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When hardware meets software: The birth of smart manufacturing

Interview - July 12, 2017

In this interview for the Worldfolio, Mr. Shoji Tada, President of Nippon Systemware (NSW), gives us a unique insight into the rise of his company, which has successfully implemented innovative ICT technologies with modern manufacturing products


Your company literally embodies what the fourth industrial revolution is about, with a convergence between the mechanical and digital world. Your company started by developing software and later expanded IoT solution embedded systems. You are now at the stage where you are able to create machine-to-machine interaction. Japan itself is suffering from a negative demographic decline with one of its challenges being a shortage in the workforce. As a leader of that sector, could you explain to what extent the fourth industrial revolution can help Japan face that challenge?

A crossroad of technologies can be used to help solve the problem we are facing with the workforce shortage. Automation can be utilized to reduce the actual workload and A.I. can be used to memorize some technologies, which will fulfill the labor shortage. The construction company Hazama Ando Corporation are an example of how A.I. can be used to minimize the impact of labor shortages in the market. Part of their job is to check the strength and durability of bedrock. This process was originally assessed visually. They then introduced A.I. which allowed them to check the strength and durability of the bedrock using their mobile device, therefore reducing the labor needs of the company.


Your company was established in 1966, you started by producing software and then you expanded into device development systems, integration services, going from LSI's to components and then establishing cloud services in your data center. Can you explain to us the advantages that this history and diversification strategy gives you as a company today?

There are only a few companies in Japan that have technologies in terms of both device and application technology required for IoT, we are one of these companies and as such it is one of our strengths. Of course, major Japanese companies also have both of these sectors in their divisions, but as a medium-sized company, we have the added advantage of being able to make faster decisions.

At NSW, IoT usually covers around 80% of manufacturing businesses, cloud, data centers, original electronic manufacturers. Our core is essentially software but we oversee all these businesses in our company, which gives synergy throughout the company. In terms of organization, we are less complex than the larger companies which enables us to make decisions much faster. In the IoT business usually it is necessary to establish PoC. Because we run on a much smaller scale, we can complete these PoC much faster, which is another one of our strengths.

US citizens have a big misconception about Japan but we are actually lagging behind compared to countries like the United States. Our technologies are excellent and specific but perhaps we look at them in too much detail which isolates us from the global market as a consequence. Leaders of companies in Japan observe what happens in the United States before looking to see how they can adopt those technologies or mobile phones into the Japanese market, which I believe is the case even with the cloud.   

Ten years ago, internal discussions were being held to discuss the revolution and today, we are still looking for the post revolution. PTC, Boston (who purchased Thingworx), are communicating with US customers in terms of IoT business and we collaborated in improving their packages and business as a whole which resulted in an increase in their success.

US manufacturers have a great trust in the credibility of Japanese companies in terms of quality and manufacturing, so we help them to cross the bridge between American and Japanese companies, they trust the quality of these products and providing packages and software is part of the IoT sector of our business.


North America dominates the global demand for IT services, representing around 40% of the worldwide demand (followed by Europe and Asia). You partnered with Minacs, a global outsourcing business solutions partner to offer technology-enabled customer experience management services for cross-sectorial processes and you also partnered in 2015 with Digital River (another North American company). Looking at the future and the international strategy of NSW: which markets will you prioritize and how?

China provides a great opportunity in terms of volume, but the process to enter China is very complicated.  The global market as a whole is critical for us, and we see South East Asia as one of the most important markets to enter. We have a partnership with companies in Taiwan dealing with the area of semi-conductors.  Going forward, we would like to go into the global markets like the United States. Last year, I went to the US to look for partners and unfortunately we have not decided yet. In the future, we would like to have a branch office in the USA.


The US is known to be at the point of a saturated market with a lot of competition.  What do you believe NSW can bring to the US as a competitive advantage? What makes your company unique on the global stage?

