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Wednesday, Sept. 18, 2002

THE STUDY OF MISTAKES

Trying to learn from failure suddenly all the rage


Staff writer

Isatsugu Sugahara, president of leading box-lunch caterer Tamagoya Co., runs his fingers across a stained, worn-out calendar, looking for a little circle he drew years ago. His fingers stop at May 12, 1982, the day his life changed forever.

News photo
Isatsugu Sugahara, president of box-lunch catering firm Tamagoya Co., takes a break at his office in Tokyo. On the wall next to him hangs a list of 12 ways to fail in business.

At around 9 a.m. that day, Sugahara got a phone call from a major shipbuilder, his biggest corporate client at the time.

The caller told him the "bento" lunches Tamagoya had delivered to the company the day before were tainted with bacteria. Hundreds of people who had eaten the food were complaining of stomachaches and rushing to the company's infirmary.

"The moment I heard it, my mind went blank," Sugahara recalled.

"I thought I would lose all my customers, and that my business was over."

A food-poisoning scandal could bring down any caterer. Sugahara's firm, based in Ota Ward, Tokyo, and specializing in delivering lunches to offices and factories, was soon swamped with calls from the media, and from angry customers seeking to cancel their contracts.

Sugahara, now 62, said that crisis 20 years ago, the biggest of his career, taught him an important lesson in life.

"You can tell right from wrong only by making a mistake," he said.

The incident dramatically shifted the direction of management, which he confessed was overly profit-driven.

The first thing Sugahara did was to invest heavily in sanitation measures. The firm bought top-of-the-line equipment, including a water purifier and dish washer. This was a difficult decision to make for a firm on the brink of collapse, he said.

The company also terminated practices that contributed to the fiasco, including taking orders beyond its capacity.

It has since come to regard employees as valuable assets, rewarding them with a high, performance-based salary, he said.

Paradoxically, the business has turned upward since Sugahara stopped making profits his ultimate goal.

Tamagoya now ships nearly 50,000 lunches a day, compared with 13,000 in 1989, for employees at more than 1,000 firms across Tokyo.

These days, Sugahara is busy being interviewed by the media, telling them all about his past failure.

In fact, talk of failures is in fashion in Japan. Amid the recession and rampant corporate bankruptcies, such stories abound.

A search on the Japanese version of online bookstore Amazon.com shows at least 10 books have been published this year on lessons learned from business failures, with such titles as "Learn from past failures!" and "Rules of failure in venture businesses."

It has even caught the attention of scholars, prompting a prominent engineering professor to advocate the establishment of an academic society dedicated to research on failures.

Yotaro Hatamura, a professor emeritus at the University of Tokyo who teaches at Kogakuin University in Tokyo, has authored a number of books on "shippai-gaku," or failure studies.

There are rules in failures, he said, and cases of failure can be analyzed and classified into several types, including "ignorance," "carelessness" and "wrong judgment."

According to Hatamura, the case of the Tamagoya box-lunch company falls into the category of "failure to follow proper procedures," because it was the result of inadequate quality control, which is a must for a catering firm.

Hatamura then sorts the causes of failures in a hierarchical order.

For instance, mistakes resulting from ignorance or carelessness are at the lowest stratum, because they are not as serious in nature and are made by individuals.

More serious mistakes are attributable to defective management, for which company presidents, not individual employees, are responsible. At the top of the hierarchy is "an encounter with unknown factors." Failures in this category are hard to predict, Hatamura said.

Why bother studying failure? Hatamura said Japanese have long regarded failure as "morally wrong" and have shied away from looking squarely at their own mistakes.

"No one likes to fail, and it's the same anywhere in the world," he said. "But what is different about Japanese is that, every time (a corporate scandal breaks), we put the blame on individuals, punish them and then forget it. We never try to learn systematically from the mistakes we make."

Hatamura said his research covers a wide array of subjects, ranging from traffic accidents, man-made disasters and corporate scandals.

For example, the recent beef mislabeling scandal involving Nippon Meat Packers Inc., better known as Nippon Ham, could have been avoided if management had learned from the mistakes of the Snow Brand group.

The once-prestigious dairy group was hit hard, first by the mass food-poisoning outbreak in summer 2000 caused by tainted dairy products from Snow Brand Milk Products, then the beef mislabeling scam at Snow Brand Foods Co. that was revealed in January.

"The biggest problem in Japan is that companies are run by managers with little regard for their responsibility," Hatamura said.

"Look at Nippon Ham. A big company with sales of nearly 1 trillion yen was hiding the fact that it was mislabeling beef, and its president (Hiroji Okoso) claims he did not know about it. It's like, what were you doing for the past year?"

Hatamura's message has struck a chord with many of the nation's entrepreneurs. Katsumi Kuwabara, president of Saitama-based Science, a manufacturer of boilers and water purification equipment, said he couldn't agree with the professor more.

Kuwabara himself has bitter memories. An inventor of a bath water recycling system, he had his brainchild technology stolen twice by firms he asked to manufacture the products. He blamed this on his flawed knowledge about patents.

"I've made many mistakes, sure, but I haven't risked my life or anything," Kuwabara, 55, said.

"I think it's better to fail at an early stage (to avoid making more serious mistakes later)."

In July, Hatamura set up a nonprofit organization on failure studies.

The academic body will hold its first meeting in December, providing a venue for discussion by academics, professionals and business executives, he said.

Some 200 people have shown interest in joining the society, including engineers, medical professionals and publishers, said Kenji Iino at the society's secretariat. He added the group has even received a call from a paroled convict who said he wants to make use of his own mistakes.

Iino, who owns an engineering firm in San Jose, Calif., has found that rules of failure apply to personal relationships as well.

"I have found (failure studies) to be helpful in relationships with women," Iino said. "Now I have learned from my own past failures and stop (dating women) before being tricked."



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