Infrastructure forms the core of any society and the stronger it is, the stronger a society becomes. NIX not only helps provide this crucial infrastructure, but also offers renewable energy sources in the form of hydro and solar power. In this interview, President Tomoaki Ichimori discusses his firm's goal of becoming a total infrastructure company while highlighting the strengths that NIX can bring to the world.
What is your general analysis of the needs of Japan’s infrastructure market? How do you foresee its evolution?
I would like to start by explaining my career progression thus far. I graduated from Kyoto university studying in the civil engineering sector. After that, I joined a general construction company in charge of the construction of an underground subway system. I was involved in design and construction management in Kyoto, Osaka, Kobe, Tokyo and additionally Singapore. Around 20 years ago, it was not the best environment for the construction industry, with the change in government to former prime minister Junichiro Koizumi, as he decreased the public construction budget. Finally, my former company went bankrupt.
At the time, I returned to my hometown, here in Toyama Prefecture, and joined a small company of about 30-40 employees that my father was managing. My father’s company also seemed to be going bankrupt due decreasing sales. It is here where I felt that I really must change the structure of the business, because only survey and design work was not enough and I took over my father's company. I started to search for other business opportunities. 17 years later, we are much bigger now, maybe 10 times more the amount of sales of what we were previously, but that is not enough. We are focusing on new business areas, especially in disaster prevention and a long-term strategy in infrastructure, as well as a focus on environmental issues and decarbonization.
The Ministry of Land, Infrastructure, Transport, and Tourism's investment forecast indicates that maintenance and renewal costs will be JPY 5.2 trillion in 2018 and will be around JPY 6 trillion in 2028. Moreover, these figures do not include post-maintenance, but rather preventive maintenance, i.e., longevity planning. There are cases in which the long-life plan does not work well, or in which the aging of the building is worse than expected due to the effects of earthquakes. In such cases, further costs will be required. Although technological development to control costs through automation, etc. is progressing, the effect is limited, and we believe that more time will be required. Therefore, at least for the next 10 years, the infrastructure market is expected to remain stable and demand will continue to be high.
What impact do you see DX or digital technologies having on the construction sector in Japan? Secondly, in a sea of very traditional companies, how do you stand out and differentiate yourself as a technology-focused enterprise?
I do not think DX started recently - we have been working with it for more than 10 years. Therefore, we do not believe that it will bring about a radical change, but only a slight increase in the speed of conventional change.
However, the spread of BIM (Building Information Modelling) is crucial for our business in Japan. We have introduced BIM in our hydropower projects in Indonesia, and we have realized that Indonesian engineers are more capable of adapting to BIM than Japanese engineers and that Japan is lagging behind. In the field of survey and design, there is no clear effect of DX and BIM at present, but if we follow the global trend, we can manage infrastructure efficiently by adapting to it. It will also provide an opportunity for companies to differentiate themselves from their competitors and gain a competitive advantage.
I would like to explain some of our DX projects.
The B-DASH is a new technology development project sponsored by the Ministry of Land, Infrastructure, Transport and Tourism, and we have been selected for three consecutive years. The English name for this project is “Breakthrough By Dynamic Approach In Sewage High Technology Project.” These is an urban flooding prediction system based on rainfall radar and runoff analysis models, an efficient management method using AI for sewer manhole pumps, and efficient 3D modelling of sewer treatment plants. The project aims to establish disaster prevention/mitigation and efficient maintenance management via Information and Communication Technologies (ICT).
Other DX projects include a road patrol system and AI water level prediction system, combined with a flood forecast and rainfall system. For in road patrol systems, we are providing a system managed by local governments, where road damage conditions are input using smartphones and tablets, and the data is managed in real time on a server.
Clearly, you have had success with this kind of model of co-development/co-creation in Japan. Are you are looking to replicate this kind of collaboration and local partner sourcing in overseas markets?
In terms of overseas collaboration, we are particularly interested in finding a partner in Indonesia. I would say that we would also like to expand our collaborative efforts to other Southeast Asian countries as well. In fact, all our overseas business consists of collaborations. The hydro power business, the mega solar power business and the engineering business are all in the same situation. Collaborations in overseas markets plays a role in creating investment opportunities. It creates enhancements to the stability of the business.
