Story of Innovation: How a local Rice Wine became a gift to President Obama?

This is a story of innovation of the operating model for Japanese Rice Wine ("SAKE"). This is given to President Obama, from Japan's Prime Minister.

  1. Did you choose the company as an example of effectiveness or ineffectiveness? Why?

“DASSAI” is the best seller and most famous Japanese rice wine (“SAKE”), which was presented to the President Obama from Japan’s Prime Minister Abe during the visit in 2014. I chose this example as a successful and intriguing example of integration between an innovative operation process and a successful business model. Asahishuzo (“the company”), the manufacturer of DASSAI, was once in danger of bankruptcy due to the failure of diversification of its business. However, after the current CEO took over his position and changed its SAKE making process dramatically, DASSAI now became the most popular Japanese SAKE and known throughout the world. Its sales are expected to increase by 32% in 2015, despite its shrinking “SAKE” market in Japan.

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  1. Describe the company’s business and operating models. What is interesting about them?

The most interesting feature of its operating model comes from its data-oriented “SAKE” manufacturing process. Traditionally, “SAKE” manufacturing process was largely dependent on the experience and feelings of experts with long period of severe training. Therefore, most part of the process including manufacturing, production plan, and inventory management was led by these experts and literally the “black box”. However, after the crisis of near bankruptcy, the CEO of Asahishuzo tried to establish more efficient and reliable process by analyzing all the manufacturing process by using “Excel” and control the process without these experts. He computed as many data/figures as possible, including weight of rice used, time of washing rice, water temperature, humidity, etc. By enormous trial and error, he finally found an ideal process which enable the company to create best quality Japanese “SAKE” without help by experts.

This “scientific and industrialized” method of SAKE manufacturing enabled Asahishuzo to establish successful business model. One interesting element is the company expanded its target market from within Japan to throughout the world. Typically, Japanese SAKE manufacturers aim for domestic market because the manufacturing process limit production volume of its SAKE. However, thanks to Asahishuzo’s new method, the company obtained mass production capacity which enabled the company to enter into overseas markets with enough amount to export to these markets. Especially, the company intensively explored its sales route in France and the United States, where there are biggest potential and influence over other markets. The company now envisions to increase the sale outside of Japan from current 10% to more than a half. As a result of continuous efforts, DASSAI won several awards outside of Japan, which boosted its sales in the overseas markets.

Another successful element is that Asahishuzo can manufacture SAKE throughout the year while keeping its quality very high, thanks to the data oriented process. Normally, Japanese SAKE is made in winter, but Asahishuzo was not affected by this seasonality because its process enabled the company to find the way to adjust to the weather, temperature, and seasonality differences which used to be huge obstacles for year-long production. This enabled the company to manufacture SAKE steadily and, as a result, increase production volume to ship to its markets. Consequently, the company become able to conduct marketing throughout the year, which contributed to increase in sales and expanding its recognition.

  1. Do the models align and support each other? How?  What specific features of the operating model are designed to create and sustain competitive advantage?  What features of the business model leverage unique capabilities of its operating model?  What are the implications for performance?

As such, the data oriented innovative SAKE manufacturing process enabled the company to establish successful business model. This new process helped the company to achieve 10 times of production capacity over the 15 years, with keeping its high quality and reputation over the taste. This data oriented manufacturing process is not some thing novel in other industries, but introducing very old fashioned SAKE making process delivered the value to the market. Also, with the continuous “Kaizen” process, Asahishuzo continues to improve its manufacturing process, which enable the company to keep the competitive advantage over other competitors. These models combined, Asahishuzo’s performance is far exceeding under the sharply shrinking SAKE market in Japan.

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Source:

  • Nikkei Shimbun, Dec 5, 2015

http://www.nikkei.com/article/DGXMZO94335530U5A121C1000000/

  • TOYOKEIZAI Online, July 7, 2014

http://toyokeizai.net/articles/-/41798

  • nippon.com, Dec 16, 2013

http://www.nippon.com/ja/features/c00618/

  • Asahishuzo Website (Dassai’s manufacturer)

http://www.asahishuzo.ne.jp/en/

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8 thoughts on “Story of Innovation: How a local Rice Wine became a gift to President Obama?

