Motoyuki Oka



Chief executive officer and president, Sumitomo Corporation

Nationality: Japanese.

Born: In Japan.

Career: Sumitomo Corporation, circa 1998–2001, managing director; 2001–, CEO and president.

Address: Sumitomo Corporation, Harumi Island Triton Square Office Tower Y, 8-11 Harumi 1-chome, Chuoku, Tokyo 104-8610, Japan; http://www.sumitomo corp.co.jp/english/index.htm.

■ Motoyuki Oka was a handsome man with a strong lower jaw and a piercing gaze. He was a tough-minded and determined leader. His company, Sumitomo Corporation, was an old institution that survived wars and revolutions and endured dramatic revisions of its corporate focus during economic changes, including the arrival of Western ways of conducting business and the losses of power and prestige after World War II. Oka may have undertaken one of the most dramatic changes in corporate outlook in the company's history when he tried to transform Sumitomo Corporation from a Japanese firm into a global firm; he envisioned prosperity in the embracing of local economies around the world.

HISTORY OF SUMITOMO

Sumitomo was an ancient company, having been founded in the early 1600s when Masatomo Sumitomo (1585-1652) established a shop to sell medicines and books in Kyoto. He wrote a business guide called Founder's Precept , the principles of which came to be known as the "Sumitomo Spirit." The corporate culture was barely modified over four centuries before Oka made significant modifications to reflect not only changes in Japanese society but in Sumitomo's global ambitions, which required the company to interact with many different cultures. Riemon Soga (1572-1636), the brother-in-law of Masatomo Sumitomo, was an innovator in copper mining who discovered a method for separating silver from copper ore. The technique was passed along to other copper smelters, binding them to the Sumitomo family and beginning a zaibatsu , or family-owned trading company, of which the Sumitomo family was the head. Thus metal production was the lifeblood of the early Sumitomo zaibatsu , which would be reflected in dealings with both North America and China in Oka's era. The zaibatsu would expand to become a keiretsu —a vast holding company composed of numerous interrelated smaller companies that did business with and owned shares in each other.

Collectively the Sumitomo zaibatsu became a dominant manufacturer of copper in the 1600s, opening its most important facility in 1691: the Besshi copper mine, which operated continuously for 283 years. For this mine the zaibatsu imported Western technologies, especially during the 1800s and 1900s, helping to prepare Sumitomo for Japan's industrialization and giving the group a global outlook. The Sumitomo zaibatsu became a keiretsu after expanding into warehousing and manufactured retail metal goods; but not until the initiation of expansion into finance did Sumitomo have a significant presence in the United States. In Osaka the keiretsu established a financing business called a Namiai-gyo , which in the early 1900s became a banking business like those familiar to Westerners. The legacy from this business manifested itself in Sumitomo's U.S. banking operation, which included Union Bank of California.

The Sumitomo keiretsu was one of several very powerful keiretsu that dominated Japan's economy, and the metals business was very important in the wars Japan waged against its neighbors and the United States, culminating in World War II. In November 1944 the Sumitomo Building Company merged with Osaka Hokko Kaisha, which had been incorporated on December 24, 1919. The new company, Sumitomo Real Estate and Building Company, went back into the trading business in November 1945. Sumitomo and other keiretsu were blamed by many for promoting Japan's militarism for profit; the United States curtailed their powers after World War II, and over a decade passed before Sumitomo restabilized itself. In June 1952 the keiretsu changed its name to Sumitomo Shoji Kaisha. In December 1962 it reorganized itself into nine divisions spanning the keiretsu 's vast interests in metals, farming, fuels, retailing, and real estate. In July 1978 the keiretsu gave itself an English name, Sumitomo Corporation.

Not until February 1998 did Sumitomo Corporation try to significantly reform itself; a new company mission statement was created that tried to redirect the efforts of the firm's employees to incorporate a modern outlook on social issues such as environmentalism and cultural diversity. By then Oka was a managing director of the company, and he became responsible for explaining the company's new policies. He probably played an important role in the formulation of the "Reform Package" that was introduced in October 1998, which included one of his favorite ideas: "integrated business enterprise." The plan was a response to Japan's flat economy and reflected Oka's view that Sumitomo Corporation needed to think of itself as a global company rather than strictly as a Japanese one if it wished to survive.

