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.
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.
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.
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 wideangle to telephoto. What’s more, Denmarkbased 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 nighttime 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 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 interchangeablelens 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. global.canon