Thursday, Feb 29, 2024
Update At 14:00    USD/EUR 0,92  ↑+0.0003        USD/JPY 149,82  ↓-0.809        USD/KRW 1.333,72  ↓-0.43        EUR/JPY 162,35  ↓-0.926        Crude Oil 83,40  ↓-0.28        Asia Dow 3.724,48  ↓-37.1        TSE 1.746,50  ↓-7.5        Japan: Nikkei 225 39.164,76  ↓-43.27        S. Korea: KOSPI 2.645,78  ↓-6.51        China: Shanghai Composite 2.979,56  ↑+21.7102        Hong Kong: Hang Seng 16.561,53  ↑+24.68        Singapore: Straits Times 3,15  ↑+0.002        DJIA 22,42  ↓-0.13        Nasdaq Composite 15.947,74  ↓-87.563        S&P 500 5.069,76  ↓-8.42        Russell 2000 2.040,31  ↓-15.801        Stoxx Euro 50 4.883,77  ↓-1.97        Stoxx Europe 600 494,59  ↓-1.74        Germany: DAX 17.601,22  ↑+44.73        UK: FTSE 100 7.624,98  ↓-58.04        Spain: IBEX 35 10.068,60  ↓-45.2        France: CAC 40 7.954,39  ↑+5.99        

Masuoka Gumi: a leading Japanese construction player since 1908

Interview - April 21, 2023

Masuoka Gumi is one of the longest-standing and most reputed players in Japan’s construction industry, providing world-class civil engineering and building construction services since its establishment in 1908.


Could you give us your take on the state of construction in Japan, and what you anticipate its needs will be in the years to come?

First of all, the aging of infrastructure is not an issue confined to Japan. Other countries, such as those in Europe, are also experiencing it. With a limited budget, it is important to consider the cost efficiency involved in rehabilitation. The selection and concentration of resources will be important.

Society is becoming mature, with an aging population, and less children. There are new types of needs, such as care homes, that are joined together with medical treatments. That is another type of new value that is required at this time.


How is Japan's aging population impacting your business?

I feel as a market as a whole, it is becoming harder for us to secure a labor force with the aging population. The appreciation of the yen once attracted foreign workers to come to Japan. However, as a result of the recent depreciation of the yen, it's becoming harder for us to secure foreign workers.

On top of that, following the lead of the government, we are forced to change our working style, reduce the hours of overtime and increase salaries. With the depreciation of the yen there's an inflation of imported goods that include construction materials, and the question is being asked.


Why is the introduction of DX and AI – technologies that could make a key difference in combating these challenges – being delayed in the construction industry?

This is because in the past, we were able to secure plenty of workers, so there was no incentive or driving force to introduce additional means. In the past, it was more efficient to focus on having multiple workers take care of one construction-related task, rather than focusing on increasing the capability of one worker, but the environment has drastically changed, and it's now important to increase per-capita productivity for instance by utilizing DX and/or AI.


Can you tell us a little bit more about how you're introducing digital initiatives in your own activities?

By introducing drones in our operations, we are not only able to have accurate measurements, but at the same time, provide safety to workers and cut the cost and time required to do the operation.

For example, we can measure a mountain that we will conduct a civil engineering project on, using 3D mapping. By combining this accurate data together with the construction plan, we are able to determine at which point we need to cut and do the civil work.

Another approach we are taking is utilizing AI in knowing the real time cost of construction, or the price of materials.

In construction, there are many diverse types of materials, and different methods utilized.

Costs differ considerably depending on the combination of the materials and methods, the region of construction, the timing, and the amount of the order. It's important to provide clear cost information to our customers, but more than that, we need to know the real cost incurred in the construction, so I believe that by using AI, we will be able to gather real time data on the cost. That is the approach we would like to take.

Currently, we have a designated department in-house that collects all the data and inputs it by hand. It's cumbersome work. We actually are the customer, since we are procuring the materials, but we spend time to determine if it's an adequate price.

It's ironic. If it's the seller, it's understandable that you would find buyers taking time, so we're now trying to figure out a way to minimize the effort to input this data. It's hard for us to do everything by ourselves. That's why we would need to partner with a systems developer to develop a new type of system.

