It was. I had to learn Japanese, I had to learn about the culture, and so on. And if I didn’t, I would probably have gone bankrupt! I had a lot of incentive to learn quickly. Back then, it was a different environment. In 1979, there was no word for entrepreneurship. The closest thing was Dassara (literally meaning, “leaving a white-collar job”), which had a very negative connotation of going independent. It wasn’t prestigious to be an entrepreneur back then. That was the environment at banks also – they would hesitate to lend to someone who was a foreigner, someone who was young, and someone starting up their own business.

　I had some advantages from my father and some assets – some money, but I had to start completely greenfield. After I doubled majored in Finance and Accounting at Columbia and got my MBA in 1976, I was asked to join some large companies – but I turned them down.

　Maybe I can go back even further. I want to start at the beginning of my entrepreneurship. I realized that I had to leverage my assets, obviously, my strength was internationalism. If you have a good product and a good price, it’s very easy to sell Japanese products in the U.S. The reverse was different. Even large U.S. companies were not successful in Japan.
　My first business venture was in the lumber industry. Japanese houses are built from logs imported from the U.S. as what Misawa Homes, Daiwa House, and other major home-builders use, and cut in Japanese sawmills. Japanese sawmills and American sawmills use different standards. In the U.S., the quality of lumber is determined by strength. They’re very strict about size measurements. In Japan, the lumber is evaluated using a visual grade, which is even more complicated than structural strength. So, no U.S. sawmills could cut for the Japanese market. I was able to develop a sawmill in the U.S. to cut for other Japanese housing markets, like resell homes, dive halls, and major home builders. I was able to develop a large import company and acquired a sawmill in Canada and cutting rights in Vancouver, Portland, and Seattle. I had distribution centers throughout Japan.
　The next venture I was involved in was a neurosurgical brain implant. The owner had established the largest company in the world in a very niche area. The implant treated hydrocephalic patients, people with issues from birth defects or head injuries. To import this unit, we had to get a medical import license, medical facilities, and medical technicians. We also had to get the unit approved by health insurance companies, otherwise, no one would buy it. I was able to convince the manufacturer to adapt to the Japanese neurosurgeon market and ended up with the number two market share in Japan.
　It often breaks down into 50% luck and 50% circumstance. Depending on how hard you work, how smart you are, it might go from 50 to 60, or 70. But time, luck, and circumstance always play roles. Even if you’re very successful, you can become unlucky. You can always fail.
　My third business venture was with Domino’s Pizza. Domino’s was already successful in the U.S. In 1983, the owner of Domino’s Pizza (at the time) was Tom Monaghan. He bought the Detroit Tigers for a record USD 53 million (approximately JPY 5,680,195,500)! I was so surprised to hear that you could buy a baseball team like the Detroit Tigers just by being a pizza company. Out of curiosity, I wanted to meet him.
　After I met Tom Monaghan, I was really interested in the business. I thought that, if I adapted it for Japan, it could work just like my lumber or the medical device businesses. I had to figure out what the differences between the Japanese and American pizza consumers were. For example, the per capita consumption of cheese in Japan was, on average, less than one kilogram. In the U.S. it’s between ten to eleven kilograms! So I thought, “Well, if they don’t like cheese, we’ll do toppings that they do like.” 　Another part of customer satisfaction was quality over quantity. In the U.S. customer satisfaction was determined by supersizing the quantity, but the Japanese wanted higher quality food. The most difficult adaptation was matching American fast food rules to Japan. In the U.S. the golden rule of fast food is: keep it simple. If you have a complicated menu, there are more opportunities to make mistakes. They could offer just 12 toppings and one drink – Coke. But there’s no way we could do that in Japan. We ended up with 30 different toppings, seasonal menus, side dishes, and all kinds of drinks.
　The next key adaptation was the internet. I was spending about $20 million on printing and distributing flyers. The internet would be more flexible and cost a lot less. I told the U.S. Domino’s office that I wanted to do internet ordering and it really caught on in the 1980s. It ended up being about 60% of our sales. We were also one of the first apps on SoftBank iPhones.
　After I sold my business with Dominos, and my medical and lumber businesses as well, I got a call from the American embassy: “Wendy’s is here.” Wendy’s had come to Japan twice before and failed. When they called me, I said: “Well, I’m not interested, this doesn’t sound like a good thing to me. But I’m willing to give them some free advice.
　After we had dinner together, I started to think like an entrepreneur. It was so difficult, all those challenges of trying to reestablish Wendy’s in Japan for the third time. I knew that this kind of business had to think globally, but act locally. And they said that they agreed with me. I warned them, it’s going to take a lot of investment.
　I recommended we acquire the Best Kitchen chain. It already existed and would get Wendy’s better locations. I had a preexisting relationship with Suntory, who owned First Kitchen. We did a test sale in Roppongi, and it increased sales of over 200%. So we did other tests in more typical locations that were still successful, even in this deflation environment. So, we bought the First Kitchen chain from Suntory
　First Kitchen already had some brand equity and a customer base. We first had to research what Japanese customers thought about First Kitchen. First Kitchen’s customer base was 70% female. They liked that First Kitchen was reasonably priced and conveniently located. However, First Kitchen didn’t have a strong brand image or a signature product. On the other hand, Wendy’s had very strong branding as an inexpensive hamburger restaurant. However, it had mostly inconvenient locations and most customers were male (about 60%). So, we combined both to have a variety of First Kitchen and its female customer base, with Wendy’s broader price range. Adaptation was key.

　Well, I think that globalization is actually about 80% Americanization. They have their own global standard of good and bad. It’s English, that way of thinking. It’s not just a language issue; it’s a mentality. Becoming more global sometimes often means becoming more American. You can have language translated, but there’s not a cultural translator.
　In terms of language, everyone learns English in Japan from a very young age in school. But they are not able to communicate. I think that’s a cultural issue, as well as a problem with how we teach. Of course, foreigners that come in to teach do so, but there’s still something missing. It goes beyond language; again, it’s really quite cultural.

　Many business leaders use this phrase from Darwin’s Theory of Evolution: It’s not the biggest animal, or the strongest animal, or the fastest animal, or the smartest animal that survives. It’s the animal that can adapt to change. And change is happening now unlike any time before.

　I was inspired by, number one – my father, number two – Chiyoji Misawa, founder of Misawa Homes, and of course Tom Monaghan of Domino’s Pizza.

　I think it is most important to understand your own personal strengths and weaknesses. Of course, when we’re young, we don’t know our own strengths and weaknesses. We spend our whole lives trying to understand ourselves. The quicker you understand your strengths and weaknesses, the quicker you can shift what you do, and understand how to get the career you want.