R&D: a Key Driver in Hitachi's Global Growth

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R&D: a Key Driver in Hitachi's Global Growth 2014 R&D strategy R&D: A key driver in Hitachi’s global growth Solution-oriented R&D for Hitachi Global Business 10 April 2014 Keiji KOJIMA, Ph.D. Vice President & Executive Officer Chief Technology Officer President & CEO, Research & Development Group Hitachi, Ltd. © 2014 Hitachi, Ltd. All rights reserved. Contents 1. Foreword 2. Leading Social Innovation Business 2.1 Transforming through a customer-driven R&D model 2.2 Expanding service business 2.3 Enhancing world No. 1 product business 3. Global R&D 4. Strategic steps for the future 5. Summary © 2014 Hitachi, Ltd. All rights reserved. 2 1. Foreword © 2014 Hitachi, Ltd. All rights reserved. 3 1-1 2015 Mid-term Management Plan: Management Focus 2015 Mid-term Management Plan - Achieving Growth and Hitachi’s Transformation - Innovation Global Transformation Strengthen service Deliver Innovation to Transform Hitachi: businesses that maximize Customers and Society To deliver innovation by the utilization of IT and globally standardized and speedy bring about innovation operation © 2014 Hitachi, Ltd. All rights reserved. 4 1-2 Corporate R&D directives Management focus R&D directives • Promote R&D to expand service business 1. Innovation •• Development of innovative technology to support worldworld-- class No. 1 product business • Contribute to overseas 2. Global business through Global One Hitachi approach • Transform through a 3. Transformation customer-driven R&D model © 2014 Hitachi, Ltd. All rights reserved. 5 1-3 R&D organization President Kokubunji-shi Tokyo R&D Group Technology Strategy Office Technology strategy planning Hatoyama-machi, Health Care Group Saitama Central Research Laboratory Expand business coverage, New areas in Power Systems Group anticipation of future societal needs HitachiHitachi--shishi,, Ibaraki Infrastructure Hitachi Research Laboratory Energy, Societal, Industrial and Life infrastructure, Systems Group Materials and Key devices HitachinakaHitachinaka--shishi Information & Telecomm. Yokohama Research Laboratory Systems Group Information platform technology, Monozukuri technolory Construction Yokohama-shi, Machinery Group Design Division Kanagawa High Functional Materials Vision design, Experience design & Components Group Overseas research centers Automotive Akasaka, Contribute to expanding regional business Minato-ku, Tokyo Systems Group Collaboration with key customers *as at April 2014 © 2014 Hitachi, Ltd. All rights reserved. 6 1-4 R&D: Key Driver for Global Growth Expand the Social Innovation Business globally --LeveragingLeveraging R&D capability and global network -- Promote open innovation with customers and business partners for contributing to solve customers’ issues Closely tied to customers locally providing R&D capabilities Develop the world-class cutting-edge R&D with combining systems, products and IT on the Cloud Increase and enhance global R&D bases Europe China North America Hitachi China Materials Technology Innovation Center (2013/4) European Big Data Lab. Japan U.S. Big Data Lab. (Univ. of Manchester) (2013/4) (2013/10) • Central Research Lab. • Healthcare services • Hitachi Research Lab. Hitachi South America • Yokohama Research Lab. R&D Division (2013/6) • Design Division India Asia Est. since 2013 © 2014 Hitachi, Ltd. All rights reserved. 7 1-5 Hitachi Group R&D investment Approx. JPY400 billion invested in Hitachi Gr. R&D, approx. 4% of revenue R&D investment trend R&D investment trend by business segment Information & 81281.2 5000500 6 情報・通信システム Telecommunication 87.9879 R&D Systems As a % of Revenue [%] revenue of % as a investment R&D 売上高研究開発投資率 19719.7 investment Power systems電力システム 165 16.5 FY2012 5 24624.6 FY2011 4000400 Social infrastructure社会・産業システム & 225 Industrial systems 22.5 43443.4 Electronic電子装置 systems・システム & 473 4 Equipment 47.3 17217.2 3000300 Construction machinery建設機械 164 16.4 43443.4 3 Highly functional高機能材料 461 materials & Components 46.1 58358.3 2000200 Automotiveオートモティブシステム systems 528 52.8 2 Digital media & 20820.8 デジタルメディア・民生機器 236 Consumer products 23.6 10.1 1000100 金融サービス 3 1 Financial services 0.3 R&D investment [billion yen] yen] [billion [billion investment investment R&D R&D 69 その他 6.9 Other 74674.6 25225.2 0 0 Corporate全社 items(本社地区) 24024.0 200001 02 03 04 05 06 07 08 09 10 11 12 Fiscal year 0 200 400 600 800 1,000100 Billion yen © 2014 Hitachi, Ltd. All rights reserved. 8 1-6 Hitachi Gr. R&D investment efficiency & personnel Annual trend in R&D investment return 6 1.40 a % OPM as [ROI] investment R&D R&D expenditure/operating profit margin (%) 1.20 5 R&D expenditure/Revenue (%) 1.00 4 0.80 3 0.60 2 0.40 1 Operating income/Revenue (%) 0.20 0 0.00 Operating income income income % of % of as as revenue revenue Operating Operating 2000 01 02 03 04 05 06 07 08 09 10 11 12 R&D expenditure as a % of % of % of a a as as revenue revenue expenditure expenditure R&D R&D Annual trend in number of R&D personnel FY2012 FY2013 FY2014* Hitachi, Ltd. 3,410 3,280 3,250 Subsidiary 1,850 1,620 1,720 Total 5,260 4,900 4,970 *forecast © 2014 Hitachi, Ltd. All rights reserved. 