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CEO Blog
Autobiographical memory from An Entrepreneur （1）
The day his father told him to "Draw the bill"
Over the past few years, Index Group has expanded its business domain from construction project management to domestic and international PPP and social infrastructure. As a result, I have been receiving increasing questions from people outside the company about the Group's business and how construction project management (Construction PM) was created. Therefore, I want to write a story about the Index Group, construction PM, and myself.
Pioneer of construction PM
Over the past few years, Index Group has expanded its business domain from construction project management to domestic and international PPP and social infrastructure. As a result, I have been receiving increasing questions from people outside the company about the Group's business and how construction project management (Construction PM) was created. Therefore, I want to write a story about the Index Group, construction PM, and myself.
Pioneer of construction PM
First, some of you may not be familiar with the term construction PM, so let me briefly explain it here. In a nutshell, a construction PM works on the client's side to help optimize the construction project. We provide comprehensive support from the initial stages of a construction project to its completion.
Specifically, we participate in the planning stage of a construction project. We provide advice on how to maximize the business profit of the building, develop ordering strategies that match construction market trends, handle the selection of design firms, and reduce construction costs through quality control and progress management during the construction process.
Lawyers represent clients who lack legal expertise and are committed to protecting their legitimate interests. Project managers who work on construction PMs have the same essential role.
The building client is not as knowledgeable about construction as the people at the design and architecture firms. Building projects often result in building over-specification and cost overruns. This is partly due to the fact that the client does not have the knowledge and know-how to place the most appropriate order. To prevent such problems, project managers like us act as the client's agents to optimize the project.
Construction PM seems to participate in the project as a matter of course, and there are also many construction PM companies nowadays. Back in the 1990s, there was not much market for construction PM. This is because, unlike in the U.S., design firms and architectural firms in Japan have been holding the design and construction work, and there wasn't a culture of entrusting project management to outside third parties.
I found this situation, and together with the client, who trusted us and appointed me as project manager, we have popularized the concept of construction PM. My peers call me a "pioneer of construction PM" because they have seen this in my past.
When I established Index Consulting in 1994, I was not sure about the future of our business. The construction PM market was created from the sense of business crisis and discomfort of the Japanese construction industry.
To explain this, I need to tell you a story before I founded Index Consulting. It is not something I am proud of, but I hope you will bear with me for a bit of a tale from the past.
Born as the first child at a lumber store
Born as the first child at a lumber store
Starting a start-up business can not be more normal today, but when I founded Index Consulting in 1994, it was commonplace for university graduates to work for a company. However, in my case, working somewhere else was not an option from the beginning.
As the first child at a lumber store, I was born in Anjo city, Aichi prefecture. My grandmother, whom I loved very much, always told me, "You're going to take over the lumber business," and I thought I was going to become a lumberman when I grew up as well. But before I left the local university, I wanted to take a look at the outside world. So my father allowed me to study in the U.S. on the condition that I would come back, which was in 1981.
I majored in interior design at the California College of the Arts, where I studied abroad. I chose interior design because I thought it would help develop products that utilize lumber. I believe my skills as an interior designer were not bad, and I won a second in the IBD (Institutes of Business Designers) competition in the U.S. just before graduation. Then I worked as an intern at SOM, one of the leading architectural design firms in the U.S., and went on to graduate school at the University of California, Berkeley.
Of course, there was discrimination against foreigners. But at that time, the U.S. West Coast evaluated people according to their abilities, regardless of nationality.
I can still remember meeting with the vice president of Westinghouse when I was a student at the California Institute of the Arts. Westinghouse is famous for building nuclear power plants, but they were in the office furniture business at the time. I didn't have any particular connections with the company, but he personally responded to my request when I made an appointment to talk to him about the office furniture business. Perhaps because I was young, the charm of the U.S. immediately attracted me. I thought, "What a generous country," and "I want to try my skills in this country."
However, when I told my father my thoughts, he became furious. Since he had sent his son to study abroad, assuming that he would take over the family business, it was not surprising that he said, "That was not what you promised." My grandmother, who had always said, "You are going to take over the lumber business," also called me crying, begging me to come back. I rebelled against my father, but there was nothing I could do when my grandmother tearfully told me to come back. I had to drop out of the University of California-Berkeley and return to Japan.
I returned to Japan with this situation, and I argued with my father almost every day. Our biggest disagreement was that my father was not interested in product development or marketing at all.
The top importer of redwood in Japan
The top importer of redwood in Japan
Lumber dealers had always been an easy business, with a strong sense that customers would come to them without any effort. When I returned to Japan in 1986, there was still a strong sense of "I can sell it to you if you really want." I felt, "That's not right.
Lumber was the major choice for construction before. While more lightweight steel and reinforced concrete buildings were built, lumber needs for the domestic market decreased gradually. Since then, the market has changed. People realized that lumber stores needed to develop new operations, create attractive catalogs, and propose them to design firms.
When I talked to my father about it, he rejected it and said, "I can not see why I have to spend money on it." I was also repulsed and argued with him every time we saw each other. Finally, I gave up trying to persuade him and decided to start my own business.
I worked on redwood import from that time.
Before I dropped out of Berkeley, I visited different companies looking for new business because I was returning to Japan anyway. I went to the sawmill of a lumber company called Pacific Lumber Company (PALCO). PALCO, located in California, is the largest redwood company. When I visited the sawmill deep in the mountains, there was a man as tall as a mountain cutting redwoods.
Later, when I returned to Japan and was thinking about creating new products, PALCO suddenly came to my mind. I thought it would be possible to create an exterior material that took advantage of redwood's water-resistant properties. When I approached a domestic exterior manufacturer with my project, they were enthusiastic about developing an exterior using wood. I flew to California and obtained the rights from PALCO to become an importer and distributor of redwood in Japan.
After developing new products such as carports and wood decks, I visited design offices in Tokyo with newly prepared product catalogs in hand. There were days when I visited 30 or 40 offices in a single day, including door-to-door sales. Thanks to this, our products were well received, and we even recorded the highest volume of redwood imports in Japan. I loved redwood and enjoyed getting people to use the products I loved.
The 80 million Yen bill was drafted due to my father
At that time, I lived in Mikawa-Anjo, Aichi Prefecture, so when I went to Tokyo, I always took the Shinkansen. It may seem exaggerated, but when I saw Tokyo Tower from the window of the Shinkansen returning to Mikawa-Anjo, I always felt tears welling up in my eyes. The lumber business is a declining industry, and there is no future for us in a wait-and-see attitude. I wanted to go to Tokyo to make a name for myself and do business in Tokyo from the bottom of my heart.
One day, I told my father I wanted to do business in Tokyo. My father was against it again, and we ended up in a big argument. In the end, he told me that I should take all the lumber I had purchased and pay the bill if I wanted to go to Tokyo.
It may not be easy to understand unless you have run a company. When a company settles payment for goods, it often uses a bill to make the transaction. The bill has a payment date and price. The company paying the bill to the other party would draw it. If making the payment by the due date, there is no problem, but if the payment is not made by the due date, the bill would be dishonored and the company's creditworthiness would be significantly reduced.
I had about 80 million yen in imported redwood inventory at the time. I was asked to pay for it and leave. I can't give up doing business in Tokyo, so I drafted a bill for 80 million yen with a deadline of 18 months; if I did not come up with the 80 million yen within 18 months, the bill would be dishonored, and I would go bankrupt. It was a risky move, but it was the only way.
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