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ITO Corporation: Fueling the evolution of moving components.

Interview - October 19, 2022

Prioritizing continuous communication with customers and a combination of skills, ITO Corporations provides not only optimal products but solutions  specializing in industrial machinery.

HIROSHI ITO, PRESIDENT AND CEO OF ITO CORPORATION
HIROSHI ITO | PRESIDENT AND CEO OF ITO CORPORATION

The strength of the Japanese manufacturing industry is its monozukuri, where major companies like Toyota are on top while the majority are chusho kigyos. However, because SMEs often lack financial and human resources, their ability to sell their products directly or expand to other markets is limited. How would you explain the role of Ito Corporation within the Japanese industry? How do Ito and traders support Japanese manufacturers?

We serve as the catalyst for making innovation happen. Innovation demands diversified people, ideas and perspectives. To that end, our company values diversity, and we welcome everybody regardless of nationality and background. Capitalizing on our employees' varied backgrounds is pivotal in our successes in innovations. Communication and understanding the ideas of others improve with developed listening skills as well as sincere curiosity. We value sincere curiosity because it is bound to stimulate meaningful discussion and relevant questions. In fact, it is one of our hiring criteria. 

 

Traders were historically responsible for handling distribution and financing, but many trading companies today are asked to provide production and formulation services. How do you foresee the evolution of traders in Japan in the coming years?

I am not sure about trading companies in general because each company has different strengths and history. Nevertheless, one thing is obvious; traders were used to be known as middlemen. When we were constantly asked what exactly we do, we had to consider what we should do. I think trading companies evolved based on a sense of urgency. There is a growing need for us to shift our roles from middlemen to something that is unique. I am not certain how each company will evolve into a new kind of firm, but Ito has decided to stick to the manufacturing sector. Japanese manufacturing used to dominate the world, but we have lost our competitive advantage to others. Still, I believe that we have a huge potential to regain that. Also, Japan's manufacturing sector is known for its quality operational technology (OT), but it seems like many manufacturing companies are struggling to integrate IT into OT. Though it will take time, we can help them to integrate IT and OT. I used to work as a sales representative in NEC in the IT industry. I found out that someone in the IT department of a manufacturing company may be very knowledgeable in IT, but not much about the company’s operational technology. Due to the significant gap between the two, as well as the language barrier, perhaps we can be the translator between the IT department and OT factory staff. 

 

Japan is a leader in process automation; however, it lags behind in adopting digital technologies, ranking 28th in IMD’s digital competitiveness ranking. Ito not only connects OT to IT, but you also offer various digital solutions such as design simulation services. How are your solutions helping your clients transition to more digital-based operations?

When we provide our services to our customers, we first explain to those in the engineering department how our software can be very useful in accomplishing their daily tasks. They may end up loving our software. On the other hand, when the next hurdle comes to us, they do not have the authority to buy our software. The president of the company or director of operations makes that decision. We need to explain how this software can improve their company's competitive advantage and avoid issues like bottlenecks or delays. We usually do not go into detail when we present the usefulness of our software to the director of the production because his top agenda could be labor shortage or skill transfer from experienced workers to younger or foreign employees. In many cases, the impact of integrating a software does not happen overnight, so they greatly appreciate the help we extend in this regard. The engineers thank us profusely whenever we successfully help their director of production understand the value of the software. As a solution provider, we not only offer products or services, but we also help our customers to buy solutions. The cooperation between businesses differs from B2C, and the customer's purchasing process is very complicated. Since customers refrain from impulse buying, one of our roles could be figuring out how our customers can buy something.

 

Japan has the oldest society in the world with a declining population, creating two major challenges for manufacturers. First, the shrinking domestic market means fewer consumers and products. Secondly, it is becoming harder to recruit younger graduates from a talent pool that is getting smaller. What services does your firm offer to tackle that problem for Japanese companies?

Automation is one of the obvious solutions. When we offer automation systems to the factory floor, I see consumers demanding change.  In the past, most manufacturing companies tried to implement robotics and automation in the core processes of their production line like assembly and welding. I think there are aspects of the production line that we do not want to see. The core processes are done by robots, while the less important tasks are performed by humans. For my part, I would like to offer the opposite and propose some kind of automation between the processes. However, it is extremely difficult to standardize between processes because factories vary, and our challenge is how to monetize offering this kind of section automation. We are still working hard to find the answer.

 

China's zero-COVID policy has created a wave of uncertainty in Asian supply chains. Your company specializes in sourcing products through your network in China. What has been the impact of these logistics disruptions on your business?