OKA'S EMERGENCE

Perhaps the earliest point at which Oka showed up in the English-language press was in November 1998, when he attended a conference on Asian investments in Africa. Sumitomo was an exporter of African goods for sale overseas, especially to the United States; when asked about what Africa needed to do to improve its economic situation, Oka produced an answer that varied from those of other delegates, who mentioned their concerns about the stability of African governments. Oka told delegates that he was worried more about the physical infrastructure of African nations and the skill levels of African workers. At the time he was a managing director at Sumitomo but not well known outside of his company.

By 1998 Sumitomo had been organized into five major divisions: metals, traditionally the most important, which consisted primarily of manufacturing in steel and iron; transportation and construction equipment, which comprised complete transportation systems as well as a vast array of construction vehicles, ships, aerospace materials, and construction and factory machinery; information technology and electrics, which Oka thought of as a knowledge-based business; electricity, comprising complete electrical systems with power plants and energy resources; and consumer goods and retail services, from foods to textiles. Each of these divisions was composed of numerous companies, each with its own management and all of which belonged to the keiretsu ; over 700 such companies existed.

By 2000 Oka was becoming publicly prominent as Sumitomo's representative in international affairs. In October 2000, in his capacity as the chair of the International Market Committee of the Japan Foreign Trade Council, Oka asked the Japanese government to negotiate a free-trade treaty with Mexico before Mexico's Maquiradora system of duty-free exports and imports expired in January 2001. Oka foresaw chaos for Japanese businesses in Mexico if tariffs and other duties were to be imposed on companies that had historically operated without them; but he faced a Japanese government that for years had opposed free trade by protecting local businesses from outside competition with its own byzantine tariffs and regulations. Efforts to lower trade barriers would be one of the hallmarks of Oka's leadership of Sumitomo.

Oka was a strong advocate of the "Step Up Plan" that was launched at Sumitomo in April 2001. The plan was intended to make the company quicker to react to economic and social changes by giving individual managers more power to make decisions. Oka emphasized the importance he attributed to making the leaders of each business unit autonomous in an essay of July 2001. Perhaps in response to managers being too slow to accept the changes in corporate culture that he wished to institute, he later pressed division managers to conform to his guidelines liberalizing the treatment of employees and demanding strict respect for the laws—especially environmental laws—of the countries in which Sumitomo's companies did business.

The Step Up Plan also introduced rewards for profitability. For all of Japan's keiretsu the volume of business had been more important than the value of that business—which was one reason why major keiretsu such as Sumitomo Corporation had become so huge: acquiring businesses to increase sales volume had been deemed more crucial than making businesses profitable. When Japan's economy flattened in the 1990s, the keiretsu found themselves with huge debts and various companies producing goods that were not being sold. Oka wanted a system whereby managers would be encouraged to make profits; yet he was not as liberalizing as Mitsubishi Corporation's Mikio Sasaki, who eliminated the tradition of promotion based solely on seniority and replaced it with a system whereby promotion was based on employees' earning of profits.

PRESIDENT AND CHIEF EXECUTIVE OFFICER

On June 22, 2001, Oka became president and chief executive officer of Sumitomo Corporation, replacing Kenji Miyahara, who became chairman of the board. On that very day Oka launched what would be one of his most important efforts as president and CEO: he established a set of environmental regulations for Sumitomo's keiretsu mandating more efficient use of energy resources as well as the incorporation of renewable resources. Oka wanted to break with the past; he envisioned turning Sumitomo Corporation into a company that was constantly renewing itself, looking for new and better ways to conduct business. He believed that globalization and information technology would generate profound changes in Japan's society and economy and wanted to transform Sumitomo into a major global company. In the Sumitomo Business News he said, "What I have in mind is a company whose corporate vision, management principles, and activity guidelines reach across all the barriers of culture and language to be shared as common values by all employees across the globe, each of whom implements them with confidence and pride" (October 2001).

In explaining how he wanted Sumitomo Corporation to achieve his goals, Oka ventured into the realm of the metaphysical: he boiled his notions down to "dreams." He wanted to reform Sumitomo Corporation into a company that fulfilled the dreams of each individual employee as well as each individual client. He asserted that this would entail ensuring that Sumitomo Corporation met people's cultural needs while earning their trust through services that were not only the best but individually appropriate. Throughout his tenure as president and CEO Oka was bothered by the bad reputation Japanese companies had among the Japanese themselves for corruption; this translated into an enduring resolve to earn trust everywhere.

