Smarter buildings for a changing society

In the last 25 years Japanese manufacturers have been put under pressure from regional competitors in China, South Korea, and Taiwan that have replicated the Japanese monozukuri processes, but done at a cheaper labor cost, providing the world with cheaper yet lower quality products but then we see companies like Daikin which is a world leader when it comes to HVAC systems with their compact compressor technology and has a huge market share. How can monozukuri allow your company to overcome this steep regional competition?

Our revenue from overseas is about 6%, that is small amount, and we are mostly competing with our competitors in the same line of business in the domestic market.

With regards to our international expansion, we maintain our focus in Southeast Asia - in Singapore, and Thailand, and we have recently expanded our business to Vietnam.

In order for us to remain competitive we put a lot of effort into our presentations as we consider ourselves as coordinators of spaces with our business based upon suitable environments for each client. We cannot show our final products to our clients before the completion, as regards to how to create the best, clean and safe environments, all we can do is to put our efforts into PR and the presentations of the various technologies and services that we are able to provide. Of course, prices come into play in order to remain competitive and if at least we could bring our prices to the same level as our competitors’ we believe that we could have an edge through our technologies.

The Japanese construction boom occurred more than 50 years ago around the time of the 1964 Olympics. As such, nowadays there is a need for maintenance and repair which implies that new technologies are needed for the buildings to continue to operate. At the same time of course Japan has an aging population which requires social infrastructure to adapt. Your company has been involved with Smart Buildings which have the ability to use innovative technologies such as IoT, AI and Big Data to provide solutions in this respect. Can you tell us how you are leveraging digital technologies and how your company is providing the world with a road map when it comes to digital technologies for smart buildings?

In Japan Smart Buildings are called ZEB (Zero Energy Buildings). We are basically working on office buildings and within each office building this concept of ZEB is the standard that is being placed by the government. Zero Energy Buildings utilize renewable sources of energy, and this is basically the Japanese concept of Zero Energy Buildings. We also integrate IoT and cloud systems into our services which allows us to manage buildings remotely.

The Japanese system is different to the model abroad. For example, in the UK, there is a consultant that helps clients to hire contractors of different types depending on the needs - civil engineering, architecture, mechanical, and electrical contractors - and then the client signs a contract with these individual contractors. But here in Japan the general contractors, especially when it comes to large-scale projects, have their own integrated civil, architecture, mechanical and electrical contractors; there is no consultant involved. The huge contractors of Japan, such as Obayashi, commission us as their mechanical contractors; this is how the construction business is operating.

We are able to take on a number of projects from small to large buildings with our expertise as mechanical and electrical contractors where we provide mechanical service and electrical service necessary for these buildings, the majority of it is air conditioning. With regards to maintenance and repair work we can provide clients with services to help them renew and refurbish their buildings through our smart systems that I have explained above.  In terms of our business as a whole, half comes from new projects where we are contracted by general contractors and the other half comes from working directly with our clients.

You are engaged in a lot of building work on facilities for pharmaceutical regenerative medicine. In 2017 you established Cellab Tonomachi, a base for regenerative medicine and for cell culture processing; and last year you established Cellab Healthcare Services to give additional services related to that. Can you tell us why you established these companies and what are your plans for this sector of regenerative medicine?

Our Cellab Tonomachi business is directly focusing on the regenerative medicine area and the facilities and technologies that we provide are catered to pharmaceutical factories and hospitals especially when it comes to clean room technology. We foresaw that there is a great opportunity in regenerative medicine, for this reason we decided to put up this kind of business because we are capable of providing the services and the clean room technology that we already have with regards to facilities to pharmaceutical factories as well as hospitals. Lastly, moving forward we see that there will be an opportunity for new services and kinds of facilities that might be required in this business area and we have wanted to be able to cater to these.

If we look at Japan geographically, we see it at the intersection of three tectonic plates and as such it is a natural disaster-prone country. By necessity Japanese companies have developed technologies to continue conducting their business in times of a disaster. Your company has established various technologies which are turnkey Business Continuity Plans (BCP) solutions, not only do you install the equipment but also provide added value and follow up services to allow clients to continue business in such situations. Can you please tell us more about this service?

