The country’s corporate lodestars are firmly focused on the horizon in positioning their companies for continued success.
February 7, 2020
With the enthronement of a new emperor in May 2019 and the successful hosting of Asia’s first Rugby World Cup, optimism in Japan has been running high in recent months. This enthusiasm is expected to carry over this year, as the country takes center stage again with the Tokyo Olympic Games, which is scheduled to take place this summer. Meanwhile, Japan’s government in December raised its economic growth forecast for the next fiscal year to 1.4% on the back of improving domestic demand.
Despite the bright spots, there is no getting away from an uncertain macro environment plagued by trade tensions, a broader retreat from globalization and geopolitical tensions. For some of Japan’s most successful corporates, however, the current bout of volatility is just another short-term challenge in their long and successful track record of overcoming adversity.
Indeed, a focus on the long term and the ability to adapt to ever-changing conditions have been the hallmarks of leading companies such as Canon, Kikkoman and THK.
Yuzaburo Mogi, Honorary CEO and Chairman of the Board of Kikkoman Corporation, is one who is no stranger to taking bold steps in the face of uncertainty. He led the traditional soy sauce maker to set up a factory in the U.S. back in the early 1970s, a daring move that was decades ahead of its time. Looking ahead, he believes that companies need to look beyond just technology and focus on developing their human capital in order to succeed.
Fujio Mitarai, Chairman and CEO of Canon Inc., is another Japanese corporate leader concentrating beyond the immediate turbulence to position his company for future growth well into the middle of this century. Canon is in the midst of a major transformation that aims to foster synergies in new business areas, even as it continues to pursue a strategy of mergers and acquisitions.
As for Akihiro Teramachi, CEO and President of THK, the aim is to capitalize on the megatrends of digital technology, aging populations and globalization to fuel the company’s growth. He likens running a business to a marathon rather than a sprint, stressing the need to keep a long-term view in order to reap efficiencies. In 2020, THK will launch a new service known as OMNIedge—a solution to predictive failure detection. It works by installing sensors on existing THK components embedded in client machines that collect and analyze data and provide alerts.
In an era marked by disruption and change, it will be companies such as these that will emerge stronger from the immediate challenges ahead to prosper for many more generations to come.
Fujio Mitarai Aiming To Position Canon For Further Growth Into The Mid-21st Century
Fujio Mitarai is looking to position Canon Inc. for future growth into the middle of the 21st century by building on the transformation of his company’s business portfolio to make the switch from a B2C to a B2B company and stay abreast of global market developments.
The year 2020 marks the end of Phase V of this business portfolio transformation, and the multinational company that is listed on both the Tokyo and New York stock exchanges continues to advance steadily toward the targets set by Mitarai.
The transformation of Canon’s business portfolio includes seeking synergies in new business areas that leverage its existing assets, including both technology and human resources, while also continuing to pursue a strategy of merger and acquisitions. “We are transforming our business portfolio to stay in sync with the changing times,” Mitarai says.
“We are transforming our business portfolio to stay in sync with the changing times.”
– Fujio Mitarai, Chairman and CEO, Canon Inc.
Canon at the Cutting Edge in the Medical Field
Mitarai has earmarked the medical field as an area for potential growth and in December 2016, Canon acquired Toshiba Medical Systems Corporation.
Over the short term, Canon is looking to expand its lineup of diagnostic imaging equipment, such as CT, MRI and ultrasound, while also boosting their competitive capabilities.
Mid- to long-term growth includes a focus on regenerative medicine, which could have far-reaching applications, especially in an aging society. Since August 2019, the company has engaged in joint research with Nobel Prize winner Professor Shinya Yamanaka of Kyoto University into induced pluripotent stem (iPS) cells, and how they could be used to replicate injured tissue, test drug efficacy and develop new medicines. Canon is contributing advanced optical, measuring and diagnostic imaging technologies to the project. Together with Yamanaka and his research group, Canon is confident they can make a contribution to the further development and adoption of regenerative medicine. It’s still in the early stages, according to Mitarai, but there is huge growth potential.
M&A: Mitarai Adopts Two-Pronged Strategy
Canon’s network camera business boasts annual growth of more than 15% outpacing the market, and Mitarai aims for further dominance in this area with a two-pronged strategy of acquiring various hardware and software businesses.
In 2015, Canon acquired Axis Communications, a global leader in network video equipment, less than a year after the acquisition of Milestone Systems, a leader in video management software for such equipment. In addition, in 2018, Canon acquired leading video analysis solution provider BriefCam.
The global network camera market is expected to see annual growth in excess of 10% over the mid- to long-term, with such fields as security and law enforcement making up a major share.