  1. Great insight about bringing in innovation in traditional ‎alcohol business!!! Gaining more than 10 times revenue in 15 years is amazing, and I wonder how this high quality sake penetrated over the alcohol market, for example, word of mouth or any particular advertising method, etc.

    Moreover, I personally like to drink Dassai because the taste is much better than the other general sake. It is really easy to drink, and even if you are drunk, you will wake up feeling well the next morning. There is a significant and noticeable taste value for consumers as well.

    Dassai is, however, really expensive compared to regular sake market price, and I wonder whether expertise or some of intellectual property for manufacturing Dassai can be transferred to other companies. If I had a chance to learn how to generate sake, I would definately start a new company!!

    1. Thanks! I also am interested in whether the recipe for DASSAI is easily transferred or imitated by competitor, as it uses more data than experience. It sounds that DASSAI has some unique advantages over other competitors as they improved their production process, but I assume there is still a “blackbox”.

  2. I love the story as Sake fanatic. This is the first case that a company brought disruptive innovation in the luxury sake market, eliminating black box human factor. However, it really raised sentiments among Sake lovers about the company’s decision to eliminate Sake production masters “Toji”, as they consider the Tojis are the most precious asse.ts of the Sake brewery. I know many traditional Sake lovers left and seek other brands.

    Having said that, I truly think the CEO made a bold step. There can be many way to produce genuine products and this surely is one of the ways. Moreover, Dassai contributes a lot to make Sake fun in the world.

    1. I just cannot believe that how brave the CEO is to eliminate Toji from its production process. At first, it is actually hard to believe that they used excel to control the quality and taste.
      However, yes, the popularity of DASSAI is really great. I assume there should be lots of marketing efforts to, but the operational change made its expansion capable. Judging from the CEO’s statement, it seems that limitation on production volume mattered a lot to target oversea market outside of Japan.

  3. Thanks for your post! This is interesting stuff. My only questions in response to your description of the CEO’s move to eliminate the experts from the process, to mass produce sake for the global market and the produce year-round without regard to the weather are: do you believe that quality standards have fallen as a result of this? Do “purists” believe that they have or that they can? How can the company go about satisfying both “purists”/”connoisseurs” and the global consumption market without sending conflicting brand messaging?

    More Marketing questions than TOM questions, perhaps, but relevant nonetheless!

    1. Thank you for your comments.
      Actually your marketing question is also very interesting topic. The CEO did not explain fully about their marketing strategy, maybe because it is one of the key and did not want to let competitors know what they exactly think.

      Definitely strong push by Prime Minister Abe and President Obama’s taste boosted its recognition outside of Japan. Japanese Sake is a little different than wine in a sense that there were so many different brand and the production volume used to be very limited, which made each brand difficult to dominate. DASSAI could enter into the market as “new” brand very easily, even though the company itself existed for long period.

  4. Very interesting story! It makes complete TOM sense and is certainly quite an impressive success story.
    What I’m wondering is to what extent successful marketing contributed to that.
    I imagine that if you try to do the same with things like whisky or cognac, where you have this “black box”, there would be a big consumer backlash, initially at least. The reason is that the traditional inefficient production process is such a big part of the product image.
    However, given that even Barack Obama got to try SAKE, looks like the marketing team was pretty successful, and indeed it seems to be a great story of alignment between business model AND operations AND marketing!

    1. Thank you for the post!
      I agree that usually brand image comes from the “blackbox” and that is a common sense in this industry. However, here, the CEO tries to explain that their operational change was a key for their turnaround.

      In fact, I think still marketing played crucial role for DASSAI. You want to know that DASSAI is coming from Prime Minister Abe’s home town and he pushed hard on this product which was also crucial. This is why many Japanese people think that DASSAI’s success is more about its marketing strategy than operation, despite the explanation from the CEO.

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