Operation ideals in overseas deployment

Ichioka: Business is rapidly changing in the markets of East Asia, such as my own target market, the Chinese market. However, I haven’t seen any major changes in our operations since I first joined the company. For example, I think that if we were to shift decision-making more overseas it would accelerate the process. Chinese and Taiwanese business moves extremely fast, and I feel that there’s a lot of business that we could capture if we made decisions faster. What are your opinions on changing the contents of operations based on market conditions?

President Ishii: Lately I’ve had more opportunities to go overseas, and every time I do I am impressed by just how fast the pace of business is. You often go overseas for sales purposes, so I’m sure you’ve seen just how fast work is conducted. There are many companies in China which will be increasing their sales ten-fold five years from now, so when you come back to Japan I’m sure it seems like the way business is conducted is frustratingly slow. I think this realization itself is important, and because our work consists of providing customers with greater value, I believe we need to actively make changes where changes are needed.

Ichioka: Looking at the work carried out in the Japanese headquarters, I feel that in a lot of cases efforts are dependent on the skills developed by individual company members. There are good aspects to this, of course, but I don’t think it will be possible to maintain the same training and operation processes within our rapid overseas shift. On the contrary, factories may be becoming over-systematized and inflexible. It would be best if we could create an environment that sits comfortably between those extremes.

President Ishii: There aren’t yet any clear answers about what, specifically, we should do, but it’s important to speak up before losing that mentality. There are internal improvement projects underway, and I hope you can take steps in these projects to address issues like this. I’m not saying that one voice isn’t enough to bring about changes, but you need to take steps to make sure your voice is heard. I think we can become a better company if you join your voice with those of the people around you, spurring your division into action, which will spur your group into action, which will then spur the company into action. Young people like you are driving the changes to this company, and I keenly feel the need to create an environment in which voices like yours are amplified, helping bring about change to the entire company. We need to have the capacity to accept these changes, and to actively mutually engage so that we can gather more feedback and opinions from the front lines.

Corporate acquisitions aimed at strengthening business

Ichioka: When our team discussed how we can strengthen the company over the next ten years, the topic of corporate acquisitions came up. For example, given the global material shortages, I think handling material procurement within the company would serve as a source of competitiveness. What do you think?

President Ishii: You’re asking me if I think corporate acquisitions are feasible. Of course, I believe they are potential options for future business expansion. In addition to M&As,( Mergers and Acquisitions) there are also other options such as partnerships and collaborations, and I definitely think that business expansion and reinforcement through strong relations with outside parties is an option that is on the table. However, I can’t respond affirmatively if the M&A itself is seen as the goal. If, as you say, it’s an option for strengthening the company, then I would say “Yes.” However, successful M&As are difficult. One manager expressed how difficult they are by saying, “88% of M&As are failures. 10% are in a gray zone, where it’s difficult to declare whether they are successes or failures. Only 2% are unqualified successes.” That’s the actual situation when it comes to M&As.

Ichioka: As you said, we discussed M&As purely as means to an end, not ends in themselves. When we considered whether the goal would be to improve our technical strengths, our purchasing power, our sales strengths, or our system strengths, the conclusion we arrived at was that it would be bolstering our purchasing power. Like you said, it would be a difficult process, but this holds for other companies as well. We thought that it was precisely because of the difficulty involved that it would contribute to the future strength of the company.

President Ishii: If we’re talking about purchasing strength, then we’re talking about material business, but we don’t have any material business professionals in the company, so unless we come across some truly talented people in our partnerships, I can confidently state that this approach would not end in success. This topic is one that requires deep thought concerning the goals of the M&A, what kind of synergy it could produce, what management approach to use, and the like. We would need to create a dedicated team to lead this effort. For an M&A to be successful it is absolutely essential to have tip-top spirit, technique, and physical condition.

Ichioka: At present all we can do is manufacture and sell products. That’s precisely why I think we need to strengthen our material procurement capabilities. In China, for example, it’s not unusual for us to capture business from local component manufacturers that are unable to procure materials. Seeing that, I feel it’s truly important for Hirose to reinforce its own ability to purchase and procure materials.

President Ishii: We recognize this as a challenge we face now and will continue to face in the future. Setting aside the issue of M&As, improving relations with suppliers to achieve greater collaboration is one of our management challenges. To put it bluntly, for suppliers Hirose is just one of many clients. Reinforcing our procurement and purchasing capabilities will be a critical issue that we need to thoroughly address.

Ichioka: Today’s discussion has impressed on me the potential of methods other than M&As, such as partnerships and network-building. In our team discussion we weren’t able to get down to details, but one possibility we discussed was using outsourcing, AI, or the like for our clerical work in order to free up sales resources for use in other areas, such as formulating marketing measures. What do you think about that?

President Ishii: I totally agree. Ultimately, business success comes down to employees, and companies can’t survive without a system for leveraging peoples’ wisdom and capabilities. I’d like to continue to deploy IT – though it’s still too early to tell to what extent AI can be leveraged – and more actively introduce new technologies which help improve efficiency so that our people can engage in more innovative work. I’d especially like for us to provide work environments like these for our young, talented employees.

Ichioka: Thank you for sharing your thoughts with me today.