We are looking for partners in Indonesia, of course, but also in other Southeast Asian countries. We have engineers from Southeast Asia among our employees, and we believe that their countries of origin would be our first target.
What motivated your diversification into power generation? What do you believe to be the main obstacle or impediment to the proliferation of alternative power generation?
The overseas power generation business is all about adding value and business expansion enhancement. It has the advantage of enhancing the sustainability of our business by strengthening our ability to expand overseas which is a weakness of Japanese companies. We do have a focus on our hydro power plant overseas as a renewable source of energy for the future. We have an advantage in that respect purely because we are a consulting firm on these projects. We have expertise in designing all sorts of civil engineering structures and hydro power plants, as many investors do not have this kind of technical sector within their companies. We can provide technical due diligence by ourselves; as a result, they order it to us. We can also analyse feasibility studies and facility information collaborations, all sorts of technical duties. In terms of finance, we can reduce costs as we are the design company as well.
Construction status of Tongar Hydro Power Plant in Indonesia (Weir)
Construction status of Tongar Hydro Power Plant in Indonesia (Head pond)
How do you plan to develop your overseas business? Can you please elaborate for us on your specific strategy to target this market?
We are aiming ourselves towards general infrastructure company - that means not only design, not only construction and not only investment. We are like a consultant that oversees all. We have been looking for increases in other business areas. In Japan, we have many opportunities to acquire other companies. In fact, we have already acquired nine other firms within Japan. Of course, we would like to employ this same strategy of acquisition in Southeast Asia in the future, because we do not have so much time to grow and catch up to economic speed. Acquisition is essentially spend money and save time strategy.
We do have readers in the Southeast Asian market that are looking for opportunities within Japan. Could you give us your main competitive advantage as a firm and what solutions you provide customers? I would also like to ask what other fields are you looking to diversify into in the future?
If I talk in terms of overseas business, we are a consulting firm. I think that is really our number one advantage. We have expertise in many fields. When compared to Japanese consulting competitors, they are not investing for growth. In addition, their decision making is very slow. I would say that when you look at the corporate structure too, because if there are many employees, and also many directors, it takes a long time to come to a decision. Unfortunately, this is Japanese culture.
In terms of our strength as a Japanese company, one I would say is our ability to use Japanese banks and have access to Japanese industry finance. In Southeast Asia, people tend to trust Japanese companies, making them very suitable business partners. I find it all to be very interesting. However, sometimes they can come across situations where bigger companies find it not possible to give smaller ones a sense of security because they change mind very quickly on certain issues. In our case, we can connect to have top-to-top deals. But in the case of a big company, they cannot talk to the top.
I believe your company as it stands today has an employee count of 200, and an annual turnover of JPY 3 billion, am I correct?
Currently, we employ around 370 employees in the NiX group and the annual turnover is around JPY 5 billion. I would say in NiX, there are around 200 employees and annual turnover is around JPY 3 billion. To answer your previous overseas business question, we focus on renewable energy, especially with interest in the hydro power business in other countries. We are looking for potential sites in other country and we started to invest into the mega solar power business in Indonesia.
Customers do not like to take capital investment risks. We are using rental systems because we look to take some of that burden. We provide solar panel facilities to them, and they just pay the usage fee. We can also have a good asset. It is a business model that works well for us. Also, this business is a collaboration, not only us but also other Japanese companies.
Can you tell us more about the structure of the NIX group? How can you leverage the strengths of your group, and what kind of synergies can you tap into with this kind of structure?
NiX Group structure
This is the NiX group structure: the consulting business, the domestic/overseas energy business and the community development business. Customers of the consulting business are government, and we also have an area that deals with private company as customers. We have our business-to-business (B2B) area in power generation that mostly deals in the sale of electricity to other private firms.
This year your company will be 43 years old. Let’s imagine that we come back to conduct this interview again in 7 years' time for your company's 50th anniversary. What would you like to tell us? What are your goals and ambitions for the future?
Our goal, as I described, is to become a total infrastructure company. In the long and short term, we want to continue to work in the infrastructure field because it is necessary for the future. To follow world trends, an increase in our sales amount is necessary; as we stand right now, we are still too small. For our 50th anniversary, I would like to think that we will have become twice as big as now. Lofty goals, I know, but it's our clear focus and objective.