Nicca’s ‘bazaar’ approach to chemical R&D creates real-world solutions

We have been told by many that Abenomics is as much about changing mindsets as it is about economic policy, allowing the Japanese private sector to be more ambitious, to think and to act globally. Would you agree with this? Do you think that your fellow CEOs and presidents are thinking more globally?

First of all, you have to realize that before Prime Minister Abe and Abenomics, everything was negative; we were in a negative spiral with a high yen, high taxes, and deflation. However, I can attest that after Abenomics, the spiral has turned around and is now positive. Yet, there are problems. The first one is the speed of change, and secondly whether or not the benefits have spread throughout Japan. And thirdly, whether it is felt throughout the different classes in society. For example, we are based about 400km west of Tokyo, and the economy in that area has not benefited much from Abenomics. I believe the sectors that benefited the most are the stock security industry, the real estate industry, the general construction industry, and the exporting companies, thanks to the depreciation of the yen.

Regarding the effects of Abenomics on our business, considering the fact that we have 12 factories outside of Japan, and 50% of our sales come from factories abroad, the depreciation of the yen was a great benefit for us. In a sense, the number has expanded; however, it is expansion, not growth. I believe it is our mission to grow, not expand. We did grow, and significantly in terms of the cosmetics business. When we compare 2006 to 2015, chemicals have grown around 30%, and cosmetics 159%.

In which sectors are you looking to grow your operations further? What does the future of Nicca Chemical look like?

I would like to touch upon our past before talking about the future. Nicca was founded by my grandfather. He set up very strong beliefs and philosophies in the company that we still to this day value and emphasize. The first one is that we are selling the technology, and not the product. This means that we have to be a solution provider. The second thing is our very unique philosophy that we are all one big family, and not only here in Nicca Japan, but in all the countries we operate. The reason these strong values were put in place was because we experienced a large earthquake in 1948. My grandfather’s family suffered; some family members passed away and our factory was completely shut down. There was sadness not only within my family, but all over Fukui prefecture. However, we had to remain strong to keep the business going; the earthquake occurred in June and by December the same year we had built the new factory. This happened almost 70 years ago; I have to say it is quite amazing.

The company came together with a mission to build the factory as quickly as possible. Three years later, another big thing happened: the Korean War ended. The war appreciated the raw material prices. My grandfather bought as many raw materials as possible because he thought the price would rise.  However, the plan backfired. The Korean War suddenly finished with the 38-degree line, and the price of raw materials fell substantially. Our company almost went bankrupt. At that time, my grandfather had to fire people, which dropped the number of employees from 70 to 35, and the people he fired were close to our family. This move made us able to survive this time. My grandfather decided then and there that he would never experience such a thing again. All employees should be regarded as family, and we should secure our family. We started our family-style tradition 65 years ago.

We had another big shock eight years ago. At that time, our sales fell by about 10%, our ordinary profit fell about 80%. I made a speech to our employees all over, and promised in front of them that I will never fire anyone. Not only have I cut the whole board’s salary including my own, but I also had to cut bonuses from a 2.5 months’ worth to a month’s worth of bonus. I said, “Please advise everyone together, and let us know what you are thinking about cutting costs. Any idea is fine. All of you are a manager employee, so please implement the idea of cutting costs.” Then our breaking point went down to maybe 20-30%, and we barely survived. I think this kind of strong philosophy in the end secures or even strengthens the company. It is not a big company story, but a small company story.

Nicca Chemical is synonymous with Japan as a whole because you are a family, as you said. It is really about coming together during difficult times like Japan has done time and again. Do you believe this is going be the foundation for the future?

I believe the future is in our company’s tradition as a solution providing company with an emphasis on our innovations, sustainable innovations, our big family company culture, and how we care about our customers. Our first motto is to serve the customer. The second is to grow the company. Third is to ensure our employees’ happiness. I would say that it is customer satisfaction, employee satisfaction, and profit. Those three are the company mottos.

Nicca Chemcial really is a great embodiment of innovation, especially with your new Nicca Innovation Center. Can you share with us this exciting facility that you are building, and how you're going to use it to really drive your future growth?

Our profit is about $30 million a year. $20 million in chemicals, $20 million from cosmetics, and a $10 million loss from new challenges; then our profit is $30 million. I take this $10 million loss as very, very important. If we cut the loss then we immediately have $40 million profit. But I would not do this because the $10 million loss will become one of our greatest assets in the future. In order to make this happen, we need to grow closer to our customers, communicate with our customers, emit information, and spread out. Those outside relationships are very important. Our headquarters are in Fukui, which is very far from Tokyo. However, I do not believe this is a handicap. This building is a symbol of the emission of information spread out, and also of getting together from all over the world – not to Tokyo, but to Fukui.

