Japan In 2019: Innovation-Led Growth

One of Japan’s strengths has always been in the area of innovation: Japanese firms are known worldwide for embracing and developing new technologies. The companies profiled in this section are primary examples of ones deploying this strategy.

Seeing the demand coming from healthcare industries around the world, including Japan, Mr. Fujio Mitarai, Chairman and CEO of Canon, has decided to revamp the entire corporate structure at his firm, so as to position medical technologies as a core revenue source. Lucrative opportunities are seen in diagnostic imaging, healthcare information technology and in-vitro diagnostics. With Japan leading the world in imaging scan rates per head of population, the innovation of miniature endoscopes is also an example of how Japanese companies are applying cutting edge expertise to produce better health care.

On the shop-floor, Mr. Akihiro Teramachi, President and CEO of THK is applying robots and AI in the increasing automation of production lines to help off set declining labor availability. He is also putting into place the Flexible Manufacturing Systems necessary to stay abreast of the high-mix low-volume order format likely to emerge as a result of the diversification of newer markets.

Mr. Kouichi Tamai, President and Representative Director of Fuji Xerox, is also leading with innovation. His approach is called Smart Work Innovation, which is a term covering a host of new services from Fuji Xerox. The approach combines aspects of AI, IoT and what the company calls IoH—the Internet of Humans. One example is software for reading handwritten documents with 99.96% accuracy, so data stored on these documents can be converted and digitally processed.

Even a traditional firm such as Kikkoman, which has been making soy sauce for more than 300 years, employs innovations. As Yuzaburo Mogi, the Honorary CEO of Kikkoman Corporation notes, “Innovation drives demand, which drives growth.” Kikkoman has been using innovations in its products and marketing efforts to grow the company into a leader in the global soy sauce market.

On a broad scale, Japan is helping the economy, and companies, with such innovations as the introduction of 5G telcom services—a fifth generation mobile Internet service that is as much as 10 to 20 times faster than those currently available. The rollout of 5G worldwide is expected to boost the sales of electrical components, such as semiconductors, sensors and other technology which are often produced by Japanese firms.

While Japan is buffeted by some headwinds, such as possible spillover effects of the U.S.-China trade dispute and local challenges such as an aging population, overall Japan’s economy remains resilient and the corporate community’s reputation for innovation remains strong. As the world’s third largest economy, Japan has tremendous resources to deploy to overcome any challenges and maintain its position as one of the world’s leading economies with a corporate sector underpinned by innovation-led growth.

Canon: Imaging the Future

Once known only for its camera and office equipment, Canon is evolving into an imaging solutions provider under the leadership of Chairman and CEO Fujio Mitarai.

Fujio Mitarai, Chairman and CEO, Canon Inc.

Once known primarily for its camera and office equipment, Canon is in the midst of a grand strategic transformation into a provider of strategically diversified imaging products and services. Navigating this ambitious journey is Chairman and CEO Fujio Mitarai, who is leading the company through five phases of its medium- to long-term Excellent Global Corporation Plan.

Having successfully implemented the previous four phases of the plan, Canon is carrying out Phase V, covering 2016 through 2020, with a focus on seven key policies: establishing a new production system to achieve a cost-of-sales ratio of 45%; reinforcing and expanding new businesses while creating future businesses; restructuring its global sales network in accordance with market changes; enhancing R&D capabilities through open innovation; completing its Three Regional Headquarters management system comprising Japan, the United States and Europe; cultivating globally competent human resources; and re-instilling the Canon Spirit as a foundation for new growth. However, the acquisition of new businesses has already resulted in dramatic change.

“This transformation is already starting to show results,” says Mitarai. “Currently, new businesses account for about 25% of sales, and by 2020 I’m hoping that will be about 30% of total sales. We’re not just adding new businesses. We’re strengthening them and looking into further M&As.”