I think in terms of the business continuity plans at times of disasters it really depends on the kind of building or facilities we are talking about because each has different needs and focus. In hospitals the priority is to save as many lives as possible, office buildings need to have an evacuation plan, and as regards data centers or factories the focus is to protect the systems and machines. The BCP (Business Continuity Plans) services that we provide are tailored according to the applications, therefore it is a case-by-case basis. We provide different proposals that are appropriate to the needs of each type of building or facility.

You have been involved in a number of prominent projects such as the Nankai Namba Station in Osaka, Kobe Eye Centre, Enefice Kyushu (Kyushu branch). Which is your favorite and why?

Actually, I am a former technician and a part of an institution of professional engineers, in fact my background is environmental engineering and comprehensive technical management.  I have a lot of great memories when it comes to industrial types of facilities such as working at UMC’s subsidiary, USJC’s  semiconductor factory (past Fujitsu) in Mie Prefecture and providing Seagate technology for a hard disk company in Singapore. We created a clean room environment for both of these projects, and I was the technical officer in these projects. Of course, we have done a lot of projects but these two that I have mentioned are the ones that I am most proud of. 

R&D is vital in any industry and Japan is famous for having one of the highest levels of spending on it with up to 3% of annual GDP goes towards it. Buildings are huge consumers of electricity with estimates that more than 40% of all energy used worldwide is being used for buildings. In 2013 your company established your Smart Energy Research & Technology Center. Can you tell us more about your R&D strategy and how you are helping reduce building energy consumption?

The world is moving to becoming carbon neutral. The building we concern uses a lot of energy whether it is air conditioning or electricity. Before this call for a carbon-free world there were different standards that have been in place which we call Energy Saving Principles that the companies and buildings needed to adhere to. It seems that only Japan is doing this kind of energy-saving standards set by the government. I can say this because I first heard of this concept on renewable energy when I visited Denver, Colorado. In a nutshell, looking at the outcome whether it is energy-saving or renewable energy, either way you are reducing the use of fossil fuels.

Our company has continually accumulated R&D work to optimize energy-saving technologies and this is in relation to the remote building management and cloud systems that I mentioned above, providing such systems and services for our clients to use renewable energy sources. I believe that we are a company that can really contribute to a carbon-neutral society. We also have a special chair with a control system “removis” for air conditioning, which enables the person sitting on it to switch and modulate the temperature according to their level of comfort, either warmer or cooler. There is no need to lower or higher the temperature of the air conditioner, thus cutting and reducing the usage of energy. This is one technology that we have developed through our R&D efforts. We are doing our best to provide micro and macro solutions. 

Throughout our interviews with Japanese companies, we often hear about this problem of the aging population and how it has forced them to expand overseas. You have operations in Singapore, Thailand and Vietnam, can you tell us more about the benefits that these international locations bring to your business and your international strategy?

It is true that in order for us to sustain our business we must go overseas and we must do this as we plan to increase our oversea business revenue up to 10% in the near future. As regards our international strategy we just need to work and redevelop what we already have. We tried to expand overseas 40 years ago but did not do well - we went to the Philippines, Malaysia, and Hawaii but we were not successful, but we have learned a lot.

We provided some of our mechanical and electrical facilities to the airports in Kuala Lumpur, Bangkok, and Manila; and at the moment in Changi. In Japan we worked with Haneda, Kansai, and Itami airports. We have a good track record with regards to construction in airports and one thing that we need to do is to polish our current international strategies to reach our numerical target. There is no need to start everything from scratch, we just need to learn from our mistakes and continue to build our growth from there. We are now targeting Vietnam. It is our new endeavor and we are carefully studying how we can expand further overseas and our goal is to grow our revenue up to ¥ 16 billion in the near future.

Imagine we come back to interview you again in two or three years, what would you like to tell us? What are your dreams for the company and what would you like to have accomplished by then?

We have been listed in the first section of Tokyo Stock Exchange. I am sure you already know that the Tokyo Stock Exchange is being reorganized. From April 2022 it is going to be reorganized into three sections: prime,  standard and growth. My dream is to retain our position at the prime on the list. Right now, there are about 2,200 companies listed in the first section of the Tokyo Stock Exchange, but it will probably be reduced to just 1,500 companies when everything is reorganized.

As regards our domestic operations, we are not worried about that because this company already has 120 years of history. On the other hand, we should put more effort into our international strategy and have a strategy focused on new business, such as regenerative medicine - so we will have a more solidified and a clearer picture.