CHAPTER 3

Changing Takihyo with American Brashness

Ten months after I joined Takihyo and established the raincoat factory in Okinawa, my father passed away. I suggested to the company’s executives that my mother take my father’s place as Takihyo’s president and that I take the office of vice president. I felt that as a carrier of the Taki name with an older, more experienced face, my mother would create a better image for the company. I must admit that I was terrified to replace my father at the company so suddenly. I feared the responsibility, and I worried that I might not live up to the successes that people had come to expect from my lineage. Having my mother as the figurehead would allow me to avoid bearing sole responsibility.

At only 26, I did not believe I was ready for such intense responsibility. The executives, however, vetoed my suggestion. Perhaps they weren’t ready for a woman to run a company so anchored in tradition; perhaps Japan’s culturally deep-seated paternalism made me president. Although I had disagreed and fought with these same men before, I knew I wouldn’t win the battle this time. It not only had been a tradition within the Taki family to pass the torch from father to son, but, despite my lack of managerial experience, I was technically of age. The board believed in me and what I could offer the company—perhaps more than I believed in myself. With the board’s trust and my own motivation, I could only do my best and embrace my new role as president.

I therefore was forced to rescind my acceptance to Harvard University’s B-school and take over Takihyo. Having worked only in the import-export division, I had little knowledge of the company—and even less knowledge of the kimono business itself. I had never made a kimono, and everyone else in the company had been in the business for many years.

Thus, I had to ask a lot of questions to get the information I needed. There was no learning curve in the business and there were others waiting to test my knowledge and legitimacy as Takihyo’s president. To say that I was not comfortable in my new position would be an understatement. I had only my past experiences to provide a foundation for my future endeavors. I reminisced over my basketball coach’s words: prepare yourself, know your opposition, be aware of your surroundings. But how could I run a company whose products I did not know?

At the time, Japan was transforming, well on its way to becoming a pacifist, democratic nation-state. There was no defense force, and the government money that once had paid for the military was redirected to rebuild and improve the country. I felt change happening all around me, and as the new president of a company older than America itself, I knew that Takihyo needed to adapt. These feelings, however, were just that; they were emotions, not evidence. Before I would make a drastic move on behalf of the company, I would need hard facts to support my gut feelings.

As the new president, I wanted to learn about the company by starting at the bottom and working my way up. I had to see how the company made its money and how it had been sustaining itself all those years. As part of my learning experience, I asked for all of the invoices and payables to be sent to me after any purchase or sale had been made. I wanted to know how much people were spending and how much Takihyo would make on each sale. Each day, I went through stacks upon stacks of invoices—not only to learn about the company, but also to question the decisions that the other executives made. I would ask, for example, why certain fabrics were bought at certain prices and if there were anywhere else we could purchase those fabrics at a better price. I would also ask questions about the manufacturing process, and why it cost more to handle some fabrics than others. This research was painstaking, but the results were clear to me. I now had the facts to move forward with my strategic plans for Takihyo.

I saw the traditional garment and fabric business in Japan moving on a downward slope. As a young man, I—and my peers—rarely wore the traditional garb. As such, the kimono had shifted from an everyday necessity to a specialized market. In addition, many of the fabrics needed to produce the traditional kimonos were growing increasingly expensive and Takihyo’s profits in the kimono market were negligible. Underwear, for instance, could be sold at a high volume with little profit; however, it still provided the manufacturers and wholesalers a decent margin of income. Kimonos, on the other hand, did not sell in such quantities. I knew that if a declining business were at the heart of Takihyo, I would not be able to sustain the business into the future. The evidence of this was indisputable; yet it wasn’t until I finished my research on my family’s company that it became entirely apparent.

By the time I became head of the company, most men were no longer wearing kimonos, no matter what the occasion. That trend was sure to seep into the female way of life in Japan’s future. Although elegant and beautiful, kimonos are cumbersome; they’re best suited for ceremonial activities, not daily ones. I knew deep down that the future of the clothing business was in the West. A few other Japanese clothing companies had begun to dabble in the Western clothing business with some success. However, their efforts were not full force. In a typically Japanese fashion, companies tend to make changes gradually—which often also means that it takes a long time to accomplish anything significant. I reasoned that Takihyo would have to make a similar move into Western clothing; however, instead of taking baby steps like our competitors, I felt that our company should thrust itself into the new, emerging business of women’s fashion.