Transformation Track Record

It’s been 85 years since Canon’s predecessor, Precision Optical Instruments Laboratory, developed the Kwanon, Japan’s first 35mm focal-plane shutter camera, and the company is still globally renowned for its superior camera products. In 2018, Canon launched the EOS R, a full-frame mirrorless interchangeable-lens camera. It features a highly innovative lens mount, provides more responsive autofocus, and enables unprecedented creative power in photography and visual expression. But while Canon has continued to set industry standards in both consumer and professional imaging systems, it has also been working non-stop to reinvent itself.

Canon’s EOS R is a full-frame mirrorless interchangeable-lens camera with an entirely new lens mount.

Around the time Mitarai became President of Canon in 1995, the shift from analog to digital in cameras and other electronics was already rapidly gathering steam. The switchover was a full trend by 1998, and demand for digital products gave Canon eight years of expanding sales and profit from 2000 to 2007. But even amid this growth, Mitarai had the foresight to launch the Excellent Global Corporation Plan, a strategy to put Canon at the forefront of innovation in the 21st century. So when the financial crisis of 2007-2008 struck and many other companies met significant headwinds, Canon was able to minimize its effects.

“In light of this situation, I began thinking that we truly needed to change our portfolio,” says Mitarai. “I didn’t want to let go of any of the management resources that the company had built up, but I began looking for new businesses in peripheral fields that we believed had potential for growth and could supplement our existing businesses. So in 2010, we acquired the Dutch company Océ, which possessed superb high-speed printing technology. This of course complemented our existing office equipment business.”

Through this acquisition, Canon has been advancing the digitalization of commercial printing by launching innovative products such as the Océ ProStream 1000, which can achieve high-speed inkjet printing on offset coated paper with quality that comes close to that of typical offset printing.

Axis network camera systems support security at Sweden’s Malmö Central Station.

But Canon didn’t stop there. Over the past eight years it has pulled off a series of acquisitions to bolster and expand its businesses. To complement its existing network camera line, it acquired Swedish network camera company Axis in 2015. Working together, Canon and Axis co-developed the AXIS Q1659, an interchangeable-lens network camera that can be fitted with lenses ranging from wide-angle to telephoto. What’s more, Denmark-based Milestone Systems, a dominant player in video management software, joined the Canon Group in 2014, offering Canon customers enhanced abilities in managing multiple network cameras. Yokohama, one of the host cities of Rugby World Cup 2019, has introduced Canon’s network camera system, which is capable of high-resolution night-time video and 360-degree omnidirectional shooting. By introducing this system, Yokohama can help prevent incidents and accidents at large public events. These cameras are also expected to demonstrate their value in helping authorities quickly grasp the situation when a natural disaster occurs.

Healthcare as Canon’s Third Business Pillar

As part of its transformation, Canon is now strengthening its medical technologies in a bid to establish healthcare as one of its three main businesses after cameras and office products. The company aims to become one of the top three players in the field. To that end, Canon acquired Toshiba Medical Systems Corporation in 2016 in a deal worth 665.5 billion yen (US$5.7 billion). The company, now known as Canon Medical Systems, is a leading provider of diagnostic imaging systems such as X-ray, computed tomography (CT), and magnetic resonance imagery (MRI) systems.

Canon is establishing healthcare as one of its three main businesses after cameras and office products.

“Canon actually has a very long history in the medical field, ever since the founding of the company when we were involved in medical equipment such as indirect X-ray cameras,” says Mitarai. “When we welcomed Toshiba Medical into the Canon Group, we knew that we could achieve a lot of synergy, especially in the realm of image-processing technology. We hope to leverage their CT, MRI, and diagnostic ultrasound systems expertise for joint research to unleash further innovations.”

Collaborating with Harvard Medical School teaching affiliates and other leading medical centers around the world, Canon is now focused on three key areas: diagnostic imaging, healthcare IT, and in-vitro diagnostics. What’s more, Canon is also working on developing new fields through innovations such as miniature endoscopes of less than 1mm in diameter and robotic systems that will automatically guide needles into the body.

