‘Always challenge something new’: The key to success.

In recent years, we have seen that Asian companies have upgraded their manufacturing ability and caught back on Japan. Nevertheless, Japanese firms have succeeded in maintaining a dominant market share in a variety of specialized sub-industries, despite having higher labour cost. How do you explain this phenomenon?

In recent decades, China and Korea have adopted Japanese technologies and processes, and in some sense, stolen Japanese “monozukuri.” Nevertheless, we have to face the fact that their production ability has undoubtedly increased. China and Korea are purchasing and utilising new models of machinery, which gives them the hardware necessary to upgrade their processes. While Japan is known for quality, traditional companies still use the machinery they employed years ago. Our manufacturers rely on old, out of fashion machines that were used throughout the ages. That's why emerging economies such as China and Korea are, in some way, exceeding Japanese quality.

Furthermore, Japan is slow at catching up with international trends. System engineering and IT technologies are being slowly adopted, especially when compared to other countries who experience a much faster development. During the 70s and the 80s, companies such as SONY and NINTENDO branded themselves under “innovativeness.” More than 30 years later, many corporations play on that “innovative brand image.” I believe that this positive, pre-acquired image limits investment in IT and system engineering.

Nevertheless, what distinguishes Japanese “Monozukuri” from its regional counterparts is the historical know-how acquired. Knowledge and craftsmanship technique have been cultivated throughout the years and manufacturers are devoted to their arts. Implementing or replicating “know-how” is simply impossible, especially on the short term. To manufacture certain products, Japan firms have developed techniques cultivated over several decades. It is impossible to replicate that knowledge in the space of years.

From my point of view, I also believe that Japan’s manufacturing strength resides in the stability of its SMEs. Chinese and Korean conglomerates are excellent at making finished products. However, the performance of SMEs in those countries can rapidly change. From abrupt changes in management to lack of capital, SMEs in other Asian countries aren’t stable. In Japan, SMEs are extremely stable and their production ability is maintained constantly throughout the years.

Another strong point of Japan is its ability to grow human resources. In Japan, you can only accumulate knowledge and experience by devoting your life working for one particular company. This sustains workforce stability and allows employees to become field experts.

How have all these emerging and new technologies affected your business.

It has been assumed that AI will cause drastic changes. In terms of traditional manufacturing processes, the impact of AI has been rather limited and there is a particular reason for that: For AI to function, it is the industry as a whole that must adopt it, not individual makers. Nevertheless, Japanese firms can be quit to implement innovative technologies. For example, our industry unilaterally adopted the ERP system some 10 years ago. ERP systems are automatic carts which remove analogue technologies from the production facility. Robots have also been installed as a partial addition to human workforce. Of course they are trying to keep up with the times and look forward to new technologies but in a sense, the traditional way of making things has not been changed so far.

Due to specificities that must be preserved, the core business of Nichiei Kakoh has not been changed. We are producing high adhesive tapes. 20% of our sales is limited to the traditional way of selling stickers. Base technologies are given to clients, and they can then choose what kind of colour or adhesive power they want. Our business has been following such a model for many, many years. The other 80% of our revenue comes from custom-made designs, where we apply our production force to best fit our customers’ requirements.

The implementation of new technologies has been slow because we have great strength in making particular items for particular clients, and we cannot make such products through mass production. Sealing and taping techniques are small solutions for clients and we can produce it in small quantities only. The strength of Nichiei kakoh is found in its ability to produce different variations of the same item. We can come up with different solutions for different customers. While it blocks us from adopting new technologies quickly, it also creates a sense of uniqueness as our customers know they can trust us. Most of our clients are repeated customers.

Right now the company has around 18,000 variations of PSA-film products. For new other products that are coming out, the annual increase of variation is over 800. If we were to adopt new technologies, it would take a large span of time and require more capital to transform our production system. And we will lose in terms of production efficiency, as well as in flexibility towards customers. If there is an AI solution that can allow us to apply our traditional segregation of different kind of seals and stickers, then we will of course be using it. At the moment however, we haven’t found anything of the sort.

In our business, many steps of the manufacturing flow has to be done by hand. To give you an example: within one package, the seals have to be of different sizes and put in different places. That simply cannot be done by AI. As smart as AI can be, it cannot simply adjust a new idea on the spot. This is why we continuously use the same way of production we've used over the years.

The reason for our sales increase is to build trust with customers. We are flexible and capable enough to take care of small and precise production. This is why we have a good connection with our customers and creates the impression that we can do anything for them. Whereas large corporations have rigid production rules, our medium size allows us to be flexible. It is our advantage compared to big companies.

In recent years, we have seen a multiplication of electronics, such as smartphones or wearable technologies. How are these trends affecting your business?

First of all, we must consider the everyday use of smartphones. We did not begin our production of protective tapes for display screens because of the proliferation of smartphones. We began by producing stickers for industrial use. These stickers can be applied to the packages of any product.