Mitarai explains, “Using a camera equipped with the ultra-high-resolution 250-megapixel CMOS sensor and 800mm telephoto lens, it is possible to identify the lettering on the side of an aircraft from a distance of about 18km. This can help security patrols view objects that cannot be seen with the naked eye.”
That’s not to say Mitarai is ignoring the conventional applications of network cameras and their potential to help realize a safer, more secure society.
Mitarai also sees uses in marketing: “Network cameras can be used in places like supermarkets to gather data on purchases made by certain demographics from specific shelves. I believe that this technology can be used to create a more convenient society,” he says.
He cites potential smart cities as a catalyst for the future development of the network camera market, envisaging the technology connecting such institutions as schools, broadcasters and hospitals.
Mitarai’s M&A strategy is also proving a success in the field of commercial printing, identified as one of Canon’s new core businesses. Canon acquired Océ, based in Venlo, the Netherlands, in 2010, but the company that is expected to revolutionize high-volume, high-speed printing continued to operate under its original name. Last year, Océ’s business division recognized the advantage of adopting the Canon brand name, and effective from January 2020, the company has been rebranded as Canon Production Printing—making Océ, already a fully fledged member of the Canon Group, a member in name as well.
Serving Professionals and Innovating Imagery
The Canon name has long been synonymous with consumer cameras, but this market has matured as many of the original user needs can now be met by smartphones. Mitarai wants his company to focus its efforts elsewhere, including the professional user market.
“When we talk about the shrinking camera market we are really only talking about consumer cameras. The market for professional-level cameras used by the media and those who shoot sporting events will not disappear. These are areas where smartphones can’t meet user needs,” he says.
Beginning with the Rugby World Cup in 2019, Japan is set to host a number of global sporting events over the next several years. Mitarai himself played a leading role during the Rugby World Cup as Chairman of the Organizing Committee.
Canon maintains a strong connection to sports, including event sponsorship and media support, and has actively honed its technological capabilities, including the Free Viewpoint Video System, capture and display of high-resolution 8K images, and immersive widescreen viewing experiences. Canon produced video content that allowed viewers to feel like they were right in the middle of the action.
Canon’s Free Viewpoint Video System is comprised of cameras installed around the perimeter of the field, producing computer-generated video that provides a new perspective of the game.
“The images from the cameras are immediately processed by computers and television viewers can observe events from virtually the same level as the crowd in the stadium. It is also possible to trace individual on-field plays, and to use computer processing to view them from different perspectives,” Mitarai says.
He sees possibilities for strategic analysis in such sports as American football and to help referees determine rule violations from positions they cannot see for themselves. “This will transform the way people watch sports,” he adds.
Looking ahead, you can be certain that Mitarai and his staff have plans for Canon to continue to create new image expressions that change the way people view sports as the third decade of the 21st century gets underway.
A native of Kyushu, Japan, Mitarai decided not to follow his father and brothers into medical school, but instead joined Canon where his uncle served as the first President. Five years later he was posted to Canon’s U.S. headquarters. He stayed for 23 years, eventually becoming President of Canon U.S.A. Back in Japan, he was later appointed President of Canon Inc. before becoming Chairman and CEO.
Few executives anywhere have seen as many economic cycles as the head of the world’s best-known maker and purveyor of soy sauce and other global seasonings.
He’s not as young as he used to be, but he still cuts a dapper figure in person. At 84, he is one of the elder statesmen of Japanese business, not merely by virtue of age, but due to the widespread respect he commands both at home and abroad.
Yuzaburo Mogi, the Honorary CEO and Chairman of the Board of Kikkoman Corporation, is in many ways the face of the company. Back in the early 1970s, he pushed the traditional soy sauce maker to set up a factory in the U.S.—years before Japan’s giant electronics companies and automakers did the same. His strategy of local manufacturing, local sales and responding to local needs was decades ahead of its time.
How does this farsighted executive feel about changes in Japan today? For example, many Japanese companies set 60 as their mandatory retirement age, but are now hiking it to 65 in response to the growing labor shortage. How does Mogi see that change?
He is quick to respond: “There are lots of people who are still vigorous and want to work until 70 or even 75. Why should they be forced to retire? Older workers have a wealth of knowledge and experience. Putting those assets to work, perhaps by having older workers teach younger ones, is a smart policy. It’s good for the company, good for the workers and good for society. Everyone wins.”
“What should be done? Mogi replies quickly that “both employees and managers should be given a wider range of experiences to broaden their outlook.”
Bold, decisive men such as Mogi helped to build Japan into the economic giant it became in the 1970s and beyond. To continue growing in this century, the nation needs more leaders with his values, insight and vision.