“Of all our new business areas, I’m most interested in medical,” says Mitarai. “The medical world is so broad. At the moment, the scope of our business is limited to diagnostic equipment, but there’s also regenerative medicine, including induced pluripotent stem (iPS) cells, the biochemical industry, and pharmaceuticals. I’m sure it will take a lot of time before we make inroads, but I’m hoping we can establish a presence in some of these medical fields as well. I believe that the medical business has the broadest potential for growth, and I would like them to make focused investments.”

Innovating in Mainstay Businesses

Some of these new business areas, such as medical and network cameras, may at first glance appear very different. But these are all areas that can increasingly make use of advanced technologies such as artificial intelligence and automation. For instance, Canon’s network video solutions use deep learning in tandem with high-resolution network cameras to automatically count the number of people in a crowd and infer the age and gender of people from live video. Canon is also developing a Wide Area Monitoring System for security purposes that will be able to track individuals and even anticipate their next action using multiple cameras.

“Even in medical imaging and diagnostics, AI will be crucial,” says Mitarai. “Until now, doctors have been diagnosing illnesses from images using their own eyes, but in the future AI will have advanced to a point where it can diagnose illnesses while doctors perform other tasks. I think AI can be applied in many areas to advance our existing businesses.”

Mitarai also aims to strengthen and expand the scope of Canon’s industries as the business landscape undergoes rapid change. As smartphones feature better and better cameras, consumer camera sales will continue to decline, but new products with innovative features, such as mirrorless interchangeable-lens cameras, can increase the company’s market share. That’s also the case in the B2B market in areas such as electronic newsgathering. At Rugby World Cup 2019 and other large-scale international sporting events in the near future, Canon hopes to show the world its broadcast camera and display technologies that realize extremely high-resolution 8K imaging. Meanwhile, the automotive industry should continue to generate strong demand for lenses and camera systems amid the rollout of autonomous vehicles. Manufacturing plants are also boosting demand for cameras used by robots and for factory automation.

“Canon has a hand in all kinds of camera-related applications,” says Mitarai. “Perhaps I shouldn’t call these products ‘cameras,’ but ‘optical devices’ from now on. Canon’s optical technologies are being applied in various areas now. So I think that’s where our camera technology can continue to play a very important role in the industrial world.”

Looking to the Future

In 2017, Canon marked its 80th anniversary while its sales surpassed 4 trillion yen (US$36.1 billion) for the first time since the financial crisis of 2008. With Canon’s new businesses in place and ready to drive growth, the company is set to rebalance its portfolio in order to stay flexible. Canon’s current business is made up of four segments: the Office unit accounts for 45.7% of sales, the Imaging System unit 27.8%, the Industry and Others unit 17.9%, and the Medical System unit 10.7%; sales between segments account for 2.1%. For Phase VI, Canon’s next five-year plan spanning 2021 through 2025, Mitarai thinks the new businesses that he’s now fostering could contribute up to 35% of sales. That means existing businesses will need to continue to grow at around 2-3% annually while new businesses will have to grow 7-8%.

But what kind of company will Canon become when this grand transformation is complete?

“Of course, Canon is always going to be a camera and office equipment company, but we’re also adding network cameras and commercial printing presses to our portfolio,” Mitarai says. “However, with the growth of our B2B businesses, the proportion that B2C makes of our overall business could decline.”

As for Mitarai himself, he’s showing no signs of slowing down, even at the age of 83. His secret? “You just have to keep following your dreams,” he says with a smile.

A native of Kyushu, Japan, Fujio 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 the United States, where 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.



A Proven Recipe For Success

An inconspicuous Japanese firm that doesn’t make cars or cameras or TVs became a business pioneer in America and replicated that success story around the world.

