HORIBA champions ‘the Kyoto way’

The global manufacturing sector is undergoing a deep transformation with the introduction of more efficient and sophisticated techniques aimed ensuring sustainable growth by minimizing the impact on the environment, which remains one of the most important challenges to be addressed. Is sustainability still a buzzword, or have we reached a turning point with the new policies outlined at COP21?

There is no doubt that we need to look at environmental issues very seriously. Regardless of the decisions taken by global political elites, what we need to focus on is how to speed up the process of ensuring environmental sustainability in the short and long-term. The solutions and technology is already there.

We are proud of HORIBA’s products and how they can improve the impact of various industries on the environment. Because without our instruments, nobody would be able to analyze, monitor, and find solutions to issues regarding gas emissions. We continuously invest in technology in order to provide the best quality to our clients. We feel that this is not only our business, but also our assignment towards the society.

As Mr. Yamamoto, the Minister of Environment, pointed out to us in our interview, the role of the private sector is in fact the cornerstone in order to ensure environmental sustainability; otherwise policies won’t have any impact alone. What is your personal opinion about the policies put in place in Japan and how is environmental sustainability redefining the market requirements in the automotive and energy sectors?

I can mention an interesting example to give you an idea about this. Kyoto is surrounded by mountains. When I was a kid, you could not see them for maybe 2 or 3 days a week because of the smog. But today, thanks to the technological progress and stricter regulations introduced especially for the automotive and energy sectors, the sky is always clear and you can always enjoy the beautiful sight of the mountains.

Without any doubt, the environment has a strong impact on people’s health. Therefore, if you don’t take care of the environment with preventive policies, the government will end up spending even more on healthcare because of the issues associated with living in a polluted environment.

Considering the big picture is key. The solutions are there, but everywhere leaders need to develop a clear vision about the future and not being shortsighted and look only at electoral cycles. At HORIBA, every year we invest 10% of our revenue in R&D. Without that commitment to research and constantly striving for excellence, we would not be a healthy company in the future.

That is why we value educating our human capital. That’s the key to HORIBA’s success. You can develop the greatest technology, but without a motivated team you will not have the necessary know-how that takes a long time to build. Because many other companies don’t see the value in their human capital, they decide to copy what leading companies do. HORIBA has a different philosophy. We provide original products. To do so, we have developed long-term relationships with academia, for instance in China and France. We would like to do the same with the American academia.

The point is that globalization requires localization. Without localizing, we cannot be a global company. We cannot define by ourselves all market requirements in all different countries across the world. That’s why our strategy focuses on developing fruitful collaborations and expanding globally through M&A activities. In this way, we are able to provide our unique know-how and technology and customize it according to the different market requirements. More than 60% of our employees are foreigners.

To be global, that’s the only solution. That’s why each of our customers feels that they are using their own country’s products and services. The automotive industry is regarded to as a strategic economic sector in many countries. Therefore, it tends to be very nationalistic. However, in the US, UK, France, Germany, and the rest of the world, everyone is buying our products. We have 80% share of the global market in the automotive industry and that’s because our customers trust us. We are a Japanese company but they don’t look at us as foreigners.  

Horiba is a clear example of a case study of excellence of a “hidden champion” of Japan, a very competitive chuken kigyo (mid-sized company) that thanks to its continuous investment in R&D and innovation has been able to acquire large share of the global market in its niche sector. In this context, could you please give us an idea of how your technology can be applied to different industries?

Our measuring technology applies to different industries. For instance, we produce emission measurement systems, automotive emission analyzers, and onboard emission measurement systems for our automotive test systems business segment. In the environmental segment, we provide stack gas analyzers, water quality analysis and examination systems, air pollution analyzers, and environmental radiation monitors. But that’s not all. We have equipment for blood sample analysis in the medical diagnostic system business; mass flow controllers, chemical concentration monitors and other monitoring systems for the semiconductor industry. HORIBA pioneered the first “Made in Japan” pH meter in 1950. Today, we have expanded our products in the scientific instruments and systems business by developing 500 types of instruments for measurement and analysis, such as X-ray fluorescence analyzers, spectrometers, and particle-size distribution analyzers.

In the automotive and semiconductors business segments we have a very high market share. Let’s put it like this, if one day we go bankrupt, all the industries in the automotive and semiconductors sectors would stop right away.

That’s our pride. HORIBA operates in a very niche segment. And not many but us can develop that kind of products and services with these high quality standards. Our focus is to continuously develop new added value for our customers. We want to have great products, not mass products. This is the philosophy of what I like to refer to as the “Kyoto way”. In this area, there are many high quality manufacturers all specialized in a niche sector. I truly believe this is also the future of Japan. No more mass production, but a strong focus on customization and high quality.

One of the key concepts that often arises in our interviews is hitozukuri. How do you promote open innovation within your workforce?

