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Customers as the driving force of innovation

Interview - January 20, 2022

Japan’s Iris Ohyama has established itself as a market leader in innovative home appliances, homeware products, and quality business solutions defined by the “user-in” concept. We spoke with president Akihiro Ohyama to learn more about the concept and how it underpins the company's product development.

 

AKIHIRO OHYAMA, PRESIDENT OF IRIS OHYAMA INC.
AKIHIRO OHYAMA | PRESIDENT OF IRIS OHYAMA INC.

Japan has seen the rise of regional manufacturers that have been able to replicate the Japanese monozukuri manufacturing process while taking advantage of cheaper labour costs. As a maker and vendor of household appliances and products, what are some of the competitive advantages of Japanese firms that allow them to maintain a high global market share despite stiff competition?

It is true that the place of mass production has shifted to Asia, but the cultures of Japan and China/Korea are very similar, and there are many similarities in lifestyle. However, Japan is developing faster than other Asian countries, which is an advantage for us. We have accumulated a lot of know-how about lifestyles, and based on this accumulation, Japanese companies still have a competitive edge in terms of manufacturing processes and marketing.

Japan has the advantage of analog manufacturing, because with analog, unlike digital, improvements can be continued on a daily basis. Based on this analog improvement, the Japanese philosophy of manufacturing still maintains its competitiveness.

 

In the next 15 years, one third of Japanese people will be over the age of 65, and there are two problems that emerge from this. The first is a labour crisis and the second is a shrinking of the domestic market. At Iris Ohyama, what will the impact of this demographic decline be, and how will you overcome these challenges?

We believe that Japan's declining population poses a risk to us in the long term. In the short to medium term of the next 20 years, we will face not only a declining population, but also an aging society and an increase in the number of one-person households and two-person households. We should be able to capture these lifestyle changes and meet the demands of the new lifestyle.

There is also a positive side to this. Change will create new needs, and by offering new products that match the demand, the company should be able to continue to grow. Right now, the population is declining and aging, but the same thing will happen in China, Korea, European countries, and the United States. Therefore, I believe that our experience in Japan is something that we can expand to export overseas in the long run.

We offer both DX cleaning robots and serving and transporting robots, both of which are in high demand in Japan due to the labor shortage caused by the declining population. We will work with our customers to find problems and issues, fix and solve them, and then use our experience to propose solutions to create new products and services and export them around the world.

 

In 2021, Iris Oyama established Iris Robotics with SoftBank Robotics. Could you tell us more about that partnership?

Up until now, Iris-Oyama has focused on making its own products, but with the rise of digital transformation, we realized that we could not use all the technologies, especially AI and robotics, on our own. Therefore, we took a new approach and were looking for a good partner. SoftBank Robotics was one of them. We are currently working with them to plan and develop the production of new products, and our focus is on creating innovative new products. We are also looking for new partners in Japan and not only in Japan but also in other Asian countries.

 

Your company's two main robots, the DX cleaning robot Whiz i Iris Edition and the food delivery and transport robot Servi Iris Edition, already exist in some form, hence the "Iris Edition" in their names. What value have you added to these products through your partnership with SoftBank Robotics?

The robot itself was developed by SoftBank Robotics, but what we are doing is adding options to increase the value of the robot. For example, in the DX cleaning robot, we added mops and other enhancements to allow for more thorough cleaning. We also added a camera to the top of the cleaning robot so that it can check on the store, the customers, and the work being done. Furthermore, by adding digital signage, the robot can now be used not only as a cleaning robot but also as a promotional tool.

 

For the past 20 years, new products have accounted for more than 50% of your sales. What is your current R&D strategy?

For research and development, we are currently strengthening our recruitment of young and talented engineers. There are engineering colleges in Japan, and we are also focusing on people who have graduated from universities and studied engineering. Originally, our R&D bases were located in Miyagi and Osaka prefectures, but with the opening of our R&D center in Tokyo this year, we hope to hire more engineers and further speed up the development of new products.

 

How do you define the “ah-ha” concept of Iris Ohyama?

The idea is that developers are also consumers, and it is important to represent the voice of the consumer. Our focus is on finding dissatisfactions and deficiencies in existing products, and developers use their own and competitors' products to determine what the underlying dissatisfactions are.

As for product development, we have new product development meetings every Monday, about 50 times a year. The good thing about these meetings is that all the departments involved in the product are brought together, and the top management makes a quick decision on the spot and shares the situation with us.



Iris Ohyama’s large appliances have a grievance that is being addressed currently and is about being digitally integrated. What other digital initiatives are you developing to address environmental concerns or needs from consumers?

We are currently working on developing a voice recognition system with high applicability and adding voice control to circulators. This is to achieve efficient energy saving.

From the COVID epidemic, we have also launched an AI thermal camera for non-contact temperature measurement. Currently, we are adding a face recognition function to enhance security and to link with attendance management.

