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Noritsu Koki: A diverse representation of monozukuri

Interview - June 14, 2022

For many firms, the Japanese manufacturing philosophy of monozukuri takes many shapes and forms. For Noritsu Koki, a holdings company with subsidiaries engaged in different businesses, the possibilities are endless. From DJ equipment and headphones to pen nibs and metal injection molding, Noritsu’s manufacturing prowess knows no bounds. In this interview, Representative Director and CEO Ryukichi Iwakiri discusses his unique views on the Japanese market and the role that globalization plays for Noritsu, in addition to the holdings group diverse set of businesses and the success that stems from them.

 

RYUKICHI IWAKIRI, REPRESENTATIVE DIRECTOR AND CEO OF NORITSU KOKI CO., LTD.
RYUKICHI IWAKIRI | REPRESENTATIVE DIRECTOR AND CEO OF NORITSU KOKI CO., LTD.

In the last 25 years, Japan has seen the rise of regional competitors who have replicated Japanese monozukuri processes, but at a cheaper cost, pushing Japanese firms out of mass production markets. Yet we still see many Japanese companies maintain large global market shares, especially with high-cost quality consumer and industrial products. How are Japanese companies able to maintain this market share despite the stiff price competition?

Japanese firms have successfully continued to develop high-quality products. Companies with a long history have achieved a spirit of craftsmanship over basic manufacturing, whether done by hand or machine, and have accumulated techniques throughout the years through fine-tuning and stable processes passed down over generations. That excellent quality Japan is known for cannot be easily replicated abroad. In addition to that, the Japanese ethos highlights its people's inclination to meticulousness in details and in whatever they do.

Looking at the small and midterm business model, the lack of human resources to succeed and continue Japan's spirit of craftsmanship, which is the foundation of Japan's economy, is a serious predicament for companies. The price bubble burst slowly reversed the upright pyramid structure. The population decline poses a crisis when it comes succeeding the work of the older generation. Millennials have more interest in attractive industries centered on IT, AI, digitization rather than in the traditional spirit of craftsmanship, which, in my opinion, is dignified and glorious in its own right. There is not only a decline in the population but also in interest.

Japan's business sector is weak in marketing and fully grasping the needs of globalization. They are exemplary in squeezing down the cost as much as possible, which emanates from the mentality that raising the price is evil to the business. However, with current global events, such as oil price hikes due to the Ukrainian crisis, firms need to realize that they cannot continue to operate in that kind of setup. Japan cannot shift its mindset and abandon that preconceived notion of how they do business. Not to mention large companies that have been in the game for a long time, start-ups and newer companies have the strategy of first succeeding in Japan before thinking about the rest of the world. They believe that establishing a solid foundation within the Japanese market is the way to go. I think there is an aspect of Japanese education that is at fault. Nowadays, companies can immediately consider the global market to take advantage of economies of scale. Since the Japanese market is limited and saturated, their approach automatically reduces the investment and market growth potential. Unless we can perceive globalization from a completely different perspective, it will be difficult to take advantage of the vast ocean of opportunities that exist globally.

 

As we got closer to the 2000s, the former keiretsu model became irrelevant due to globalization. Companies within that pyramidal structure that depended on others for innovation and global expansion, such as Toyota Boshoku, which supplied automobile seats to Toyota for decades until Toyota decided to work with an American new partner, Camry, in 2006, are met with the reality of globalization. How do you think Japan’s industrial structure will evolve in the future?

The keiretsu model proved successful as long as the pyramid was upright. Several of the top companies worked in a coalition to be able to take full reign or monopoly of the top shares within any industry. The reversal of the pyramid due to the population decline has resulted in cut-throat competition for recruitment and succession of human resources. Before, being one of the top seven companies meant maintaining significant success and longevity. However, these days you will need to be among the top three, if not the best, to keep your position in the market. All companies in Japan, especially larger ones, undoubtedly understand the risk that comes from this business model and operational structure. The challenge in this present business environment is the possibility of disappearing next year or in the next few years. If they do not transform the way they operate and gain profit, they cannot maintain their competitive edge in the global economy. Unfortunately, Japan’s education at schools and training upon entering a company is inadequate in equipping them for what lies ahead.