We actively involve all our workers to participate in activities with the objective of improving the quality of our products or processes. We have a particular program called “Black Jack Project.” You know the aim of black jack is to reach 21. Similarly, we think that to be successful in the 21^st century we need avant-garde ideas to anticipate market trends. Every month, I chair along with other directors “Black Jack meetings” with selected groups of workers that present their ideas on how to improve a particular aspect of a product or service. Each group has 7 minutes to present and we have 3 minutes to comment.

A great example that I remember is that once, one of our part-time employees brought up a great idea that we positively evaluated it and endorsed her project. Of course she became a full time staff right after that! We now have 800 teams presenting their idea every year and we provide 200 awards for the best ideas since the beginning of the project in 1997. Programs such as this really define our power. Each worker’s idea is valuable for us.   

We foster open innovation by promoting our corporate philosophy of “Joy and Fun.” These are the two core values that my father focused on when he founded the company. When you have a hobby, you are so concentrated on your activities that you can also stay up all night. In the same way, we engage our human resources because we want them to work with good spirit and open innovative minds.  

How would you describe Horiba’s price/quality relationship, and why should companies in various industries pick your products over competitors’?

I’d rather say that other companies compete with us. What sets us apart is our willingness to adopt new technology that no other company is able to develop, because we are continually investing 10% in R&D from our annual revenue.

We try to reduce the price as much as we can, but it’s also true that we reinvest the money in R&D that at the end of the day is an investment for our customers. We commit to investment in innovation regardless of customers’ orders. We do that so that everyone can reap the benefits of improving their performances. On top of that, we provide the best customer service in the industry and we solve the potential issues along with our customers. For this reason, we have to keep a strong financial situation.

Looking ahead, what do you think will be the business segments driving the future growth of Horiba?

The two businesses are definitely automotive and water. The automotive sector is undergoing a significant transformation worldwide and new opportunities are emerging with the new environmentally friendly trends. Water is the new frontier. There are so many different aspects to be considered.  First of all, water is the most precious natural resource we have and it’s becoming more and more scarce. Second, when we think about water we can see different application such as for the salty water, industrial water, fresh water, wastewater, and so on.

One of our subsidiaries, HORIBA Advanced Techno, is already operating in the water business. I have decided to integrate all liquid-related teams together so that they can provide every kind of solution related to water. The HORIBA’s way is to aggregate our talents for the best.

We don’t want to enter in new ventures where we would face competition from massive companies. Our strength is our specialized knowledge. Big conglomerates don’t have the resources to develop such niche products. We can. Of course, we want to diversify but we have to do so carefully, by looking at the opportunities that we can maximize by applying our unique know-how.

What is Horiba’s presence today in the global market?                                                

70% of our turnover is generated overseas and already globalized. About 70% of total turnover consists of industrialized countries.  Emerging markets are still not our main markets but there is tremendous potential for growth.

The way we want to penetrate these markets is not by launching a new branch from Japan. We want to leverage our “horibarians”, namely the human capital and facilities we have all around the world, to get involved. So for example, we would use our subsidiaries in Singapore to further penetrate the Southeast Asian market; or we can use our French subsidiary to go to West Africa. Collaboration is again a keyword in our strategy.

What is the role of the US market in your future growth strategy? What are the business segments you are focusing on?

I lived in the US for six and a half years; I know the market well. Although it's the largest market worldwide, it is not the case for us yet. We face very strong competitors there. So what I am focusing on is to find ways to collaborate and localize more in the US. With respect to the automotive area, we are pretty successful. However, in other business segments, we have room to grow. I am quite interested in growing in the US. We have already a good presence with facilities and R&D centers in the Silicon Valley area and another research team in Reno, Nevada.

The medical diagnostic segment presents a positive outlook. We provide very good cost/performance products for mid to small-sized hospitals and laboratories.

We have successfully conducted several M&As in Europe, namely in France, Germany, and the UK. We are also interested in doing the same in the US. However, the challenge in the US is the size of the companies. Sometimes they are too small, so we cannot find them out. Other times, when we are interested, the companies are too big, even bigger than us. If it’s too big for us, it takes too much time to integrate them in our business culture, maybe 5 to 10 years. M&As are key. It’s a cornerstone in our strategy, so we’ll keep looking for new opportunities.

When we acquired MIRA in the UK, they became “horibarians” right away. I remember when I visited for the ceremony and pinned our logo on the workers’ uniforms they were so proud of being part of our group. So, I also feel proud and I feel the responsibility to make the operation work successfully.

What would you like to be your legacy at Horiba?

My objective is to maintain and improve HORIBA to be a great mid-sized company. When I say great I mean that I don’t want to grow into a huge company. The size of the operations will still grow but it has to do so in a great way, meaning by being able to keep creating added value for our customers, employees, and society.