CANON: STRUCTURAL CHANGES SPUR STRONG GROWTH AT FUTURE-DRIVEN IMAGING TECH LEADER
Innovation and developing new areas of business are at the heart of Canon’s Excellent Global Corporation Plan, as the company’s Chairman, Fujio Mitarai, explains.
One could be forgiven for thinking that Fujio Mitarai has discovered some secret energy source all of his own. Whatever force powers the dynamic Chairman and CEO of Canon Inc., it must be both potent and inexhaustible, because he is always in motion. Even after decades at the top at Canon, he never seems to tire or slow down, and he remains the firm’s most knowledgeable and articulate spokesperson.
“Companies all talk about innovation these days,” he says forcefully. “For Canon, it is a lifeor-death issue. We must keep innovating if we want to grow.”
Mitarai notes that all consumer product firms feel constant pressure to innovate by developing new products, but for Canon, the bigger challenge was to transform the very structure of its business.
“Towards the end of the 20th century, we saw the digital boom coming, and we shifted from making analog products to digital. We also increased manufacturing efficiency tremendously through automation. Both of these were smart moves, and they led to increased growth for several years. However, it also became clear to me that our mainstay product lines were maturing. When I looked at our cameras, printers and copiers, I knew that they would continue to grow, but never as strongly as they did in the past.”
The inescapable conclusion was that wringing more profitability from mature markets would be difficult. The answer, Mitarai felt, was twofold: the company must continue to be innovative with its old product lines and create state-of-the-art products, but it must also rethink its business portfolio. Canon needed to expand in areas where it already had expertise and look for new areas where it could leverage its existing technologies in higher growth business fields.
Pivoting and Accelerating
Fortunately, the firm had both the resources and the strategic vision to execute this pivotal shift. In less than a decade, Mitarai oversaw a major transformation in the Canon Group’s business portfolio, resulting in new businesses that are already turning into powerful growth engines for the company.
For example, Canon is known worldwide for its cameras and lenses, but concentrating only on individual consumers was not leading to strong growth. The obvious answer was to shift more towards B2B solutions, selling more professional-use products to corporate clients such as film studios. The company was able to do that with ease, and Canon products are now widely used by professional cinematographers. But Mitarai wasn’t satisfied. He was still looking to the future.
“The world is steadily becoming more crowded and more interconnected,” he
explains. “I see a growing need in every modern society for a greater sense of personal safety and peace of mind. Contributing to increased safety and security will be a huge growth area. But how could Canon achieve that?”
One key sector was network cameras. Conventional surveillance cameras have been used in crime prevention for some time, but the concept of utilizing networks of high-resolution cameras backed by top-end image processing, facial recognition software and other analytics is already taking hold in retail marketing (analyzing customer traffic, for example) and in factories and warehouses, where the technology is used to critically examine workflows and operational bottlenecks to improve efficiency. The number of potential applications seem to be increasing by the day.
“I knew Canon had a great deal to contribute to this business—not just cameras, lenses, sensors and digital image processing, but also our manufacturing know-how and our global sales network. Even so, we were newcomers to this market,” Mitarai admits. “In order to enter the network camera market, Canon first built an appropriate internal organizational structure. Then we examined the global market and looked at the competing firms, and only then did we decide to partner with a few of the world’s top companies.
“That led us to acquire Axis, a Swedish firm that excels in network video technologies, and the Danish company Milestone Systems, a leader in image processing software, and welcome them into our Group. By adding Canon’s lenses, sensors and other imaging technology, we created one of the world’s leading network camera companies. And this area is going to grow strongly for years to come.”
Game-changing Growth
Mitarai is an active spokesman for the value of network cameras in multiple fields, and also for the power of Canon Group companies to contribute to society by developing this technology. His other big concern for the future is the healthcare business, which is another significant area where the firm can grow by helping to improve lives. Canon was already well known for making excellent diagnostic and imaging devices, such as portable X-ray detectors. However, it did not make the bigticket items, such as CT scanners, that dominate the sector.