Our company started by manufacturing industrial labels. We then increased our production capacity and shifted to the development of smoke films for car window and protective tapes for mobile phones’ screens. The smoke films have to be evenly applied to the surface desired so that no air pockets are created between the layers. Consequently, we adopted new technologies to make our PSA films block and avoid from contaminating any kind of particles or dust coming in between the film and the glass.

This technology creates ten-odd microns of PSA layers on the film itself. We accumulated this technology and adapted it to cell phones. Mobile phones have switches and buttons that need to be covered and protected by membrane surface films. Our technology was so advanced that we received orders from two big-major companies each of Europe or Japan. Our brand name was established thanks to these large firms. As we were able to execute orders from them, people started to see us as a company that could make adhesive tapes for electronic appliances. Other companies were impressed by the fact that we could do business with such big names.

The next milestone of the company came about when we began producing full screen protection films for smart phones. What's interesting about the production of thin films for the screens of mobile phones is that Nichiei kakoh can make various films to protect the entire surface. We have up to 8 different films covering one single layer of display, and each of them have different functions.

The most important feature is the light reflective layer of the tape, there are also several layers such as UV protection and lighting protection that have to be applied before the final display.

While it represents a small step of mobile production, it remains an important business that only a limited amount of companies can cater for. We are capable of doing so because of the know-how we accumulated throughout the years.

In our business, the ability to produce on small volumes is key to success. China, Korea and the US all have different mobile production specifications and they require customized products. We happen to be a one-stop company that is able to do so. There is harsh competition in the mobile phone industry and each manufacturer, from two major manufactures, have to come up with splendid and advantageous devices for customers. Hence, creating a necessity for the creation of new solutions. As many mobile phones have a once-a-year renewal, it creates a need to introduce new films or tapes or protective glasses. Our customisation ability is a strong point to anyone.

Your company has expanded outside of Japan. You're now present in many countries like Thailand, Vietnam and China. Can you tell us a bit more about your international strategy and what areas of the world do you see the greatest growth potential in?

90% of our sales come from domestic activities. The domestic market is currently at its peak. However, the population of Japan has reached its peak and will gradually decrease due to the shrinking population. Inevitably, alongside other companies, we feel that we have to move to overseas markets. International markets represent 10% of our sales. In the years to come, we definitely have to increase this percentage. As you mentioned, we already have an overseas presence and we'd like to expand this presence to more countries.

The strategy for further company expansion is to follow the example of Japanese manufacturing companies that localise their business outside Japan. Consequently, we are following the big names that localised their businesses outside Japan. Those companies require a certain level of trust towards their suppliers, and as we have already acquired that trust, our expansion strategy is to follow our customers. In China, we have established long-term relationships with local companies. In the future, we will further expand our trust and international client base.

The most appealing point that we want to translate to potential customers is that our products aren’t simply “Made in Japan;” they are “made by Nichiei kakoh.” First of all, the most important point when penetrating a foreign market is winning customer satisfaction and winning the trust of existing customers. Once that is established, a positive dialogue between us and the customer is established and we can move on to increase production and sales.

The problem is that adhesive tapes, stickers and labels do not always carry a brand name. Consequently, some of our clients do not realize that they utilize us, and we lose leverage in terms of branding and recognition.

For example, we have an adhesive sheet tape that eliminates unnecessary odours. It has a very specific Japanese name: HALSHIKKUI. This function can easily apply for locker rooms, as anyone who does sports can understand how smelly it is! Unfortunately, certain users are unaware that it comes from Nichiei kakoh.

To differentiate our product offering and brand, we apply functionality to the production of films. Creating added-value products is a new approach to gaining more customers. Just giving the tape itself is senseless because the customers can choose anything they want from the domestic market. But due to the know-how and technology created in Nichiei kakoh, such as the odour-eliminating function, customers are willing to repeatedly purchase from us. The approach of Nichiei kakoh is not only to create great products, such as films and paper layers, but also to create a functional side.

We are especially targeting foreign markets that require functionality. Since our field is a B2B business, we understand that we need to put something so the customer realises that our products are unique to Nichiei kakoh.

I have one last question for you. If I was to come back in 10 years and have this interview again, where would you like to see your company and what goals would you like to have accomplished?

Our company is made up of four components of corporate philosophy. The first is social contribution; the second is customer satisfaction; the third is self-fulfilment, and the fourth is the well-being of our employees, which has special importance. To extend the life cycle of the company, we must care for the well-being of every single employee. Our workforce is the core ingredient that allows Nichiei Kakoh to function. After five or ten years, I would like the company to continue the same policy towards its employees.

The important point of the company's evolution is that we'd like to take it one step at a time, and we would like to develop gradually. That can only happen by having happy and fulfilled employees that work together towards a same goal.

I believe that objective to be present in every Japanese SME. We're capturing market niches and focusing on one particular thing. By developing our business step by step, we will be able to venture into other industries and find new applications for Nichiei kakoh. Nevertheless, we will do so to contribute to the happiness and joy of our employees.