Although we have subsidiaries in China and Thailand, our company does not do much import and export business as their business is close to local firms. We have not experienced a huge impact from the logistics disruptions. 



With the recent logistics disruptions, one of the trends we read a lot in the media is the localization of supply chains. Increasingly, we are seeing countries like Japan trying to bring their manufacturers back to lessen their reliance on other countries. Do you think this is going to happen and is it realistic? As a trader, what is the feedback from your clients?

Since most of our clients' factories are located all around the world, I had to ask for their honest thoughts on their production locations, especially considering that it is not easy to relocate production. Some Japanese manufacturers have switched their production lines because they think that their domestic factories can only serve the local market. If that trend continues, I think most factories will be isolated. Also, the problem will be the unsuccessful sharing of the organization's best practices to their other locations across the globe. To that end, we try to provide an MES type of solution that can be a platform for all their factories, even though they only serve locally. 

 

Ito Corporation’s business can be divided into four divisions: factory automation devices, social infrastructure devices, energy conservation systems and support services. What synergies are you able to generate amongst your business lines?

We can provide those four pillars of our business to each of our customers, creating synergy between them and our company. 

 

As a trader, how do you adapt and cater to the needs of clients and companies from different fields? 

People belonging to the same organization still say different things. Our approach is to let our sales representatives keep asking questions to help us see some trends. They gather information from those in charge of operations who identify the problems in various industries. Although they create memos for the CRM system, it is difficult to combine that data as meaningful information. It is an area we need to work on more. 

 

What role do partnerships play in your business model, and are you looking for any partnerships in overseas markets?

As a trading company, we need partnerships, which is a natural aspect of doing business. Our office in Thailand helped us to recruit our partner. We are working together with AI Venture, a company based in Tokyo, and it plans to expand to Southeast Asia. We can further expand in Thailand together. 

 

Why did you choose Thailand as a base for Southeast Asia?

In most cases, trading companies go overseas because their customers ask them to go together. For us, however, we went to Thailand of our own accord. Many adopt the China Plus One strategy in the business world. Since we already have an office in China, we started looking for a new location in Southeast Asia. At first, we did not know much about ASEAN, and our initial thought was that ASEAN could not take big roles like the EU because ASEAN’s market has not yet integrated as we expected. Out of the countries I visited, including Myanmar, I found Thailand interesting and advantageous as it is surrounded by many developing countries such as Myanmar, Laos, Cambodia and Vietnam. Another reason was that there are already some industrial bases there, since the Japanese automotive industry went to Thailand 30 years ago. Furthermore, we found that Thailand's food sector is extensive, and most Japanese food companies already have factories in Thailand. Hence, our current main target is Thailand’s food processing sector.

 

Looking toward the future, are there any markets or regions that you have identified for further expansion into?

India could be our next target in two or three years. As of now, we are struggling to monetize our Thailand operation. Also, Africa could have a huge potential, but it is far from Japan. It is an interesting region, but I do not yet have a concrete idea of how we can develop our business there.

 

It has been three years since you became the President. What ambition or objectives would you like to achieve during your time as the President?

My dream is for companies all around the world to come and visit us and learn how we operate. We are a small company, but we can do whatever we want to accomplish goals. For example, gender equality is a huge issue in Japan. I cannot change the entire country, but I can do something about it in my company. Also, we believe that diversity is the primary source of innovation. We want to prove that these diversified people can bring in new ideas. If we are successful, many will want to learn from us, and we can generate profit from all over the world. 

 

How has your international background and experience helped you in your role? What are some of the benefits that the diversity you have created in ITO bring to your company?

My experience is the foundation of our operation.  I felt the power of diversity at Columbia Business School because its student body comes from extremely diverse backgrounds and fields. The thoughts and ideas of my classmates were often unexpected. I was the only Japanese, and many asked about Japan, from Toyota’s production line, making tea, Zen, Buddhism to kabuki. I did not know much about those things, but I studied those topics because they asked me. That experience taught me that diversity is much more than merely gathering different people. We need to develop a culture of healthy communication, where everyone can freely ask questions and express their ideas.  It may be a culture that takes time to be developed, but it is one of our company's competitive advantages. 

Our company used to not have a written mission statement. As soon as we created one, people who connected with that statement joined us. We aim to recruit great talents who can substantially help our company flourish. Ito’s operation may be different from most companies in the manufacturing sector, but that distinctness is another of our competitive advantages.

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