Oka wanted to incorporate a particular American notion into Sumitomo's corporate culture: providing for the needs of shareholders. To do this he introduced and then reworked throughout his tenure the idea of risk management. In 2002 he created the Credit Rating System for quantifying the risks of business ventures and calculating those risks against returns on shareholder investment. Oka remarked in the Sumitomo Business News, "It is not an exaggeration to say that risk management is at the core of our business" (July 2003); by 2003 however he was ready to admit that some risks could not be quantified—including those of natural disasters and political upheavals—and thus worked on developing strategies for every business unit that incorporated flexibility in responding to unquantifiable emergencies.

As another element of his plans for making Sumitomo the ideal global company, Oka wished for his firm to be a good corporate citizen, paying attention to the well-being of the people with whom it worked as well as maintaining a healthy global environment. In addition he wanted Sumitomo to uphold a positive working environment for its employees, in which ingenuity would be encouraged and employees would feel enthusiastic about their work and would be willing to work as a team. These ideas were paramount in Oka's vision of making Sumitomo a sogo shosha , or trading company, for which people would be proud to work. He noted that many corporations were moving into global commerce and believed that as a sogo shosha Sumitomo would be ideally situated to take advantage of the opportunities brought forth by globalization.

Throughout Oka's writings the words "integrated corporate strength" recurred; the phrase came across as somewhat vague, perhaps because of difficulties in translating from Japanese to English. Nevertheless Oka explained that he saw "integrated corporate strength" as the essence of Sumitomo; for him the phrase connoted strong ties binding all of Sumitomo's disparate companies into a coherent unit—which in turn suggested that Oka was ambivalent about some of the changes he made to corporate governance and culture. That is, the binding of the keiretsu was an old idea, not one of the new ideas that he advocated, suggesting that he held the view that the companies of the keiretsu were obligated to support one another even if they were failing—which would suggest that risk assessment and realizing value for shareholders were not as high among Oka's objectives as his pronouncements suggested. Therein he met a problem that many Japanese business leaders faced: they could not stop being Japanese altogether and abandon the core cultural values of cooperation. Letting a failing company just fail was not really an option; Sumitomo Corporation was obliged to help its weak members. Indeed, in Oka's view the obligation was to turn the weak companies into strong ones.

In the Sumitomo Business News in 2002 Oka remarked, "The most important theme of the Step Up Plan is rapidly expanding our earning base. We are actively replacing low-return assets with those of higher return and strategically allocating management resources" (July 2002). As such Oka was working his way through a quagmire, from the long-held tradition that productivity was more important than earnings to the realm of focusing on profits. In practice he did not drop outright a losing company and replace it with another, but instead merged companies or expanded them into areas of higher returns, often by following Sumitomo's old practice of acquiring new companies. On the other hand he also formed partnerships with companies outside of Sumitomo's keiretsu , which proved effective in broadening his company's dealings in foreign countries.

In 2002 Oka pressed Sumitomo Corporation to find ways to use the Internet to enhance business opportunities. He had created a "Plan—Do—See" process in which managers were responsible for formulating strategies and following through on them; the development of an electronic medical record process that used the Internet to help hospitals share medical data was an example of the company's putting the Internet to use while implementing Oka's ideals of benefitting people through ethical business practices. Yet 2002 was a tough year: Sumitomo Corporation grossed $75 billion, down 1.8 percent from 2001, and netted $230 million, down 36 percent from 2001.

The year 2003 saw a turnaround in Sumitomo Corporation's fortunes, with a 43 percent increase in its net income over that of 2000, the year before Oka was elevated to president and CEO. Oka was making tough choices; he cut loose Sumitomo's U.S. farms, its golf-course business, and much of the e-commerce business that Oka himself had treasured but that was losing money. During that year Oka further refined Sumitomo's risk-management strategy, which he broke up into categories such as credit risk and investment risk. He introduced the Approach for Achievement Plan, the goal of which was to improve returns on risk to 7.5 percent, which would, Oka figured, cover the investment risks of company shareholders. At the time returns were 5 percent.