In regard to my comment about Japan’s weakness in marketing, the keiretsu model worked well for Japan before the economic bubble burst, as it was during that time that Japan reached its peak levels of economic growth. Back when the market had immense growth potential, companies were able to work together as a team and mutually support each other’s growth. You only had to be in that industry to grow, not even needing a specific competitive advantage because of the market’s great power. By just entering the field, you can benefit from the large waves emerging from the economic swells. After the bubble burst, along with the dramatic change in the domestic and global economic situation, that model is not viable anymore. Each company has to be independent and have the ability to ride those waves on its own. They cannot solely rely upon the large tides that come from a specific field. On one hand, if the growth potential does not exist in the market they are in, they will need to create the waves. On the other hand, they should be ready to move where those waves are to shape the business for them and remain profitable. Flexibility and speed to move in different directions within the supply chain are crucial to staying in the game and creatively envisioning new ideas to respond to change.

 

In 1976, Noritsu was a global leader in revolutionizing the photography market by being the first to develop quick film processing. However, in the 2000s, digitization completely changed the business. Today, your company has stepped away from developing films and moved into the development of audio equipment, material for pen nibs as well as medical solutions. Can you run us through your transformation?

Our present operations are based on the understanding that it is very rare for the same business to remain for 10 years. That kind of longevity for a single business line is not the norm anymore. Hence, we do not expect the same product to keep selling for 10 years or the same business to continue for that long. I joined this company four years ago, along with a very long-term perspective of several decades, and we have been continually transforming ourselves by having a short-term outlook – three to five years down the road. Some that are still in the idea stage may have to be developed immediately, and similarly, our core business might disappear very quickly. With a rapidly changing environment, I have been contemplating the best model to adopt for the more than 20 businesses we are involved in.

 

Last year, you bought JLab, which is one of the fastest growing companies in the US, which provide affordable headphones. Why did you decide to purchase JLab?

JLab is not only limited to headphones and earphones, but also includes different accessories for iPhones, Google or Android products, and PCs like mice, keyboards and webcams. We believe that that is a huge market with great growth potential and involves a wide array of communication devices. JLab can continue to grow in markets where the population and GDP keep increasing.

 

In recent times, various manufacturers have combined information functions with traditional DJ functions. One of your developments is the Big Jog, an innovative wheel-type user interface that allows for DJ techniques and performance & audience information. Looking at the future, what are some of the functionalities that you are looking to add to your audio products?

We have a heightened interest in enhancing the performative functions of our products. The actual product is from Pioneer DJ, but the company is AlphaTheta.

AlphaTheta is a meaningful name because it pertains to the combination of alpha and theta waves. Alpha and theta waves are emitted when music is played. 
The idea behind the AlphaTheta name is that these waves promote emotions, and ultimately a more meaningful and fruitful life.  Our aim is to create products that can fulfill our mission of connecting people, of being One Through Music. 

 

Along with your recent acquisitions of JLab and AlphaTheta, Teibow, which has the largest global market share in pen nibs, is also part of your group. What synergies are you able to generate amongst the Noritsu Koki group, ranging from DJ and audio equipment to pen nibs?

Teibow is operating on a completely different segment. Within our audio equipment, Pioneer DJ products are high end, while JLab products belong to the affordable spectrum. Since both relate to listening, plausible synergies exist within these two segments, such as technical and user information exchange. Teibow is a segment that works more in the industrial sector, and there are often various types of cooperative structures that can provide support for the back-end supply chain.

Few synergies can be formed from a mid to long-term perspective. Excluding Teibow’s Metal Injection Molding (MIM) technology, Teibow excels at grasping the needs of the clients. It has developed writing instruments with ease of use and smooth writing experience, which they have also applied to eyeliners. They fully comprehend the elements that lead to an aesthetically pleasing writing experience. Similarly, Pioneer DJ has discerned the factors that can enhance the listening experience, as well as what the DJ wants and what the listeners might gain. JLab can cater to the diverse needs of clients coming from specific demographic groups. The commonality between all of these companies is their ability to capitalize on their accurate understanding of their users. They work with the kind of subjective information that is difficult to measure, which describes their experience with a given product. I think those are the kind of synergies that I envision as our competitive advantage moving forward.