Yuzaburo Mogi, Honorary CEO and Chairman of the Board of Directors, Kikkoman Corporation

It is a common observation in boardrooms and CEO conferences around the world that Yuzaburo Mogi, the Honorary CEO of Kikkoman Corporation, has learned to defy time. Although he joined the company back in the 1950s and became its President in 1995, he still keeps up a daily work regimen that embarrasses younger colleagues. His energy and positive attitude have driven Kikkoman from being a well-known domestic producer of soy sauce to a growing giant in the global foods business.

Kikkoman has been making its mainstay product, soy sauce, for more than 350 years, and Mogi’s family has played a key role in it for most of that time. In 1960, the young Mogi went to the United States to study Western business and earned an M.B.A. from Columbia.

Everything he had learned overseas told him that the only way for the company to grow was to become more of an international business, and that meant producing locally. He surveyed numerous possible sites in the country and repeatedly explained the benefits of establishing a production base in the US to Kikkoman’s senior management, which eventually led to the successful completion of the company’s first US factory.

“We started shipping product from our Wisconsin factory in 1973, and while we faced some difficulties in the beginning, after the first few years we started to grow, and we’ve been growing ever since,” he reminisces.

Success in America was just a stepping stone for the firm. “We created a sound business model in America, then replicated it in Europe, Asia, and around the world,” Mogi explains. “Now we derive about 70 percent of our operating income from overseas operations.”

Kikkoman’s legendary success has made it a case study in famous business schools worldwide. Students examine what secret ingredients made a soy sauce maker one of the world’s most admired international businesses.

To Mogi, there is no big secret: “The first step was getting people to try our product. At first they didn’t even know what shoyu (soy sauce) was, and then gradually they discovered that they like it. The next step was to show them that they can use it in their own daily cooking to enhance flavors. We are strong believers in ‘food culture’ and ‘food education,’ so it was natural to show people in different countries how they could use this all-purpose seasoning to make their own foods taste even better.”

One might say that showing your product to potential customers doesn’t require marketing genius. There must have been something else.

“Well, another key to success abroad is chiiki kyosei, or living in harmony with the place where we are doing business. That means buying goods and raw materials locally, hiring locally, using local vendors, practicing environmental conservation, and especially, interacting proactively with the local community. One area that we care deeply about is education,” said Mogi. There are many examples, but one clear case was just a few months ago: When the Wisconsin factory celebrated its 45th anniversary, the company donated US$600,000 in scholarship funds to a group of six local high schools. “Supporting education is just one way that we engage with communities. It goes far beyond what most companies think of as good corporate citizenship.”

Mogi is a highly respected elder statesman in the business world both inside and outside of Japan. That makes his views on the state of the economy particularly influential: “Companies that produce added value reap profits. Added value translates to GNP growth. In the 1960s and ’70s, Japanese companies were highly innovative. By constantly adding value to products, they created enormous demand, which led to a huge economic boom. In order to grow now, companies need to become innovative again. It is essential to create new demand, and that means a need for innovation and for new investment. Innovation drives demand, which drives growth.”

For half a century, Mogi says, Kikkoman has worked hard to be innovative, not simply to expand its product range, but to create increasing demand for its products. And it is still growing worldwide. Clearly, they have found a recipe for success that continues to serve the company well all over the globe.

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 Grow Core Business Despite Uncertain Global Economic Outlook


Akihiro Teramachi, Chief Executive Officer and President, THK

Like its illustrious past, the future is looking bright for THK, where President and CEO Akihiro Teramachi sees the increasing shift to industrial automation as an opportunity to boost the fortunes of the company that pioneered the Linear Motion Guide. “I see major opportunities ahead,” he says.

THK was an early adopter of Artificial Intelligence (AI), the Internet of Things (IoT), and robotics, and Teramachi expects the company to rely increasingly on non-human input in its manufacturing operations. He anticipates a growing lean to IoT amid the ongoing transition to 5G, and the company expects increased orders from the makers of a variety of electrical components, including semiconductors and sensors.

