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.

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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.

global.canon

Canon has be­come a ma­jor player in health­care with the ac­qui­si­tion of Toshiba Med­i­cal Sys­tems.

Axis's net­work cam­eras pro­vide sur­veil­lance over ur­ban ar­eas.

Fu­jio Mi­tarai, Chair­man and CEO, Canon Inc.

Canon moved into com­mer­cial print­ing in 2010 with the ac­qui­si­tion of Océ.

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