I expressed my thoughts to the other executives at Takihyo, and the consensus was strongly against me. They essentially argued, “If it ain’t broke, don’t fix it.” After all, they reasoned, Takihyo had managed to run a successful business for the last 200 years—and we were already generating more than $30 million in revenues during the first year of my presidency. What was the point of changing? Yet unlike my fellow leaders, I feared the stagnation of the company. The way I saw it, a stagnant company could be compared to stagnant water: if you let water sit for too long, bacteria grows, and the water becomes undrinkable.

One morning, I announced to the company that we could not remain in the kimono business and that Takihyo would have to retool. To that end, as of April 1, 1963, Takihyo no longer distributed or manufactured any traditional Japanese fabrics or kimonos (and it wasn’t an April fool’s joke). When the board of directors and executives asked what would become of Takihyo, I explained, “Western clothing offers us the best promise for these changing times. The kimono is outdated, and as a Japanese business, we need to supply our consumers with the products that they desire. They need active clothing to go to work, and they need to be able to find these garments without any inconvenience. We need to move forward along with the force that is changing the way Japanese people eat, live, and think. Only with these changes can Takihyo stay ahead of the waves. If not, we will sink under the tide of the future.”

Even though it had a good ring to it, this statement was purely theoretical. I had no idea how to make kimonos, but I knew just as little about making Western clothing. I had no exposure to the fashion industry before coming to Takihyo. I had learned how a business functions financially and some of the ways to put the puzzle pieces together to form a venture; however, I had no experience with implementation and application (other than my raincoat venture in Okinawa). So when the first question that the board asked me was whether I knew how to execute my plan, I could only respond, “I’ll find out.”

The first thing we had to do was to get rid of all of our Japanese traditional goods; thus, we sold our fabrics, kimonos, and futon covers at cost to make room for our future inventory. I also needed to find out how to make, market, and brand Western apparel—far from an easy task. The only way to do this would be for Takihyo to partner with an American company. This would allow us to learn what we needed to know about Western clothing while simultaneously generating our own revenues and offering my company some international exposure. Takihyo had plenty of cash and a solid corporate infrastructure; however, we did not have a single contact in the United States. I knew that I would have to take a gamble and take action that went against my heritage in order to make this drastic change work.

Near the end of 1961, I threw myself into the pool head first: I flew to the United States in hopes of establishing future business relationships. I had read a newspaper article citing that a company by the name of Bobbie Brooks was seeking to partner with a Japanese company in order to expand into the Far East. The Bobbie Brooks Company had been looking to establish a licensing agreement for a line of ready-to-wear clothing that was currently being sold in America. I saw the doors of opportunity open when reading this article, and I knew that I had to act fast.

I went to Cleveland, Ohio, where the Bobbie Brooks headquarters had been, and pretended to have an appointment with the late Murray Salzman—the company’s president and chief executive officer (CEO). Salzman’s secretary told me that I must have made a mistake and that I did not have an appointment. I brashly insisted that I did indeed; I wouldn’t have flown all the way from Japan otherwise. I told her that I would be crazy to make such a move, and she agreed that “there must have been a mistake.” My crazy plan worked; instead of brushing me off, Salzman welcomed me into his office.

I began the meeting by apologizing to Salzman and admitting that I lied to his secretary about having an appointment. Then I begged him to give me a few minutes of his time. I knew that he was scheduled to meet with another Japanese fashion business within the next couple of weeks; I therefore felt that he had to know how badly Takihyo needed his business and what Takihyo could offer the Bobbie Brooks company in return. I gave him a brief history of my family company and the recent changes I had implemented as the new president. I outlined my vision, and Salzman accepted the offer. Although neither he nor I was sure how well the design would work in Japan, Salzman and I entered a technical cooperation agreement to bring a subdivision of Bobbie Brooks’s fashion into Japan.

By 1963, all of the details began to fall into place. The Bobbie Brooks Company had agreed to license the Stacy Ames brand to Takihyo. Although any American line would have satisfied my requirements for Takihyo becoming 100 percent Western, I was interested in the Stacy Ames brand because it offered a new look. When my father was still alive, Takihyo had made initial forays into making Western-style clothing under the brand name Kinyo. This brand featured clothing that combined old-Japanese style with a Western sensibility. Although the line did well, the look had been quite strange. The jackets appeared to have the wide sleeves of a kimono with the cut of a Western coat around the body. More manageable and Western than a traditional kimono, this hybrid product nonetheless would not be the future of Japanese fashion. I saw a style with the Stacy Ames brand that was not only new to Japan but also innovative for the West.