Metallic marker


Your MIM technology uses metal molds and makes difficult to manufacture parts easy to produce. Though only recently entering this new field, you have been able to create shapes and manufacture parts or components for automotive and electronics. How do you plan on further expanding your new MIM business for Teibow? What are some of the applications that you foresee for MIM?

The components manufactured through our MIM technology are intricate and can fit into the palm of your hand. There is a hole inside where a ball passes through.

MIM technology can be used for transportation like bicycles and cars. These parts are integral, especially when it is intended for a precise fit. Some components are not very forgiving, with even the slightest mistakes; they need to be incredibly accurate and highly durable. MIM technology is the only one in Japan that can perform at a flawless level and operate in large lots at low prices. MIM produces cheap, high-quality and accurate products through mass production. Teibow's MIM technology differs from other MIM technological processes because it can instantaneously create specific and intricate processes required in one output. The traditional process utilizes a much bigger piece of metal. The machine subjects both ends of the metal with heat that differs in the flow or rate. In the second stage, the vacuum in the middle is made by forming two separate pieces to be attached. Oftentimes, when these two pieces are put together, there are some rough and uneven spots. Sometimes, due to the immense force required, the part itself breaks.

Teibow was able to get rid of all these demerits and weaknesses and forge the strongest MIM technology. Since the metal processing industry represents a massive market, I believe that that technology has the potential to perform even better. Teibow enjoys taking the lead in the global share for pen nibs. With its MIM technology, it has the opportunity to aim to be number one in this field. As it shows a huge business opportunity for us, we have been putting much emphasis on it. 


Metal Injection Molding


With electrification and hybrid vehicles, automotive manufacturers are moving away from combustion engines. Also, there is a shift from the use of heavy metals in the production of cars, like steel and iron, to lighter-weight materials, such as aluminum or certain types of polymers, which can be difficult to make precise components for. Can your MIM technology be utilized in the automotive field, especially within the context of hybrid and electrification? 

Titanium is an attractive material, but the machining and processing of titanium is extremely difficult. MIM applies to titanium, which is one of Teibow’s strengths. We are all about taking into consideration our clients’ specific requirements in order to respond accordingly. Teibow, a 120-year-old company, can contribute with its technology in the machining of difficult materials like titanium.

 

Moving forward, which countries or regions have you identified for further expansion, and what strategies will you employ?

AlphaTheta is already a No.1/Only1company, operating in several regions, holding a 70% share in the global market. We are putting more effort into cultivating China, AlphaTheta’s regional market. Moving forward, we are looking to expand to advanced countries with sizable clientele. Teibow also, with its pen nibs, owns a top share in the world. Each year, we identify one region to put more effort into to continue to expand. We plan to bring our MIM technology to the US and Europe for added value products. Although JLab enjoys a very strong presence in the US, it is not as known in Europe and Asia, which are our next targets for JLab. From a longer-term view, 30-40 years from now, we will be focusing on markets that are expecting explosive population growth, like Africa, specifically Nigeria. 

 

Imagine we come on the last day of your presidency to interview you again: what objectives or ambitions would you like to have achieved by then? 

Monozukuri, Japan’s great treasure, became known as the “Miracle of the East”. The companies in our group deal with businesses that value monozukuri. I would wish for each of the companies within our group to experience exceptional growth moving forward. My background is in digital marketing, so I want to incorporate DX and digitization to enhance their growth and success.  Furthermore, we seek to create a successful business model and platform that other SMEs in Japan can see as an example and adopt for their companies. It can serve as something illustrative of what is possible. I believe that by doing so, Japanese monozukuri can once again be revitalized and known on the global stage. Nothing would make me happier and prouder of my work than that.

 

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