Analysis Is the Wellspring of Innovation
Analysis provides the basic technologies important for supporting scientific discoveries and the innovation that flows from those discoveries. It is no exaggeration to say that analysis is the wellspring of innovation. In that sense, the role of Shimadzu to solve challenges in society is especially important considering analytical and measuring instruments is Shimadzu’s strongest business segment. It is wonderful that discoveries and innovation in biological fields are deployed as highly competitive products for solving challenges in healthcare industry and medical fields, such as for diagnosing diseases or analyzing drugs. Meanwhile, the progress of analytical technologies in fields where innovation is occurring has been amazing. Recently, there was an article published in Nature magazine (May 2024) about using a nanopore sequencing device as new technology for sequencing proteins. That is an excellent example of technology where I wish Shimadzu had established early leadership. I understand why the Analytical & Measuring Instruments Division would be reluctant to pull back from technology development for its strongest product lines, liquid chromatographs and mass spectrometers, but considering competition with other companies, we need to continue developing products that satisfy customer needs consistent with sales strategies and urgently develop instruments that incorporate AI technology. On the other hand, due to the mind-boggling innovations related to analytical instruments not currently pursued by Shimadzu, such as NMR systems, electron microscopes, and successive generations of DNA sequencers, I am worried that focusing only on liquid chromatography and mass spectrometry may limit our growth as an analytical instruments manufacturer. Therefore, I think it is important to use business partnerships and M&A (including CVC investments) activity to broaden our scope of analysis beyond the R&D work we can perform ourselves.
Despite global economic impacts, geopolitical risks, and other factors that we cannot feel optimistic about, Shimadzu managed to maintain strong results in FY2023 thanks to the tenacious efforts by Shimadzu employees. Shimadzu is also accumulating sufficient funds for M&A investments. Though investments to solidify our footing are also important, I think we are at the stage where we need to actively invest in new technologies for achieving future growth. Therefore, I hope Shimadzu grows to be a global player that supports innovation.
Outside Director Nobuo Hanai
Becoming Faster and More Dynamic
It has already been three years since I was first appointed as an outside director in 2021. Due to favorable exchange rates during that period, Shimadzu has consistently achieved strong results. It also seems that governance systems are steadily improving to healthy levels. However, with respect to the major issues of further strengthening core analytical and measuring instrument businesses and fostering next-generation businesses, there seems to be inadequate strategic capital investments and we are only part way to where we should be. In order to achieve long-term sustained growth in the future based on innovation, Shimadzu needs to, not surprisingly, engage in business portfolio management and strengthen Group governance.
Though some progress has been made in terms of business portfolio management, such as introducing ROIC as a management indicator, it has not reached the level of incorporating measures in concrete business strategies aimed at maximizing capital efficiency. “Selecting and focusing businesses” is an old overused expression, but it requires executing strategies boldly and quickly, including strategic M&A measures.
In terms of reinforcing group governance, Shimadzu has been making steady progress introducing regional integration measures globally. However, due to the large number of companies in the Shimadzu Group and the many problems that must be resolved in order to improve management accuracy, such as obtaining adequate human resources, the Group company reorganization measures already being discussed by the Board of Directors need to be executed with a sense of speed. Building a new comprehensive core computer system for the entire Shimadzu Group, which has already been scheduled, will provide a powerful tool for not only improving business process efficiency but also for improving Group governance. Though it will place a major burden on both finances and human resources, efforts should be ramped up to build the system as soon as possible.
Lastly, as I also mentioned last year, monitoring the risk-taking involved in executing businesses is important, of course, but I hope to give positive suggestions that will help Shimadzu deploy businesses more dynamically.
Outside Director Yoshiyuki Nakanishi
Strategic Approach for a Sustainable Future
During the past year, the Shimadzu Group focused efforts on improving governance and human capital and also introduced ROIC as an indicator. However, in order to achieve sustained growth in the face of expanding geopolitical risks and changing customer needs associated with the rise of AI, I feel Shimadzu needs to think more strategically.
In terms of governance, we have been improving the consistency of internal controls, including at subsidiaries, but in order to achieve more efficient management with a sense of speed, in the future we will also need to focus efforts on more proactive governance measures. Given that the overseas sales ratio is nearly 60%, we need to transfer more authority to subsidiaries outside Japan, but we will monitor leadership human resource improvements as organizational capabilities are created. Now that COVID-19 infections have subsided, global manager training sessions have resumed for the first time in five years, where we had opportunities to speak with next-generation leaders gathered there from around the world. The training demonstrated that more business growth could be achieved by promoting local empowerment. Communication within divisions involved in multiple regions and collaborations that extend beyond normal divisional boundaries have only started recently, but the Board of Directors will continue to monitor the creation of systems for promoting the active use of resources within the company.
Introducing ROIC as an indicator has clarified the profitability of not only each business division but also each business unit. In the future, we will need to use data to configure even more detailed business strategies. We need to focus on not only expanding sales but also reducing costs. Also, we cannot expect to increase capital efficiency for the overall Group unless we are open to eliminating businesses from the business portfolio if they cannot be improved adequately within a certain period.
Considering that we announced our first stock buyback in May, in order to achieve medium-and long-term growth and higher stock prices, I intend to persuade the Board of Directors to make management decisions based on more strategic thinking.
Outside Director Nami Hamada
Appointment of Board of Directors
Contributing to Value Creation with Diversity and Innovation
I am Mie Kitano. I was recently appointed Independent Outside Director of Shimadzu Corporation. Most of my professional experience is from purchasing-related supply chain management and corporate communications at a foreign-owned company involved in deploying businesses globally.
When working in purchasing, I was involved in building an open innovation platform for problem-solving and used it to develop innovative new products in collaboration with outside partners. I firmly believe that such strategic partnerships with outside stakeholders can be an especially effective means of solving issues or generating innovation.
In the communications field, I was in charge of corporate public relations, sustainability, and diversity, where the aim was to create organizations that make better use of diversity public relations activities to properly communicate corporate convictions and utilize diversity.
Shimadzu’s medium-term management plan that began in FY2023 specified “Be an innovative company that solves social issues with global partners.” In order to identify increasingly diverse needs within a rapidly changing external business environment and continue generating corresponding innovation, it is essential that we foster global leaders capable of utilizing strategic partnerships and diversity.
As an outside director, I hope to help Shimadzu create new value by using my previous experience to offer objective management advice based on a new perspective.
Outside Director Mie Kitano
