The CEOs Breaking New Ground in Japan

Bold investors will find untapped opportunities in Japan — or so claim the country’s leading chief executives.

While the country has suffered from ultra-low interest rates and tougher global financial regulations, CEOs chosen for Institutional Investor’s 2018 All-Japan Executive Team said the developed market is an excellent testing ground for new technologies, such as airless tires in the automobile industry and giant conveyor belts in construction. 

“Digitalization presents us with a big opportunity,” said top-ranked bank CEO Nobuyuki Hirano of Mitsubishi UFJ Financial Group. “It isn’t just about replacing people with machines — we want to make our services simple, speedy, and frictionless for customers.”

Native companies have become increasingly specialized to deal with the country’s demographic challenges, such as the low birth rate and aging population. “Aging customers have very specific needs and the quality requirement is very high,” said Kinya Seto, who placed first in the construction category as chief executive of LIXIL Group Corp. “If the products, services, or the business model are successful in Japan and at the same time can be adapted to different cultures, they have great potential in the global market.” 

Rather than waiting for interest rates to rise, Japanese companies have been forced to adapt. Banks like Mitsubishi UFJ are moving away from lending to service-fee-based businesses like wealth management and consulting. Meanwhile, connected devices are revolutionizing everything from construction, where the internet of things is helping to prevent water leaks in the home, to mining, where IT systems are increasing production. 

Some chief executives, like Bridgestone Corp.’s Masaaki Tsuya, are looking forward to the 2020 Tokyo Olympic and Paralympic Games to demonstrate this potential to a global audience. “The Games will also become a great showcase for our new technologies, highlighting additional opportunities for investment,” he said. 

Due to the revolutionary trends in science [and] technology as well as the evolution of society and consumer behaviors, we are experiencing dramatic changes. We fully expect these changes to continue and to accelerate during the years to come. The biggest challenge will be to be proactive in developing products and services that will be responsive to the ever-increasing requirements and expectations of society and consumers now and well into the future. 

Our innovation focus is in three areas: technology, business, and design. In addition to innovative products such as run-flat tires and air-free tires, we are proposing new business models that go beyond traditional products. For example, we are developing NVH (noise, vibration, and harshness) solution systems for passenger cars which will include and integrate tires, anti-vibration products, seat-pad, and IT systems. We will also be launching an “end-to-end” solution system for truck and bus fleets incorporating tires, retreading, maintenance services and IT systems that will position us as the provider of choice with these fleets. And in the mining industry, we are working with mine operators on solution systems which include products such as giant tires, conveyor-belts, and industrial hoses combined with maintenance services and IT systems that minimize down-time and maximize mine production. 

Our society is stable but rather slow to change. And although Japan has a decades-long commitment to free enterprise, there are still many untapped resources and undiscovered advantages in Japan. We believe that the 2020 Tokyo Olympic and Paralympic Games will give us a great opportunity to facilitate and accelerate positive changes for our society and companies.

From the Bridgestone perspective, 2018 marked our first experience with the Winter Olympic Games as a TOP partner. Following that valuable experience in South Korea, and building on our experience in Rio at the 2016 Summer Games, we’ve begun in earnest our preparations for the Tokyo 2020 Olympic and Paralympic Games. This year also marks a time of reflection for us, as we remember a number of events and milestones that have shaped who we are today, including the 30th anniversary of Bridgestone’s first significant step on its globalization journey—the Firestone merger in 1988. In addition, 2018 marks the 50th anniversary of the establishment of our corporate motto: “Serving society with superior quality,” as well as the award of the prestigious Deming Prize. So while we are proud of our history and the progress of our journey, and have taken time this year to reflect on these milestones, we look forward to the continuation of our transformation journey throughout 2018, working to accelerate our progress and identify new successes. 

The biggest challenge facing the water and housing products industry, as well as the manufacturing industry in general, is the perceived commoditization of products. Many consumers today feel there is little to differentiate between two brands as long as products perform as they are expected to. As a result, even distributors are establishing private brands, further driving the rise of commoditization. But we also live in the age of digital information in which the consumer’s voice is truly empowered and emboldened, in which consumers have the tools to compare products. In this environment, we need to prove the value of differentiation and show that we can deliver more than our competitors. 

From technologies to business models, we are bringing an entrepreneurial approach to our industry. We have developed ceramic sanitary ware that can maintain its shine for 100 years, among the first internet of things products in the water technology industry that sense and prevent water leaks in the home, while through new direct-to-consumer business models that leverage digital technologies, we are enhancing the customer’s journey. But it is not just about innovating the most high-tech, it is also about innovating to solve social challenges. Today, 2.3 billion people around the world still do not have adequate access to sanitation. We are creating a sustainable social business model to help overcome this through affordable and life-saving toilet products that have already brought improved sanitation to over 6 million people in more than 15 countries worldwide. 

Japan can serve as a laboratory for the future high-end market. The market is very developed and demanding, while aging customers have very specific needs and the quality requirement is very high. We believe our design ability will be the key to adapting our cutting-edge water products so they are successful in international markets.

In the water and housing products industry, it will be about the emergence of new technologies. We are seeing the rise of internet of things products as well as systems that will change how we live, helping to truly create a better home. 

The trend of transitioning away from fossil-fueled cars is driving a shift from engines to electric motors. All of the basic functions of automobiles—driving, turning, and stopping—depend on motors. Securing the supply of all these motors is the biggest challenge facing our sector right now. At the same time, it is also a great opportunity for motor manufacturers.

With the move away from fossil fuels, the demand for energy-efficient, lightweight and compact products is growing. We have made it our mission to develop lighter, smaller, and more efficient motors. 

My advice is to invest in companies with strong technological capabilities and stable growth potential independent of the exchange rate of the yen or the state of Japan’s economy. 

2018 will become a year marked by changes in technological trends that impact the future of mankind. In the automotive industry, this year will be remembered as the first year that electric and plug-in hybrid vehicles started gaining widespread traction. In the robotics field, 2018 will be the first year of an era of human-robot collaboration.