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Passing the Baton at Japanese Unicorn SmartHR: A Rare Move in Business Succession

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This case follows the entrepreneurial journey of SmartHR founder Shoji Miyata as he led his company to become the leading cloud player in the human resources space and one of only a handful of tech unicorns in Japan. By automating, digitalizing, and streamlining traditional HR functions such as onboarding new employees and managing social insurance, SmartHR was at the forefront of reducing manual HR-related paperwork in the country.

Among the 1.87 million business entities in Japan, most of which still relied on manual paperwork in their HR processes, SmartHR’s product offerings quickly gained traction and the company experienced exponential growth. SmartHR grew to a 45.8% market share in the labor management cloud space overall and a 71.7% market share in the enterprise segment.

Although Miyata felt it was an honor to have led SmartHR, he saw the merits of voluntarily relinquishing the CEO role and passing the baton to a successor as the company became larger and might seek an IPO in the future. He felt that he could not adapt to the changes in the macro environment, ultimately deciding to let go and focus on a new venture in a rare move in business succession.

Learning Objective:

This case lends itself to the following learning objectives. After discussing this case, students will be able to:

  1. Understand the start-up environment in Japan, why it lags other countries in this area, and how the Japanese government is trying to encourage innovation.
  2. Articulate how SmartHR attained exponential growth by automating and streamlining HR processes and discuss whether this will continue to stay valuable in face of emerging global HR e-platforms.
  3. Be introduced to the concept of “the founder’s dilemma,” which argues that founders must choose between money and power and examine the role of leadership styles in the rare case of a CEO stepping down voluntarily, looking at participative versus autocratic leadership, and transactional versus transformational leadership.
  4. Identify the skills and qualities needed for a CEO in the different stages of development for a fast-growing start-up like SmartHR, considering that the company may opt for an initial public offering (IPO) at some point in the future.
  5. Opine on whether the success of a CEO should be determined not only by corporate performance when they are in power but also by the ability of the CEO to ensure buy-in and adequate support for their successor upon retirement.
  6. Evaluate the merits and drawbacks of posting business-related content on a blog and compare this to the use of social media such as Facebook, LinkedIn, and X.

Year of Publication: 2023
Ref. No.: 23/768C
Discipline: Knowledge and Human Resource Management, Organizational Behavior and Leadership, Strategy & General Management
Industry: Software & Services
Country: Japan
Company: SmartHR
Languages: English
Pages of Text: 9