Then, the perfect complement to its business appeared on the horizon, a development that Mitarai relates with obvious joy. “When we first learned that Toshiba Medical Systems Corporation (TMSC) might become available, we looked at the synergies with our existing Medical Equipment Business Group and knew immediately that this was an ideal match. This was not merely an opportunity for Canon to become a major player in medical equipment. It was also a good way to use our vast knowledge and experience to help humankind.”
In 2016, Canon formally acquired TMSC, one of the world leaders in large-scale medical equipment such as CT and MRI scanners, as well as ultrasound imaging systems. The union of Canon’s and TMSC’s technologies has produced one of the world’s strongest and most innovative firms in the field of medical equipment: Canon Medical Systems Corporation.
“We need to grow by identifying and developing new business areas,” Mitarai says. “And wherever possible, we want to do just what we did with network cameras, medical equipment and other fields—develop businesses that provide real value to society.”
In much the same way, the company also re-examined its printer business. Canon is well known for both home-use and officeuse printers. Yet those products were not growing as they had in the past, and incremental innovations would not return doubledigit growth.
“We looked around to see what was growing in the printing sector,” Mitarai explains, “And the answer was commercial printing—catalogs, posters, including package
printing, and so on. The commercial printing business is a different world from the field of printing we were used to. So, in 2010, we welcomed the Dutch firm Océ, a major name in the business, into the Canon Group. The synergies between our two businesses are tremendous.”
Achieving Global Excellence
Canon is currently in Phase V of a long-term effort it calls the Excellent Global Corporation Plan. The current five-year plan, due to conclude in 2020, is designed to carry the company to new heights, including an increasing share of B2B revenue and the growth of new businesses.
To outside observers, however, it appears that the company has already accomplished more than that which is generally set out in any medium-term plan. Specifically, it successfully executed two of the most significant shifts in the past few decades of Japanese business. First, Canon began a strategic shift towards B2B products. Then, it identified key business fields that it wanted to develop, located the ideal global partners to expedite those developments and employed Mergers & Acquisitions (M&A) to accelerate the adoption of new technologies.
During Phase IV of the plan, the firm acquired the technologies it needed to build a stronger, innovation-driven business, and by the start of Phase V it was already reaping the benefits of its vision. Few companies even half Canon’s size could execute and digest such a strategic pivot and book the results so quickly.
Putting it succinctly, Mitarai notes that growth from old-line products was in single digits last year, while total growth from new businesses was more than twice. He points out that these numbers will naturally decline over time, but the fact that in such a short time they are adding to Canon’s bottom line (and boosting dividends for investors) is impressive.
“We will continue to use M&A to strengthen our healthcare, printing and network camera businesses. We will do whatever is necessary to support these new businesses and seek out others.”
And what other areas might be of interest to Canon? “We are looking seriously at the Internet of Things (IoT). IoT involves optical sensors that can transmit data. Canon has the lenses and the digital image processing to make all kinds of sensors, but we don’t have the large-scale networking technology or the software to run it. We believe the control system that connects and manages those huge data flows is the key to IoT. That will involve AI, so AI networking technologies will be a major growth area. That is one of our next big targets.”
So should we expect to see Canon making bold acquisitions in the AI field soon? Mitarai is tactful with his answer. “We aren’t limited to using M&A. We can partner with universities, private companies or public institutions. There are many ways to move ahead.”
In conclusion, it seems only fitting to ask what drives this executive dynamo to keep both himself and his company in constant motion. His reply reflects his perspective on the Canon of yesterday, today and tomorrow.
“The period from about 2000-2007 was a golden age for us, with constant increases in sales and profits from our mainstream products. Then those areas matured, and now we are developing a range of new businesses, which are all doing well. I expect to see a second golden age for Canon in the very near future.”
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 the U.S., where he stayed for 23 years, eventually becoming President of Canon U.S.A. Back in Japan, he was later appointed President, CEO and then Chairman of Canon.
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