We have collaborated with Docomo in terms of IoT and they already use our technologies. We would like to continue in collaborating with Japanese manufacturers and other customers to increase the uniqueness that we can offer the US market. Companies such as HORIBA, LTD. have already entered the global market as well as many other major Japanese companies, so I believe that if we collaborate with those companies rather than just locally growing strength, we can make a synergy impact against the global market.  Panasonic produced the high brightness projector which was used in various events around the world and they used some of our services and technologies in its production. The projector is extremely trustworthy and of good quality and, as such, another example of the benefits to be gained by two companies collaborating to produce top-quality products.


From 2015 to 2016, your revenue grew by some 6%, passing from 28 billion yen to 30 billion yen; as your operating income also rose from 1.7 billion to over 2 billion JPY. What were the reasons behind this growth? Looking at the future, what will be your mid-term strategy to pursue this growth?

One quarter of businesses actually shrunk after the Lehman shock and at NSW we experienced a fall in sales as a direct result. So, this growth is in response to the reform we made in our company after that loss. Today, we project our sales will increase to 50 billion yen in the next few years. A number of things have contributed to the growth, there has been an increase in embedded services for automotive users and in device designing. We focused on each of the nine business sectors individually, debated what each sector needed in order to grow and established strategies in order for grow each sector thereby providing a synergy between all segments of the company. Manufacturing distribution, social infrastructure and services for IoT have grown as has the cloud data center.

I have witnessed how much the company has changed since the first days of my employment. At that time, major companies were very conservative in their innovations and when the company is compared between how it was then and how it was after the internal revolution, you can see the connections are much more relaxed and communications between other departments have improved, which have improved our service as a consequence.

The first founder of the company was a strong leader and gave good leadership. I have been in this position for five years and have had the pleasure of leading this revolution to the stage were our company has adopted a more open-door policy, with more relaxed communications.  Our image of the East Coast is that it has a lot of financial companies and that their manner is very conservative, rigid and strict. Our company also had that image, however, we have introduced a more western coast mindset that is more casual and more focused on an open-minded, open-door policy.

On the other hand, I have talked to employees who are of the younger generation and seen that they have a relaxed rapport with their colleagues and that they sometimes meet and go out for a drink, and this trend is an example of the benefits of a more relaxed environment. As a result, we will accelerate innovation by strengthening cross-organizational links of the organization that are notably required for IoT services.


You gave us an overview of how you grew to be where you are today, after suffering because of the Lehman Brothers bankruptcy, you reorganized and reintegrated different types of services and grew your business to achieve the turnover you have today. What are the main objectives you would like to see NSW achieve in the next five to six years?

As a listed company, we have to contribute to our stakeholders and shareholders. One of our objectives is that that we need to reach 50 billion yen in the next few years and a 10% margin. We need to change our conventional values and steadiness to be more aggressive. We would like to see more opportunities for M&A and aim to enter into global businesses together with American companies, with a focus on South East Asia and some European countries. 

We highly value people and employ women, which is something that Japan can be said to be lagging behind overseas companies in.  We do not have any American employees at the moment but we would like to invite American staff to join our company and believe this will make NSW more appealing to the American market, at some point in the future.

In order to grow greatly, we utilize young people to revitalize our organization. We will continue to utilize young talent as an independent company and expand our business activities. At some point, I need to pass the business to the next generation. So, after completing my mission to achieve 50 billion yen sales it is up to the future generation to reach objectives of seventy, eighty or even a hundred billion and to expand into the global market. This will be their challenge and legacy, and I will leave my seat after achieving my mission.

The basics of managing the company is the organization, which means the people, so the most important asset of a company is the organization. If the organization is not going smoothly then you can look to run it in a different way. By making the organization better we were able to increase our sales after they dropped.


You provide a revolutionary smart bin, I also know you collaborated with Panasonic to create a smart projector, looking at 2017 what exciting new products can we expect to be released by NSW?

A.I. is definitely one of the things that we aim to commercialize into the market this year. We have tested a lot of programs during the past year to bring A.I. into the digital sector, and you can expect to see more A.I. technologies to be released this year, including more self-driving cars and other technologies in this area. Going forward, we aim to further expand our business by utilizing new technologies and cultivating know-how and organizational capabilities.