The Stacy Ames clothing line had been known for its use of bonded fabrics, which eliminated the need for a lining in the garment; I thought this design showed promise. The trends began to change at Takihyo as well. Bobbie Brooks sent a team of seven to Japan to teach us how to run a Western fashion company, everything from sewing to marketing the final product. Takihyo transformed from a company that primarily wholesaled Japanese kimonos and fabrics to a company that wholesaled and manufactured women’s apparel.

However, we were soon to find out that whereas manufacturing and advertising the products was one thing, wholesaling them to department stores was quite another. One of the first problems we encountered was finding a department store that would buy our Stacy Ames dresses. The buyers for Japanese stores were not very keen on taking in a brand about which they—or anyone else, for that matter—knew very little. However, after numerous negotiations, a Japanese department store called Isetan agreed to buy a limited supply of our new brand to test its value among consumers—after I pleaded for them to give Stacy Ames a chance.

Once the Stacy Ames merchandise hit the shelves, the department stores ran out of inventory within a week. The brand was an instant success. In two years, Takihyo’s annual revenues skyrocketed from $30 million to $100 million (in today’s dollars, a similar jump would equate to a change of about $195 million to $650 million1).

Stacy Ames was a big hit, to say the least, but it was not the only line we promoted in my first years at Takihyo. I became interested in a few other outside lines as well: Kelly Arden, Donegal, and Catalina from Kaiser Roth, to name a few. We also launched several lines within Takihyo with designs provided by a woman I hired named Dina Stern. Dina focused first on Stacy Ames, then very successfully on Kelly Arden.

Recalling the success of the raincoat factory, I wondered how I could create a line that was similar to what already existed but that used more efficient manufacturing methods to meet the demand for women’s clothing. We also were paying fees for the various lines as agreed in our licensing contracts, so even though these lines did bring money into Takihyo, we had to pay large royalty fees for all of them. While mulling over this problem, I came up with a two-part solution.

First, I began experimenting with an idea that I would use later when launching one of my most successful lines after I left Japan in the early 1980s: the bridge line, also known as a type of diffusion line. Today, every major designer has a diffusion line, which essentially functions as a cash cow for the parent company. While using a similar design to the main collection, the diffusion line uses less expensive materials and has lower manufacturing costs. For instance, Donna Karan has DKNY; Ralph Lauren has Polo; and Calvin Klein has CK. However, there were no diffusion lines in the late 1960s. Designers did not create for mass distribution, but rather according to their tastes. I saw numerous avenues to recreating a look with a lower price tag.

To supersede the need to pay royalty fees, I combined the designer we hired—Dina—with the diffusion-line concept to found K2. Dina already had experience designing Stacy Ames and Kelly Arden; now we put her to work on a line wholly owned by Takihyo. K2 referred to Kelly Arden, but because the name was so different, there were no breaches of contract in the licensing agreement. However, consumers recognized both the similarity in the product lines as well as the price difference between them. Kelly Arden did not fare very well in Japan, as the line had been too expensive; however, K2 was reasonably successful. With the great success of the Stacy Ames brand, I wanted to reach other markets as well in hopes of expanding Takihyo’s reach in the consumer market.

Shortly after K2, I started another line with a new Western designer; the line was called B&B: Brown and Beige. Stacy Ames had appealed to a younger audience; with this new brand I wanted clothes that would appeal to older women. B&B bridged the age gap with women’s suits, half of which were knits. From 1969 until the first oil crisis in 1973, B&B did quite well.

I am proud of these accomplishments, as they were some of my first undertakings. Yet I also knew that I was still facing some very significant challenges. Takihyo was growing faster than I originally imagined it could; revenues increased 300 percent. I began to fear the company’s reserves because taxes would inevitably become quite devastating if I didn’t do something to offset them.

1 See http://64.233.169.104/search?q=cache:VMTdaCjDSEJ:fx.sauder.ubc.ca/etc/USDpages.pdf+currency+exchange+historical+1960&hl=en&ct=clnk&cd=3&gl=us&client=firefox-a.