In April 2003 Oka tried to regenerate the Sumitomo Spirit with the Sumitomo Corporation Corporate Governance Principles, which laid out his mission statement for employees, demanding an awareness of legal requirements for doing business and promoting the ideal of helping people realize their dreams. Oka also reduced the size of the board of directors, cutting the number of insiders. He increased the use of outside auditors and corporate advisors in efforts to make corporate governance transparent for insiders and outsiders alike; the strategy was borrowed from American companies, who—caught up in grievous scandals of their own—reformed governance by ensuring that independent outsiders took part in overseeing the management process. At Sumitomo, Oka hoped that the changes he instituted would provide managers with a greater sense of their obligations to help others and with a greater passion for fulfilling Sumitomo's goals. He further hoped that outside observers would encourage sound business practices.

The success of Sumitomo Corporation's electronic medical record process led to greater involvement in medicine, and Oka emphasized biotechnology and information technology as areas in which his company could prosper. He also identified clean energy and nanotechnology as significant industries in which Sumitomo could be a pioneer. On January 29, 2003, Oka met with Indonesia's president Megawati Soekarnoputi to discuss Sumitomo's taking over the construction of a Javanese power plant, which had been initiated in 1997 but had been stalled by the Asian economic crisis that began that year. Sumitomo had been only a contributor to the project, but Oka proposed taking over the entire effort; he believed that the project could be a model for the responsible energy production he advocated. Postwar Iraq provided further opportunities for Sumitomo to put Oka's management principles to work. He pulled together a task force to formulate ways to assist in Iraq's reconstruction and to form lasting ties with the country. He noted in the Sumitomo Business News that his immediate goal was "to help stabilize the lives of the people there" (July 2003). By 2004 Oka was optimistic that Japan's economy was improving and that he had pointed Sumitomo Corporation and its 720 companies and 31,000 employees in the best direction for the future.

CHINA

Oka often said that Sumitomo Corporation's future was in China. In the company's business news he noted, "Geographically, China will be positioned as our chief strategic region both as a production base and an expanding market" (July 2003). Practically any businessperson could recognize that China's gradual transformation into a free economy would result in enormous business opportunities; yet, despite their proximity to China, the Japanese encountered special problems doing business there—even fifty years after the end of World War II the Chinese remembered Japan's depredations against them, and Japan's military's killing of tens of millions of Chinese civilians was unlikely to be forgiven. Oka saw China's joining the World Trade Organization as a key moment in the opening of the country's economy, and Sumitomo used its considerable logistical resources to take advantage of the situation, establishing a delivery service in Shanghai, forming a partnership in 2002 with the Chinese electric company TCL Group, and assisting in the construction of an industrial park in Wuxi.

On April 15, 2002, Oka met with Beijing's mayor Liu Qi. Oka was looking for Sumitomo to help the city of Beijing manage its logistics, which would be a true challenge, because Beijing's economy was rapidly becoming ever more complicated; Oka knew that the hiring of a Japanese corporation by the Chinese civil government would be a great achievement. His efforts to overcome Chinese apprehension over one of the old keiretsu investing heavily in their country was directed to forming partnerships with Chinese companies. Such partnerships would assure Chinese participation in Sumitomo's activities and help bring about the transparency in corporate governance that he was striving to achieve. In what may have been his greatest accomplishment in China, on May 14, 2003, Oka signed an agreement to form a joint venture between China Steel Corporation, Sumitomo Metal Industries, and Sumitomo Corporation—to be called East Asia United Steel Corporation—which would produce slabs of steel to be used by both China Steel and Sumitomo Metal.

See also entry on Sumitomo Corporation in International Directory of Company Histories .

sources for further information

Oka, Motoyuki, "Message from the President & CEO," Sumitomo Business News , July 2002, http://www.sumitomocorp.co.jp/english/company_e/message/message2002_e.shtml .

——, "Message from the President & CEO," Sumitomo Business News , July 2003, http://www.sumitomocorp.co.jp/english/company_e/message/index.shtml .

——, "Thoughts on the 21st Century," Sumitomo Business News, October 2001, http://www.sumitomocorp.co.jp/english/company_e/message/pdf/message01.pdf .

"Sumitomo Corporation Invests Jointly with Walden International in China's United Platform Technologies," TelephonyWorld.com, March 31, 2003, http://www.telephonyworld.com/cgi-bin/news/viewnews.cgi?category=all&id=1049162259 .

—Kirk H. Beetz



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