Latest / The CEO Diary with Fexingo: Leadership Lessons, Executive Decisions, and Corner Office Stories / How Shiseido Reinvented Itself After Losing Its Way
Transcript
- Lucas: So there's a number that's been stuck in my head all week, and it's about Shiseido. In 2014, when Masahiko Uotani took over as CEO, the company had something like nineteen thousand products on the market. Nineteen thousand. And he looked at that and basically said, that's not a portfolio, that's a mess. Luna: Nineteen thousand products. That's insane. How do you even manage that? Lucas: Right, and it wasn't just the number. It was the fact that most of them were low-margin, undifferentiated SKUs that clogged up the supply chain and confused customers. Uotani's insight was that Shiseido had lost its identity. It was trying to be everything to everyone, and in the process, it had stopped being the premium brand it was famous for. Luna: So what did he do? Just cut everything? Lucas: Not exactly. He didn't just slash and burn. He introduced a strategy he called 'back to basics.' And the core of it was to focus on what Shiseido did best: premium skincare. So they started pruning the product line aggressively, eventually cutting down to around four thousand products. But more importantly, they stopped launching random new products just to chase trends. Luna: Four thousand from nineteen thousand. That's a huge bet. Did it work? Lucas: Well, the early years were rough. Sales dipped, and there was internal resistance. But the strategy was to consolidate, focus on hero products, and invest heavily in a few key lines like the 'Ultimune' serum and the 'Senka' brand in Asia. And it paid off. By 2017, Shiseido's operating margin had more than doubled from what it was in 2013. The stock went on a tear, too. Luna: So the discipline of focus paid off. But this wasn't just about cutting SKUs, right? There was a bigger cultural shift. Lucas: That's the thing. Uotani came in from outside — he was previously at Coca-Cola and had zero cosmetics experience. And he said the biggest problem wasn't the products, it was the culture. The company was incredibly siloed. R&D, marketing, sales — they rarely talked to each other. And there was this deference to seniority that meant decisions took forever. He literally brought in a 'challenge mindset'. Luna: How do you change a culture like that, especially in a 150-year-old Japanese company? I imagine that's not easy. Lucas: He didn't do it with a big speech. He did it with systems. He started holding what he called 'town hall' meetings where any employee could ask him anything. He also tied bonuses to customer satisfaction scores, not just sales targets. And he made a point of publicly celebrating people who challenged the status quo, even if their ideas failed. Over time, it shifted the incentive structure. Luna: So it's about creating a safe space for dissent. That's interesting. But what about the actual business? How did they get the growth engine going? Lucas: Two big bets. First, they doubled down on China. At the time, Chinese tourists were buying luxury goods in Japan, and Shiseido realized the real opportunity was to build a direct presence in China itself. They invested heavily in marketing, in local product development, and in building a premium image. And it worked — China became a massive growth driver. Second, they rebuilt their direct to consumer model. They invested in e-commerce and data analytics, so they could track customer preferences and personalize offers. That was a big change for a company used to selling through department stores. Luna: So they went from being a manufacturer pushing products to a customer-centric company. That's a total transformation. Lucas: Yeah, and the numbers back it up. Between 2014 and 2018, their revenue grew from around 760 billion yen to over a trillion. And their operating profit more than tripled. They also made some smart acquisitions, like the us based skincare brand Drunk Elephant, which gave them a foothold in the American prestige market. Luna: Drunk Elephant, right. That was a big deal. But wasn't there a moment where it all seemed to fall apart? I remember reading about some product recalls and a scandal around 2021. Lucas: You're thinking of the 2020 to 2021 period, where they had to recall a few products because of quality issues, and there was that incident with a whitening cream that caused skin irritation. That was a serious blow to their reputation. And it happened right as the pandemic was hitting sales. So there was a real crisis of confidence. Luna: So how did they handle that? Because in a crisis like that, leadership really gets tested. Lucas: They actually handled it pretty well, I think. Uotani came out publicly, apologized, and took a pay cut. They set up a special quality committee and brought in external experts. They also revamped their quality control processes. It cost them, but it showed a willingness to own the mistake. And it probably helped that they had built a lot of trust beforehand, so customers were willing to forgive. Luna: There's a lesson there about transparency. But what about the long-term? I mean, the beauty industry is pretty competitive. How did Shiseido stay relevant after that? Lucas: They kept investing in the premium segment and also made a big push into skincare for men, which is a growing market in Asia. They also leaned into the 'prestige' positioning, so even in a downturn, they had pricing power. And they continued to build their direct to consumer capabilities, which became even more important during the pandemic when stores were closed. Luna: So it's a story of not just a turnaround, but a sustained reinvention. What's the biggest lesson for other leaders listening? I mean, we talk a lot about startups and tech, but this is a 150-year-old company. Lucas: I think the biggest lesson is that leadership is about making choices, not just managing everything. Uotani could have tried to do everything, but instead he made a few bold bets and saw them through. And he understood that culture is the foundation — you can't just change the products or the strategy without changing how people think and work. That's the real CEO work. Luna: Yeah, and that's something that applies to any leader, whether you're running a legacy company or a three-person startup. It's about having a clear view of what you're trying to build and then aligning everything to that. Lucas: Exactly. And it's also about humility. Uotani admitted early on that he didn't know everything about beauty, so he surrounded himself with experts and listened to them. That's a lesson in itself. It's not about having all the answers; it's about asking the right questions. Luna: On that note, if you've been enjoying these deep dives into leadership, and maybe that one line about asking the right questions resonated with you, it's worth mentioning that listener support is what keeps this show going. We don't have ads, and we like it that way. If these conversations have moved your work forward in some small way, you can buy us a coffee at buy me a coffee dot com slash fexingo. It really helps, and it's a simple way to say thanks. Lucas: Yeah, I second that. It's a small gesture that has a big impact on keeping this ad-free. And speaking of asking the right questions, there's another fascinating angle to Shiseido's story that I think is worth digging into — what happened after Uotani stepped back in 2023. Luna: Oh, that's a good one. Because succession is often where turnarounds fail. So what did they do? Lucas: They promoted Kentaro Fujiwara, who had been leading their Asia-Pacific business. He's a very different leader — younger, more digital-native. And he's not doing a wholesale reset. He's building on the foundations Uotani laid, but he's also adapting to a post-pandemic world where people are more conscious about sustainability and where the competition in Asia has gotten even fiercer. Luna: So the test now is whether the culture Uotani built is sustainable. Because you can have a great leader, but if the systems and mindset are only tied to that leader, it'll revert. What's your take on that? Lucas: I think it's too early to say, but the signs are promising. Fujiwara is emphasizing digital transformation and data-driven product development, which is a natural evolution. And he's also talking about 'community building' — creating a sense of belonging around the brand, not just selling products. That feels like a fresh take on the same customer-centric philosophy. Luna: So the story of Shiseido is not just about a single leader, but about building an organization that can adapt. That's a pretty powerful lesson for any CEO. Lucas: Absolutely. And it's also a reminder that even the oldest companies can change. Shiseido was founded in 1872, and it's still here, not because it stayed the same, but because it was willing to question everything. That's the enduring takeaway.