However, US-China tensions cloud the future, and harbor the potential to damage the global economy.

“We are now seeing significant impact from the US-China trade war. In particular, China is already beginning to postpone investment activity, and I feel that the effect of this is beginning to have repercussions in Europe and Japan as well,” he says. “Looking ahead, determining whether this economic war continues and, if so, for how long, will be a major challenge. We must pay close attention to developments.”

With a view to staying ahead of the pack, Teramachi and his staff are forging ahead with the commercialization of OMNI edge, and operational trials are due to begin in February 2019. OMNI edge is a new predictive application that brings together the THK Sensing System—a technology for quantifying damage and the lubrication status of the Linear Motion Guide—with edge computing to facilitate the simple creation of IoT networks and safe and secure data gathering.

“OMNI edge will provide our clients with new, unprecedented services, and help drive our company toward further growth,” says Teramachi.

The use of AI can reap huge benefits, but increasingly intelligent robots may soon emerge that are capable of disrupting the existing master-servant relationship between humans and machines. Teramachi urges his staff to hone their skills to keep up.

“Humans must acquire the skills necessary to be able to control robots, AI, and computers, otherwise they run the risk of being displaced by them,” he says.

At the same time, Teramachi maintains a positive outlook for his company and, in February 2018, THK adopted a five-year management target that aims for consolidated sales of 500 billion yen (US$4.4 billion), and an operating profit of 100 billion yen (US$881 million). The sales breakdown in the period to the end of December 2022 is expected to see the industrial machinery business account for 350 billion yen (US$3.1 billion), and the automotive and transportation business expand to 150 billion yen (US$1.3 billion).

“The order cycle and work-related cycle from order to delivery in the transport equipment business is approximately four years, meaning our current sales activities are aimed at delivery in 2022. In that sense, we have a target that is, to some extent, within our sights,” Teramachi says. “As the IoT era strides firmly forth, the industrial equipment business will develop new products and services such as OMNI edge, and we will add these new business areas to our existing line-ups to achieve further growth.”

Ultimately, while it might not be plain sailing in the short term, Teramachi is taking a mid-to-long-term stance, and looking to navigate his company toward calmer, more profitable waters in 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 taking over as CEO in 1997.




Fuji Xerox: Making Work Smarter Through Innovation

President Kouichi Tamai is transforming Fuji Xerox into an AI-powered solutions provider for smarter work.

Kouichi Tamai, President and Representative Director, Fuji Xerox Co., Ltd.

In June 2018, Fuji Xerox appointed Kouichi Tamai as its new President and Representative Director. It came at a time of historic change for the company. Fuji Xerox is transforming itself from a photocopier manufacturer into a diversified solutions and services provider, while withdrawing from unprofitable businesses and pushing ahead with aggressive structural reforms.

“In the first half of this fiscal year through September 30, 2018, sales were down 6% over the previous year as we strategically reduced unprofitable businesses, but our operating profit was up 63%,” Tamai notes. “We are determined to reinvent ourselves.”

Building on a Strong Foundation

Established in 1962, Fuji Xerox is 75% owned by FUJIFILM Holdings Corporation and 25% by Xerox Limited. It’s one of the world’s longest-running joint ventures between Japanese and American companies, and has the largest market share in most of the countries or regions where it operates, which are Japan and Asia-Pacific. But in 2008, Fuji Xerox’s leaders decided that its business model had to evolve. It would no longer depend on selling hardware such as multifunction printers.

Tamai became Corporate Vice President of Fuji Photo Film Co., Ltd. (currently called FUJIFILM Corporation) in 2006, leading various businesses there in achieving double-digit growth. He then served as Chief Innovation Officer of its holding company, spearheading company-wide reforms. His new leadership role at Fuji Xerox comes as the venture is deploying innovative technologies to make work smarter and more streamlined.