Our new research facility is not built as a palace, but more like a bazaar in Istanbul. You would revisit bazaars to keep looking for things you want, but you usually would not revisit a palace: you see it once, and you are done with it. The palace may be wonderful, but I do not want to go back because I have already seen it. That is why we rather regard the facility as a bazaar.

We would like to communicate what is going on in our innovation center, and how to feel the hospitality we are creating there. Our value is not the product. Our value is product innovation, our customer support, and our human capital. Those are our value propositions. I would like it to be an innovation center that is, as I said, the value proposition place.

This concept is very clear. Forty very young, selected employees get together and discuss future action, to change their work style to one that is more innovative and not only makes chemicals, but also spreads their information as well. Those 40 meet periodically and decide on what kind of innovation center we would like to have. In each meeting they get together to gather their comments. Those meetings are with a construction designer from Tokyo every time. We are not only creating a product, but we are also creating a place where people want to work. This innovation center is where we design, and innovators work fully motivated.

Is this the springboard you are going to use to continue your global growth? Starting in 1968 in Taiwan, Nicca Chemical has expanded into eight countries and regions. What are your global ambitions, and where does the US fit into these plans considering you have significant operations there?

Our goal is nothing but organic growth, not inorganic growth. I am saying this because we have a very strong company policy that we share. We would like to be the number one in textile chemicals in Asia, but not in terms of quantity. I want us to be the “first call” company of the clients; if the customer has problems, I want them to think of Nicca as the first company to call for help. If they want to design something new, very innovative, and someone had found Nicca by word of mouth, then they would call Nicca and say, “Do you have any innovative products?” Then our products will go to countries around the world. Not only Japan or Asia, but also in Africa, Europe, and the US. We will say, “Here are our solutions,” or “Here are our products that would fit your designs and ideas.” That is what I am aiming to do.

As a result, our sales numbers and profits are going up. That is what my aim for the company is. Not the view of “we need this many units of sale by this date”. We want to tailor our products to our customers, and create a total solution for their needs.

Incorporating CSR efforts has become a social norm. Society often associates chemical manufacturers to be exploiters of the environment; and we know you are working hard to minimize your environmental impact by developing eco-friendly products for instance. What other measures does Nicca Chemical take to ensure minimal environmental impact?

These days, one of our biggest customers or opinion leaders is Greenpeace. They have spread the concept all over the world, to all customers. Many internationally known sports and fashion manufacturers follow the concept of Greenpeace. The big impact is anti-solvent products.

Non-solvent or water-soluble products are one way. The other way is using fluorocarbon, which is quite a safe product. However, Greenpeace does not like it. Fluorocarbon is a wonderful water repellent product. We are manufacturing known fluorocarbon water-repellent products, such as sports and ski wear. However, in order to meet the demands of society, we invent and sell non-fluorine water repellents.

Interacting with the community and society has been vital to your success. Why would you say this is so important for world and business leaders to have society at the core when making decisions?

I think the strength of Japanese companies is what we have catered to, and we have moved with the demands of society. For example, there was an issue of asthma in the city of Yokaichi in the past, so air pollution became a hot topic. After that, there was no factory that emitted anything but vapor from the chimneys.

When minamata disease was a big issue due to mercury in food from industrial wastewater, the water all over Japan became very clean. Nowadays, compared to the past, even the Tokyo Tamagawa River has Ayu fish that favors the clear stream. The Japanese companies have worked to find solutions whenever there are problems. I fully agree with the fact that the G7 Summit has had the environment as one of its main topics.

Trust and confidence are key to the success of Abenomics, and it can be argued that Japan has suffered recently from a lack of trust and confidence not only from the Japanese public, but also from the international community. What would you say to the international community who may still be hesitant to invest in Japan or do business with a Japanese company such as Nicca Chemical?  

I just want to express one thing in particular about how a small company like ours can be successful in foreign countries in Asia. I think there is one single reason: trust. We are trusted by those countries, and they know we will not go away.

For example, where there is a problem or complaint from a customer, what I know from experience is that when a company is faced with such problems, then they minimize the effect of the problem. We try our best to solve the problem itself. I think that is where the trust comes from, and I think most Japanese people share the same mindset.

The biggest difference between Japanese and many foreign companies is that we base our judgment on whether it is right or wrong, not whether it is profitable or not. Of course, there are great foreign companies as well, I am not saying they are all only profit-driven.

When people are considering investing in Japan, I think there are many things we can offer, and there are many things they can learn from us. However, this is much stronger in the countryside of Fukui than in Tokyo. Fukui is a big family, and a big family society. In many cases in Fukui, the parents go to work, and the grandparents raise the children. The grandparents are morally stable so the kids grow up very conservative and their average is very high. They also have wonderfully high moral standards and scholastic achievement, because of the high level of education in Fukui.