Once we consolidate the system, we'll be able to take this product and sell it to other companies. As I mentioned before, being open and transparent is critical, and we need to change the industry in that direction.


You've described how in the past, when Japanese firms did construction overseas, the only thing that was from the local country was usually the labor. The company, the contractors, everyone was from Japan. They often kept the construction technologies close to their chest, and they would use the local labor, but now, we're seeing a shift – for example, the licensing of some of those technologies to local companies and working with local partners. What has been your experience in that regard? What do you think about this shift?

The Japanese general constructor scene is very specific to Japan. Overseas, usually it is the construction management companies in control. Our company does not own power shovels or cranes. We have the personnel to manage the construction site, so we have, for example, an orchestra, and the Maestro, the conductor. However, the conductor needs to play an instrument, or else you don't have the credibility.

What's different from an orchestra is, you're not able to take the violinist or horn player across the globe. You have to go alone, and you have to have a trustworthy relationship with the orchestra players. However, it's true that long term trust is hindering transparency. It requires a fine balance, and it's a typical issue in the construction industry. In this analogy I see us as the maestro or the conductor. Even if we have great expertise, it's important to collaborate with trusted partners.


You did some land development work in Cambodia, for example. You operate the Hai Duong Garden in Vietnam, for example. What inspired you to get involved in these projects?

First of all, the Japanese market and economy are shrinking, so it's important for us to go abroad. We need to change our work style by location. If we were to stay domestic, we would have to change our business model in order to survive. On the other hand, if we are to keep our conventional business model, we need to go overseas to open up new markets.

The very first initiative was through ADO, our group company. We started training local Vietnamese engineers so they could use CAD, BIM and other digital means to create architectural drawings, so we could increase the number of engineers in-house. If we were to welcome them in Japan, we would need to pay the Japanese standard salary, but if they are located in Vietnam, we have an economic benefit. They're very talented. We have about 30 Vietnamese engineers.


Whenever you go abroad, what do you believe are your main strengths?

We are quite unique in having such overseas operations given the size of our company. For example, in Vietnam and the Hai Duong Garden, what we provide are the dwellings, or the housing, for Japanese expats in the locality, because the homes in Vietnam are more of the Western style, without the Japanese type baths, so we provide a Japanese style bath and other features catering to Japanese people living in Vietnam, and we’re also providing Japanese restaurants. That is the service that we're providing. It's not that we are providing a unique technology in the locality, it's more of a viewpoint.


Are you interested in providing the service in other markets?

As a construction company, it's very difficult for us to go overseas, since we need to be able to work with local workers. However, Tekko Building is a group company that handles capital investment in real estate, so in that sense, it is very possible for us to operate overseas.

Currently, as Masuoka Gumi, we are looking into investing in India, Bangalore, and we are investing in the project of our local partner, and we are working together with one or two other Japanese developers.


It sounds like it's still in the formative process, but can I ask for a little more detail about this project? What exactly will you be constructing?

Have you been to Bangalore? There's a central part, and the suburban areas. There are multiple tech centers, with over 100,000 employees, and most of them used to be call centers for American banks but have now been converted into tech centers.

We're not investing in this tech center directly, but we want to create an office in the city center. Our Indian local partner came to Japan to do the research and came to Tekko Building and asked us to collaborate in terms of providing the construction plans and the technology. Rather than expressing it by words myself, Tekko Building would describe it better.


Let's say we come back to interview you again in five years' time for your company’s 120th anniversary. What would you like to tell us about your goals and dreams for the company in that timeframe, and what would you like to have achieved by then?

It's a very good question. My grandfather is the founder of Masuoka Gumi, and he's the one who built this building, and after 65 years, I have entirely redeveloped it. I redeveloped the site, but I don't consider myself as great as my grandfather.

Everything is transient and changing, and failure often leads to success. However, success may lead to failures, so you have to be mindful that the premises or the conditions always change.

In a rapidly changing society, it's important for us to be proactive in meeting market needs and not stay passive, so through the accumulation of know-how, we want to become a socially resilient company.