Fuji Xerox’s new ApeosPort-VII C multifunction printer

What is Smart Work Innovation?

Like a Renaissance man seeking new ways to improve existing methods of doing things, Tamai is spearheading a change in how people work. Fuji Xerox is rolling out new services under its value proposition strategy: Smart Work Innovation. Launched first in Japan in 2018 with a plan to progressively deliver later in the Asia-Pacific, the strategy brings together technologies in the areas of artificial intelligence (AI), Internet of Things (IoT), and Internet of Humans (IoH). General workers as well as specialists can benefit from these services. The overall aim is to enhance business competitiveness by automating repetitive tasks, sharing professional expertise among all workers, providing secure communications, and using data to foster creative ways of working.

Tamai cites several examples of Smart Work Innovation. One is automatic data extraction from handwritten forms. This technology, Document AI, can recognize handwriting with an extreme accuracy of 99.96% and convert the information into data for processing. The solution can be used to ingest data from company invoices and other handwritten documents. In a case study at a financial institution, worker productivity doubled with the platform.

“Smart Work Innovation liberates workers from repetitive tasks and opens professional expertise,” says Tamai. “Particularly in industrialized countries, simple tasks can be automated, giving people more freedom to do creative work.”

Future Edge, a new hub for open innovations in Ebina City, Kanagawa, Japan

In November 2018, Tamai unveiled a concrete example of the Smart Work Innovation approach with the new ApeosPort-VII C and DocuCentre-VII C series of multifunction printers. These 16 cloud-connectable printers make work easier with a simple connection to smartphones or other mobile devices, enabling users to print from anywhere. They are also equipped with an array of enhanced security measures that are superior to those of competing printers, meeting the needs of data privacy and security for both hardware and software.

Envisioning the Future

Tamai is confident that the Smart Work Innovation approach will help boost Fuji Xerox’s operating profit ratio to reach double digits in fiscal 2019. His confidence is backed by the experiences he accumulated at FUJIFILM Holdings as he leads Fuji Xerox toward its 60th anniversary in 2022.

“Fuji Xerox will still have printers, but they won’t be just for printing or copying,” says Tamai. “Our printers will serve as a core portal in the office that connect with various cloud and other services leveraging AI, IoT, IoH, and other accumulated technologies. This is to serve our focus of providing customers with solutions and services to streamline business operations and boost productivity; all in all, to resolve social issues such as answering to the shortfall in human resources or workstyle reforms.”

For Fuji Xerox, the utilization of leading technologies such as AI and IoT goes beyond office work. To pioneer the future of communications in commercial printing from a global perspective, Fuji Xerox unveiled in 2018 a new hub for open innovations—dubbed Future Edge—inside its product development site in Ebina City, Kanagawa, Japan. Here, the company works closely together with its customers on transforming communications, utilizing technologies such as AI, IoT, and even robotic process automation (RPA). Future Edge also aims to demonstrate how these technologies can enhance the productivity of print operations and reform workstyles by enabling people to access the state of print jobs remotely and automate workflows that require human labor. More than 2,000 people have visited the facility thus far from Japan and abroad, from both inside and outside the commercial printing industry.

“Fuji Xerox’s mission is to help businesses work creatively and concentrate on what matters most to them,” Tamai continues. “With my whole heart, I want to help customers with a smarter way to work.”

Tamai has a skillset that’s well suited to the job. His patience, determination and attention to detail are plain when he opens one of his notebooks, revealing lines and lines of almost obsessively neat Japanese script. He is also a skilled draughtsman from his training as a mechanical engineer, and is proud to show off his immaculate technical drawings. It’s no wonder some of his colleagues used to call him “Da Vinci.”

Kouichi Tamai joined Fuji Xerox Co., Ltd. in 2017 as the Deputy President and Representative Director. He holds a doctorate degree in engineering from the Faculty of Engineering, University of Tokyo.


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