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JAN 20, 2017

What I learned about business from 75 Japanese fifth- and sixth-graders

By Karl O’Callaghan

Late last year, the Young Entrepreneurs Group at my local chamber of commerce asked me to judge a 5-month business competition for elementary schoolchildren. Called Junior Economy College, it started in Fukushima Prefecture in 2009 and now takes place in 28 Japanese cities. It’s a great initiative, and for a mature market like Japan, with quite a rigid education system, it’s something that more cities should try.

I learned so much from the children that I’ve divided this article into three. This post covers planning; the second article looks at the actual sales day; and the third deals with what happens afterwards.

The goal for the 14 teams was to make a profit by selling products at the city festival on November 3rd. As anyone in business knows, you can’t just show up and sell. You have to plan. The teams met at the chamber in July and September to plan their strategy and design their stall. Like a real company, the children had to raise capital by presenting to their parents for ¥10,000 equity – ten shares each valued at ¥1,000 – and to one of three “banks” staffed by some of the judges for an optional ¥10,000 loan.

Four teams pitched my bank. Each 5-minute presentation was followed by 10 minutes of Q&A. If they couldn’t answer, they had to practice again and come back later. JEC’s goal is to let children learn what business is really like. My job was to ask why they made certain choices, how they were planning and what they would do if something didn’t go to plan. But of course with 10- to 12-year-olds, I had to suppress any Duncan Bannatyne tendencies! It’s not Dragons’ Den and I certainly didn’t want to be remembered as an evil bank manager. It helped to recall my time as a GLOBIS MBA student pitching ideas that my classmates and I were serious about. Sadly none panned out, but that’s another story for another time…

None of my teams passed the first round. I asked a few tough questions such as “What will you do if there’s stock left before closing time?”, “Why did the CFO explain the marketing?”, or “Why are you charging XX yen for that?”

Learning Point #1: Set a clear vision for why, how, what and who. I don’t think this problem is isolated to fifth- and sixth-graders. It happens even in companies run by adults: the chairman of a family company who likes to dip in to pet projects causing more harm than good; or the micro-manager who won’t trust his team to get on with work that they’re better at anyway…

Three teams passed second time. The president of the fourth team was visibly annoyed when hers failed again. I really felt sorry for her. But at the same time, my inner Duncan just couldn’t give them an easy ride. They did great the third time.

Three teams took the loan as start-up capital, but I was most impressed by the team that knew from the beginning that they didn’t need a loan and could rely purely on equity. They prepared their projections really well.

Learning Point #2: When asking someone for money, know why you’re asking and put yourself in their shoes. How can they be sure they’re going to get a return? How will you use the money? It turns out that one of the other 10 teams who borrowed ¥10,000 used just ¥5000 to purchase goods. Maybe they have a low risk appetite! Their sales came to less than ¥20,000 but they managed to turn a profit because of the ¥15,000 they left in hand. Of course, nobody knows the future. They could have spent all their ¥20,000 capital procuring inventory, produced more and come away with much higher sales, or they might have ended up with a similar revenue and made a loss. We’ll never know!

All the teams planned to sell food; some were going to make or resell other products, too. With hygiene concerns, there were strict regulations. At the July meeting, one team put forward a plan to make onigiri rice balls. Because onigiri are rolled by hand, they were not allowed. They had to pivot and come up with another idea in time for September’s pitch.

Learning Point #3: Sometimes the environment changes or your research is insufficient to understand the market. It’s important to be flexible and change quickly. I decided to leave my job and move with my family to this small city. So far, our cash flow is OK. We have food on the table and money in the bank. I don’t want to be rich, but I want to be doing more than just “OK” so that later in life, my children’s choices are not limited. I realized recently that most of my business is coming from networks I established in Tohoku and Tokyo many years ago. It’s taking time to turn prospects here into productive customer relationships. The real issue at hand is the subject of my next learning point.

The JEC set-up really allows the participants to take advantage of learning opportunities. Chamber members mentor the children, but don’t tell them what to do. One mentor told me it’s hard to not just jump in and tell them “No, that won’t work! You should do this instead!” The children also present their plans in front of the other groups. It’s a wonderful learning environment.

Learning point #4: Don’t try to do everything yourself! There’s always someone in a position to help you go further. This is a lesson that I have to take to heart. Too often, I struggle first to do things myself before reaching outside for help.

In Part II, we’ll look at what the teams did on the day.

Photo credit: Young Entrepreneurs’ Group, Tatsuno Chamber of Commerce