9 1-7 Strategic allocation of investment 2013 2015 2020 Business target Business strategy roadmap [Business Group-led] Sponsored Frontier & Sponsored Current business Platform 30% research research research <Business div. funds> R&D Investment 50 * % Adv. sponsored Next-generation Adv. research business sponsored 20% <Business div. funds> research *FY2013 Technology roadmap [Technology Strategy Office-led] Strategic allocation Frontier & Next next-generation business Platform 5% Service 15% related Research FY20132013年度 2015年度FY2015 <Corporate funds> research © 2014 Hitachi, Ltd. All rights reserved. 10 2. Leading Social Innovation Business 2.1Innovating to a customer-driven R&D model © 2014 Hitachi, Ltd. All rights reserved. 11 2-1-1 Customer-driven research model Transform to a customer-driven research model for the growth of Social Innovation Business globally 1. Uncover and share problems held by customers Uncovering and sharing the fundamental objectives, potential needs of customers Ethnographic research 2. Continuous co -creation with customers Greater innovation by quickly repeating the cycle of uncovering and solving problems Ex Approach 3. Develop innovation from a vision of the future Illustrate future social issues and a society where those issues have been resolved, and develop disruptive technology to achieve this vision Vision design © 2014 Hitachi, Ltd. All rights reserved. 12 2-1-2 Ethnographic research Provide solutions by extracting potential problems and hidden needs that customers may not be aware through on-site observations by researchers Research on maintenance of UK rail cars Ethnographic research on maintenance work was conducted at the Ashford Depot of the high-speed passenger train Class 395 → Derive measures to improve on-site work efficiency Other research examples North America Data center (storage management software) Proton beam therapy equipment construction site China Software development site Germany Needs survey of construction machinery Australia Construction machinery maintenance activity South Africa "" Mozambique "" Egypt Plant construction site © 2014 Hitachi, Ltd. All rights reserved. 13 2-1-3 Ex Approach Share and analyze problems & solutions for operation and services with stakeholders in the planning phase, to effectively develop system requirements 1. Capture current situation 2. Develop ideal outcome 3. Validate feasibility Identify objectives by Create the ideal image of new Validate feasibility of new capturing the reality of actual operations placing importance system through prototyping work sites on experience Record: 65* cases of upstream research applied (2009-2013) Investigate worker-hour for tasks, visualize issues (Retail) Point of •• External marketing customer •• Sales agents Establish customer management system (Retail) contact/ •• Sales counter Improve call center system (Electric power company) •• Back office Call center Reform external marketing operations (Insurance company) •• Equipment Reform distribution operations, staff training (Electric power company) maintenance Maintenance Improve plant construction process management system (Hitachi Group) operations, •• Construction Visualize data center work issues (Hitachi Group) etc. •• System mgmt. •• Disaster prevention Develop disaster prevention solution for evacuation shelters (Municipal govt.) * Number within the Information & Telecommunications Systems Company, Hitachi, Ltd. © 2014 Hitachi, Ltd. All rights reserved. 14 2-1-4 Vision Design Capture future societal issues, and illustrate them in detail from citizens’ perspective as a solved problem in society Capturing trends Kizashi (Issues in 2025) PEST analysis P: Politics E: Economy S: Society T: Technology * Vision design of UK healthcare in 2025 led to collaboration with NHS GM Diabetes prevention service for the U.K. Health guidance to insured citizens to prevent diabetes (10% medical expenses in UK) Insurer Hospital Insured NHS GM Healthcare vision video presented to NHS GM *NHS GM :National Health Service England (Greater Manchester) © 2014 Hitachi, Ltd. All rights reserved. 15 2. Leading Social Innovation Business 2.2Expanding service business © 2014 Hitachi, Ltd. All rights reserved. 16 2-2-1 Research strategy to expand service business Identify customers’ issues & needs, and achieve innovation through service business * 2015 Mid-term Management Plan target: Ratio of revenue from services 30% (FY2012) ⇒240% (FY2015) Services Civil Telematics Logistics Transport
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