Thursday, Apr 26, 2018
Industry & Trade | Asia-Pacific | Japan

Innovating in Japan

Yokogawa Electric pioneers innovative AI and AR solutions to industrial automation and control

1 year ago

Mr. Takashi Nishijima, President & CEO of Yokogawa Electric Corporation
share by WhatsApp

Mr. Takashi Nishijima

President & CEO Yokogawa Electric Corporation

The deregulation of the energy market has opened new opportunities for Yokogawa Electric. Following suit with the government’s policy aimed at increasing productivity through innovative solutions to address the challenge posed by the aging population, Yokogawa Electric is pioneering artificial intelligence (AI) and augmented reality (AR) to improve the maintenance of highly sophisticated industrial equipment. As Mr. Takashi Nishijima, President & CEO of Yokogawa Electric, told United World during an interview: “We are investing significantly in the development of new technologies and the pursuit of open innovation.”

One of the effects of the liberalization of the Japanese energy retail market, which took effect in April 2016, is that customers can now choose their energy provider. From the perspective of Yokogawa Electric, what have been this energy policy’s greatest successes and where do you see need for improvement?

The liberalization of the energy retail market has encouraged many of our customers to enter the energy business. The construction of conventional and non-conventional (renewable) power plants by these new investors is increasing the demand for our services. In general, deregulation has enabled many companies to scale up their energy businesses, so the market is growing more competitive. These facilities require automation systems, so we can contribute to their business activities. In this enhanced competitive scenario, it is crucial to generate electricity efficiently, and we have expertise that can help companies to do that. For Yokogawa Electric, last April’s energy sector reforms have meant an increase in demand for our services. The increased competition enables the cheap and efficient supply of energy to Japan’s industrial sector, which is benefitting from this. 


Yokogawa Electric, founded by Dr. Tamisuke Yokogawa, celebrated its 100th anniversary in 2015. What has been instrumental to the company’s survival? What are some of the core values that still are part of the company's DNA today?

Yokogawa Electric started with the electric meter manufacturing businesses in 1915. After World War II, we shifted our business to automation hardware and systems. Now, we are expanding our business globally through the provision of system integration and plant asset management services. That is our history in a nutshell.

The founding principles of the company have been passed down from one generation to the next, and that is the source of our strength as a business. We have three main principles: put quality first, have a pioneering spirit, and contribute to society. These are the founding principles of Yokogawa. As a company, our goal is to contribute to society through broad-ranging activities in the areas of measurement, control, and information. Individually, we aim to combine good citizenship with the courage to innovate. This is Yokogawa’s corporate philosophy, and all of our employees take it very seriously. These principles are the foundation upon which we run our business. We are always strengthening our capabilities based on this vision. Another way to keep our organizational spirit is by being innovative. The business environment is always changing, so we need to take action that will allow us to keep up with changes in our business environment and ensure our long-term survival.  


Could you update us on Yokogawa Electric’s current business plans, and how are you adapting to the latest market trends in Japan?

Our main market and business is industrial automation and control. This represents nearly 90% of Yokogawa Electric’s business. In Japan, our main markets have been oil & gas, petrochemicals, chemicals, and iron & steel − all of which are industries that employ continuous manufacturing processes. These kinds of industrial sectors have matured in Japan, and few of our traditional customers here have built new plants recently. The sector is mature and the business opportunities that are arising mainly involve the optimization of operations at these plants.

This is the reason why we are shifting our business from heavy industry towards new industry sectors here in Japan, and are also targeting overseas markets. We have to be able to capitalize on opportunities in these areas and strengthen our business operations. We have also been looking to expand in a vertical direction. For instance, in Japan, we supply automation systems, but some of our customers also wish to improve the efficiency of their plant operations by vertically connecting their enterprise management and manufacturing systems. Our customers want to improve their efficiency and have more integrated business operations. This is why we are also expanding our business in a vertical direction, through integration with manufacturing execution systems and enterprise resource management systems.   

Our Japanese customers are very keen to utilize information technology. However, a number of these companies are lagging behind in the utilization of IT for their business processes. The good news is that they are very keen to improve business efficiency through its utilization. For Yokogawa Electric, this presents an opportunity for the expansion of our IT business. Prime Minister Abe is also pushing companies and the Japanese society as a whole to improve productivity through the utilization of information and communications technology (ICT). 

We look forward to expanding our business in these kinds of areas. And in addition to our current efforts to grow our business in a vertical direction, we also seek to expand our activities in such sectors as transportation, food and beverages, and pharmaceuticals. We, of course, will also continue to cover our mainstay industries of oil & gas, petrochemicals, chemicals, iron & steel, and electric power.  