Regarding Japan’s labor shortage he says, “The short-term answer is simple: we must make the best possible use of our existing resources. That means providing better working opportunities for both seniors and for women.”
Many Japanese companies are now putting a strong emphasis on hiring employees with IT or technical skills. As Kikkoman is deeply involved in biotechnology, does Mogi share that emphasis on technical expertise and IT skills?
He thinks a moment and replies, “Of course, IT skills are important today, but for most workers, they’re only a tool. Business is fundamentally about people, not technology. To succeed in business you must understand people.”
“I hear some executives say that history, literature, philosophy and so on have no value in the business world. I disagree. I believe our education system is too specialized; it has forgotten the importance of liberal arts. If you don’t understand the background of something, the human perspective, you can’t really understand anything in business today.”
His most incisive comments were about rapid change, risk and middle managers’ inability to deal with both: “One thing I notice is the increasing pace of change. Of course, there is change in any era. But now the business cycles are much faster. There is greater pressure for companies to make changes quickly. Management must adapt. However, today’s middle managers have never experienced a period of strong economic growth. To use another sports analogy, they’ve never been on a winning team, so they don’t know how to win.”
“In fact, top management isn’t much better—in many cases senior executives are just as risk-averse as middle managers, afraid to invest even when doing so is necessary for a company’s growth. Simply put, people are afraid of risk,” he says.
Yuzaburo Mogi is a descendant of one of the founding families of Kikkoman, which is among the oldest continually running businesses in Japan. He became company President in 1995, was named Chairman in 2004, and assumed the title of Honorary CEO and Chairman of the Board of Directors in 2011. Mogi holds an MBA from Columbia University.
THK To Maintain Mid- To Long-Term Business Stance
While many companies have assumed a short-term business stance, Akihiro Teramachi is keeping his sights on the mid- to long-term, and is looking to capitalize on the new reality of digital technology, aging populations and globalization.
“The business world is shifting more and more to a short-term stance. It’s a bit like being told to be ‘on your mark, get set and go,’ then having to dash. I believe business is more like a marathon, so we need to see things over the longer term if we are to react efficiently,” says Teramachi, Chief Executive Officer and President of the company that developed the Linear Motion (LM) Guide mechanism in 1972.
Impact of Digital Technology and OMNIedge Launch
Teramachi and his staff are not adopting a short-term stance, but are seeking medium to longer term solutions as their clients switch strategies, products and business flows using the latest in digital technology.
Digital technology underpins AI, IoT and robots, all of which are fields where THK solutions are in demand. However, increased digitalization has also created a need to boost their response time to their clients. To reply to those demands, the company developed Omni THK, a platform for communicating with clients.
Following on this development, from 2020 THK will offer a new service—OMNIedge.
OMNIedge installs sensors on THK components embedded in client machines to monitor and predict faults by collecting and analyzing data as well as issuing alerts.
“The data gathered from this diagnosis not only makes our products more visible, but can also be used to help us advance to the next stage,” Teramachi says.
“I believe business is more like a marathon, so it is necessary to see things over the longer term if we are to react efficiently.”
– Akihiro Teramachi, Chief Executive Officer and President, THK
Extended Life Expectancy Presents Staggering Business Opportunity
Amid predictions that human beings may live until the age of 120, the challenge is to keep up with the compound needs of the ultra-aging population. Teramachi believes support robots are the answer, but he sets high entry requirements.
“Human beings are multifunctional animals. Hence, robots that perform only single tasks will not be able to help us in the future. Human symbiotic or human-friendly robots that can perform multiple tasks or jobs are needed,” he says.
That suggests a business opportunity of staggering proportions.
“The global population is approximately 7 to 8 billion people, and approximately 1 billion of those people who live in the advanced industrialized world live in harmony with such human-friendly robots, then we are talking about the birth of a market equivalent to that of the global automobile market,” Teramachi says.
Given that 60% of its workforce now works overseas, it is no surprise that THK is also banking on globalization. The company is building a new factory in India, and Teramachi expects the country to develop into a market second only to China. Further factories are being considered as THK looks to cut the distance between supplier and user.
“When it comes to components produced in volume, supply and distribution lead times become extremely important, and we are setting up a system that allows us to produce close to our clients. I believe this to be an important strategy,” he says.
The adoption of these bold strategies suggests that Teramachi and THK will successfully continue to adapt to the changing business environment of the future.
Akihiro Teramachi graduated from Keio University in 1971 and joined THK Co., Ltd. in 1975. He became a Director in 1982 and Vice President in 1994, before becoming CEO in 1997.