Mr. Hodo contributes extensive experience in corporate management and a broad knowledge of digital business operations from a career that included serving as the former Representative Director and President and later Chairman of Accenture Japan Ltd. Appointed Outside Director at Konica Minolta in June 2018 upon selection by the Nominating Committee, Mr. Hodo is currently a member of the Nominating Committee and the Audit Committee
Mr. Fujiwara provides extensive experience and broad knowledge in corporate management, including mobilizing M&A to foster new businesses, from a career that included serving as President and Representative Director and later Vice Chairman and Director of Asahi Kasei Corporation. Appointed Outside Director at Konica Minolta in June 2018 upon selection by the Nominating Committee, Mr. Fujiwara is currently the Chairperson of the Nominating Committee and a member of the Audit Committee
How do you evaluate the previous SHINKA 2019 medium-term management plan?
- Fujiwara
- The SHINKA 2019 plan was created when there was a growing sense of crisis about whether the company could survive with the accelerating trend toward a paperless society. The plan therefore focused on a thorough transformation of its business portfolio mainly through M&A and developing new businesses. Nevertheless, the plan has not yet fully produced the results that were aimed for.
- Hodo
- I thought the SHINKA 2019 strategies would be effective, and particularly thought the measures to develop Workplace Hub, bio-healthcare business, and other new businesses made a lot of sense. However, the plan’s execution speed has been a major stumbling block since, at this point, neither strategy has produced the concrete results we had expected with the new services and solutions.
- Fujiwara
- The plan was further derailed in fiscal 2019 when the intensifying U.S.-China trade friction and the COVID-19 pandemic radically upended the economic environment. The pandemic appeared just when the company was set to turn in a strong fourth quarter, which accounts for a relatively high percentage of its annual revenue. The heavy weighting on business near the end of the fiscal year is an issue that I’ve been pointing out as needing to be dealt with since I was appointed. The housing business, where I was also working as a manager, had the same issue of concentrated revenue at the year end, but management has been able to level it out across the year while simultaneously increasing business productivity and creating advantages for customers. With determination, management should be able to achieve this for the whole company.
That imbalance is another reason why transforming the business portfolio is so urgent. As the core business shrinks, it will be important to invest management resources in new businesses and promote the company’s metamorphosis as a corporate entity.
The Workplace Hub business is a prime example. The new platform is expected to generate enough revenues to essentially drive the company, but getting a new business up to speed requires considerable amounts of both time and money. To build it into a pillar of Konica Minolta’s business portfolio will also need to fine-focus the business target and use its limited resources efficiently. Right now, I still feel that management needs to narrow down its objectives.
- Hodo
- It is certainly important to have clear vision when entering any kind of new business. Management was also a bit optimistic about the projected contributions from business acquisitions and needs to adjust its expectations. Although taking risks is necessary, it’s also important to carefully determine if the expected business synergies and investment returns are worth the risk.
- Fujiwara
- At the same time, in the core Business Technology Business, the technologies will continue to be relevant even if the move to paperless shrinks the market. From that perspective, the company needs to consider strategies like pursuing added value instead of revenue volume, or encouraging industry restructuring to increase market share.
What are your expectations for
the DX2022 medium-term business strategy launched in 2020?
- Hodo
- Basically, I think management should carefully examine the strategies and initiatives of SHINKA 2019 and continue moving them forward. There are also some parts that need to be reset. Before continuing with the business portfolio transformation, I think the company needs to do detailed analysis of the changes in the external environment as well as its actual ability to execute the strategies where it had difficulties during the previous plan.
- Fujiwara
- I also think management should continue in the fundamental direction of SHINKA 2019. As you mentioned, though, the external environment has changed considerably. The COVID-19 pandemic is changing the economy and society in many ways and, even more importantly, people’s values are changing dramatically. Changes like these make it very difficult to reach an absolute consensus about which specific business model would be the most effective. The paradigm is shifting from “what is correct” to deciding a direction where “the first to move wins.”
- Hodo
- Workplace Hub is a perfect example. It’ a proprietary business of Konica Minolta offering a very unique approach. The Workplace Hub business structure with planning, development, marketing, and operation management integrated across Japan, the United States, and Europe is uncommon even for global corporations. That in itself sets a high hurdle for establishing the business, which means it will take more time to get the business on track. But it also means that the business has plenty of potential to become a pillar of future business for the company if the business execution structure is thoroughly verified and improved.
- Fujiwara
- One of the objectives of DX2022 is to use digital transformation to strengthen the solutions business, and I think improving management’s execution ability and quickly establishing a new business model will be key to fulfilling the objective.
- Hodo
- Yes, and it’s also imperative to incorporate an ESG perspective into the corporate strategy. Konica Minolta is regarded as a leading company in terms of governance, and from the standpoint of an outside director, it is extremely diligent in applying governance. Konica Minolta is also implementing pioneering efforts in the areas of the environment and society. Unfortunately, these elements are not being reflected in the stock price. Perhaps a stronger effort needs to be made to leverage them and make them more widely recognized.
- Fujiwara
- The company has clarified the social values it considers important and set five material issues. For each material issue, management plans to set and announce specific KPIs for environmental and social value and for economic value. These should help better communicate the efforts that the company is making.
How will you assist Konica Minolta management as an outside director?
- Hodo
- I think one of the biggest issues for shareholders is that the company’s market capitalization is too low. Market capitalization is in many ways an evaluation of the future expectations of a company, and it seems like the market still views Konica Minolta as a conventional manufacturing company even though the Company has significant technological capabilities, a global network, and are putting a great deal of effort into a digital shift. To overcome that image, in the next 10 years Konica Minolta must prove that it’s an essential company in the digital age. The challenge for management as it develops its businesses through digital transformation will be how it will boost profits with its solutions. I’m looking forward to contributing my experience in digital business and services and working with management to find a way.
- Fujiwara
- The outside directors actively discuss strategies with the inside directors and executive officers at the Board of Directors Meeting, but once the business direction and objectives are set, I believe our role is to step back and monitor the progress and to provide support when necessary. If the company is progressing in the right direction, the executive officers should be left to run the individual business operations. When they come upon an obstacle they have trouble working through, that’s when we can step in with support by using our external perspective to identify the problems, alleviate their concerns, and get them back on track.
- Hodo
- The market is concerned that MFPs will become obsolete, so the company must offer digital solutions that erase that fear and make it recognized as a leader in the digital field. I will give management my frank opinions on what is good and what is bad about the plan to ensure that DX2022 gets off to a solid start.