We are utilizing our automation technology to optimize a wider range of business functions, including services and logistics. And at this moment, the Japanese government’s policies are helping to create additional business opportunities for Yokogawa.      


Over the last 25 years, the world’s industrial automation sector has experienced a massive consolidation. From the 27 vendors existing in 1990, now we only have six big global players, if we do not take into account new players like Rockwell or niche or local players like Krohne and Azbil. How are you differentiating your products and services from those of your competitors? What do you consider to be your main strengths?

Our industrial automation solutions need to be accurate, stable, and reliable. Our customers do not want to experience any unplanned shutdowns at their power plants and other major installations. Stopping a huge plant, even for just a few hours, can result in big losses for a company. Our customers have to operate their plants 24 hours per day and 365 days a year. Unplanned shutdowns should not happen. High reliability is required.

The automation systems at huge plants are highly sophisticated. We provide systems that are fully integrated with the controls for our customers’ distillation towers, boilers, and other facilities. The ability to integrate these systems is a key factor for automation suppliers. The management of a huge plant construction project is complex and usually involves the use of four to five engineering, procurement, and construction (EPC) contractors who must work together. I like to compare the automation systems for such plants to the human nervous system: they detect when a problem arises in a plant so that it can be fixed as soon as possible, thus preventing major problems that could force a halt to operations.

However, our services are not only limited to the start of operations. After that, our customers still need high quality services to maintain a stable and safe operation. We set up service operations close to our customers’ plants and hire local staff to support our customers’ plant operations in the best possible way. In fact, right now, 60% of our employees are based outside of Japan: in Asia, the Middle East, Europe, the Americas, and elsewhere. We always hire local people, and train both our customers and employees locally. These efforts are based on a long-term vision that has helped differentiate us from our competitors. 


At Yokogawa Electric, innovation in measurement, control, and information technologies is taken seriously. You have started to be more active in linking your products with the Internet of Things and big data as a strategy to pursue new business growth. Even your corporate brand slogan reflects it: Co-innovating tomorrow. How are you working to sustain this culture of innovation?

We are aware that the majority of our innovation will come from ICT systems. And we know how to do it. However, it is important to take some aspects into account. Firstly, we are supplying systems that control mission-critical assets and facilities. This means that the majority of our customers never connect their systems to the Internet in mission-critical areas, as this involves extremely high risks. In any case, as demand is growing for the use of open technology and the Internet, we always take care to provide very capable firewalls. 

We are figuring out the best way to connect our operational technology (OT) with IT, which is a real challenge, especially in mission-critical systems. We try to get the benefits of both systems by balancing the potential risks. 

With IT, companies like IBM and Accenture are much more knowledgeable than Yokogawa Electric, so we do collaborate with them. However, we are the OT experts. We are working closely with IT experts to improve the connections between the two technologies in the most efficient way. Executives at the CxO level have shown their willingness to utilize all of this knowledge to make the best decisions. At Yokogawa, we are in a very good position to communicate with CxOs at companies in the oil and gas, petrochemical, and other industries. This is another of our strengths.     

Finally, talking about innovation, at Yokogawa Electric we recognize that we cannot develop all the technologies that we need on our own. For example, artificial intelligence (AI). In the future, we will use AI like the Internet, as an infrastructure platform. Yokogawa Electric will not develop its own AI systems, but we will use such tools to create value for our customers. 


How are you looking for new business alliances worldwide?

We are looking for partners by ourselves and also through our customers, who sometimes request that we collaborate with third-parties. 


How are you co-innovating with your customers and how is this helping to create new bonds of trust?

A recent example in the Japanese market is Toyota Motors. They wished to use a community energy management system (CEMS), not only for their own factories but also for those operated by other companies at an industrial area in the Tohoku region. Using IT, Toyota wanted to reduce energy costs by utilizing demand forecasting and optimizing the overall utilization of energy resources at these plants. In the field testing of the CEMS (April 2013 to March 2015), these companies reduced their energy costs by 20%.

As we are not in competition with final product manufacturers, we are in an interesting position where we can connect different companies and establish a total management system. After the Tohoku earthquake and the shutdown of several nuclear reactors, the establishment of such a system to reduce energy costs was Toyota’s main motivation.




ENTREPRENEURSHIP: An overused concept for an underused reality.


When being part of a generation on which the flag of entrepreneurship seems to be constantly waving in the sea of young professionals looking to succeed in the business world, more often than not, we tend to drown in the... Read More






© Worldfolio Ltd.

The Worldfolio provides intelligence about the economies with the highest growth potential in the world, with a focus on understanding them from within.


FOLLOW US                   | Terms and conditions - Privacy policy - Cookies policy.