 

In 2013, in response to the Great East Japan Earthquake, you entered the rice milling business with the aim of supporting the recovery of local farmers. How has this business lived up to your initial expectations and what role does it play in the business of Iris Ohyama?

In the food division, we are working to restore and rebuild the areas affected by the Great East Japan Earthquake. Since rice is the main agricultural product in that area, we are trying to revolutionize the way rice is sold by making small packs of rice and adding oxygen absorbers to keep the rice fresh. With the number of people per household decreasing, packaged rice is in demand, and we have been providing it to meet new needs caused by changing lifestyles.

Recently, there was a major earthquake in Tokyo. Tokyo is very susceptible to natural disasters and when something like this happens, there is a possibility that the infrastructure will be cut off. We have entered the drinking water business, and by establishing a system to produce water in the Kanto region, we are ready to respond to emergencies. We believe that there are still innovations that can be made in the food sector.

 

Iris Ohyama has a large variety of business segments, including home appliances, food, houseware and interior, pet, healthcare, B2B LED lighting, and then the more recent robotics and drinking water. What are some of the synergies you can create by having such a diversified portfolio of products?

 

There are many synergies between our business units and we have two main pillars, B2C and B2B. While we have a wide range of products, B2C focuses on products that are used in the home and household. As the number of people per household is changing, the needs for home appliances and interior design are also changing.

In Japan, laundry used to be hung outside, but with the increase in dual-income households and consideration for pollen and other factors, more people are hanging their laundry indoors. This is why we have developed a new drum-type washing machine that can be used for indoor drying and a hanger rack that can be used inside the house. There are many similar needs, and we are trying to respond to each of them.

The LED, office furniture, and interior design businesses developed by the B2B business are all derived from products for consumers.

 

What is your distribution and logistics approach?

Having many distribution centers scattered around is not efficient, but it can be useful in an emergency. Even if something happens and one distribution center shuts down, we have other centers. By doing so, we were able to gain the trust of our customers, who knew that we would be able to provide them with what they needed in case of an emergency, and I believe that this helped us to establish our position.

 

While COVID-19 has been devastating for the global economy, there have been some silver linings, including a thriving logistics sector and the popularization of e-commerce platforms. What mid to long-term changes has the pandemic accelerated here at Iris Ohyama?

COVID definitely had a great impact. In the past, there was a lot of consumption of things such as experiences and sightseeing in Japan, but with COVID, there was a shift to consumption of things. As a result, sales of our products have increased significantly. Healthcare products were also affected, and sales of masks, which are in demand, increased. Furthermore, in the healthcare sector, we are also developing thermometers and pulse oximeters.

 

Can you elaborate on the role that collaboration and co-creation play in Iris Ohyama business model?

We are focused on creating products that have digital features. In terms of digital transformation and digitalization, it is important to partner with other companies because they provide speed and efficiency, while also lowering risks. When it comes to working together to create digitalized appliances, we are focusing both on Japanese and overseas companies, including China, which is strong in this field, and Southeast Asia.

 

What criteria do consider when you are looking for an international partner?

Since we have already established a leading position in the consumer market, especially with our maker-vendor approach, we do not feel much risk when partnering or collaborating with other companies. What is important in finding partners is developing trust with them, and they must have good technologies and quality, while understanding the high demands of Japanese consumers.

 

When it comes to your international network, are there any regions or markets that you consider key to your expansion? Can you elaborate more on your international strategy going forward?

As for new markets, we are currently focusing on the Southeast Asian market, having established corporations in Vietnam the year before last and Thailand last year, and are focusing on sales in these regions. As for our existing bases, we are expanding mainly in the United States, Europe, and China. We used to focus on houseware, but now we are focusing on home appliances such as circulators and small home appliances, which are doing well in these regions, and we would like to further expand what we have. There is a lot of potential to expand our home appliance business, and we are currently shifting the production of some of our small appliances to local factories as well as to China.

 

When take your products internationally, how do you ensure that they are distributed in an efficient manner?

As for logistics bases, there are four in the US, but nine in Japan. If we follow the ratio and scale of Japan, there should be about 20 in the US. That is not realistic, so we may add another distribution center. We are also thinking of dispersing distribution centers in the U.S. and other countries in case of emergencies, while conducting distribution on a larger scale.

In China, we have just opened an additional manufacturing and logistics base in Tianjin, and we currently have four bases. We may add one or two more locations in China in the future. That is our international strategy right now.

 

Imagine that we come back to interview you on the last day of your presidency. What message would you like to share with the next generation of Iris Ohyama?

Iris Ohyama is based on the philosophy of user-in concept, which focuses on the perspective of the consumers, which forms the basis of our products and marketing. With Iris’ ideas, we want to make the consumer’s lives more prosperous. We do this by first focusing on the Japanese market and consumers and making their lives more prosperous and then take that overseas. Currently, we are working in Asia, Europe, the United States, and other countries, but we want to take our ideas all over the world and make everybody’s lives more prosperous.

 

 

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