"Wannovation and Our Partners" 〜 Colleagues Getting Together with Vision 〜 2 Think:Act "Wannovation and Our Partners"〜 Colleagues Getting Together with Vision 〜

No. 129 navigating complexity June 2018

「"Wannovation and Our Partners"」〜 Colleagues Getting Together with Vision 〜

I want to energize Japanese companies as well as Japan. I want to create a people-oriented society, a affluent society. Three years ago, I started meeting a variety of people with these feelings in mind. This activity is far different from problem solving, which I'm good at. So, in the beginning, I moved forward with caution. Without issues to solve, there is nothing to discuss and I found it hard to warm up the place. However, I continued and started realizing, little by little, Wa-novation that there are people who feel the same way as I do. As I ~ Creating New Value ~ continued further and further, I came across people who surprised and inspired me in new ways. And fortunately, at some point I started meeting more and more of these types of people. I guess you could say "an invisible circle of partners" had begun to form.

We propose “Wa-novation” Later on, this circle of partners became a bit more as a unique Japanese visible. Although only a little at first, I feel that I was able approach to innovation. In the Japanese language, to link different circles of partners as well. This activity “Wa” is the root of many naturally led me to form "Wannovation and Our Partners", words, including Japan itself a project I started a year and a half ago. Currently we have (和 ), dialogue ( 話 ), and 10 companies, but we hope to continue our vision and circles of compatriots(輪 ). further expand the circle. Ideally, we want to spread like a wildfire.

This issue is our special inaugural issue, created by the partner companies. We would like you to fully experience and appreciate each company's charm as well as the improvement in productivity brought by combining our various abilities and knowledge.

Roland Berger Managing Partner (Japan) Satoshi Nagashima Think:Act 3 "Wannovation and Our Partners"〜 Colleagues Getting Together with Vision 〜

Introduction

In our view, "open innovation" means innovating through open dialogue with partners with a shared vision. This is somewhat different than simply finding complementing technology and skills you don't possess from external resources. Together with your partners, you combine different abilities and knowledge that are based on various experiences to unlock future possibilities. Having so many unique and sophisticated weapons from your partners right at your disposal, you can feel as if your competency has increased, and as if you are able to produce tremendous value. It is quite a feeling. Creative productivity would increase as well. Creative productivity is about new values produced/time spent, but the numerator, the size of new values, will increase as it mixes with diverse value judgements of partner companies. If we can get the most out of the amazing talent and knowledge that we have, the speed will be accelerated significantly, and the denominator will decrease as well. And creative productivity will be enhanced even more. New values have already been produced through more than 30 projects. Not all, but some of these projects have achieved the kind of speed that had not been possible before. Of course, there have been hard times with regard to creation due to the difference in common understanding as well. However, we achieved a sense of being on the right track and enjoyment. In this issue, we are going to introduce you to people who are leading our partner companies, which have already produced such new values or are in the process of producing them now. We will introduce 5 companies this time. We asked them to share their feelings and thoughts and to tell us about their unique strengths. These interviews may not be able to give you a complete picture, but we hope you can discover these interesting people and get to know them better.

In a previous interview with Mr. Nagashima, he told us that he considers the role of design as "a job that represents the five 和 Wannovation Partners senses and emotions". Technology has evolved rapidly, and our lives has been changing significantly. In a time like this, this Profile No. 1 ： GK Kyoto role is becoming more important than ever. Design thinking, for example, has been getting more attention in economic "The World We Would Like to Create through activities, but the original value of design is to capture things Our Vision and Wannovation" from a bird’s-eye view and to represent "signs of well-being" for society through the filter called "beauty", which is a non- The weather this time of year is calm and comfortable, productive, yet primordial and globally shareable value. and the city of Kyoto is full of domestic and international The role of our design in Wannovation includes: 1) pointing tourists. Nowadays, the Internet has become part of the global to the right direction without being heavily oriented towards infrastructure, and people from all over the world can access economic performance and efficiency in the time of rapid information in real time. People who can afford to visit Kyoto, technology evolution, and 2) adding cultural viewpoints do so with the hope of experiencing "Authentic Kyoto". that are essential to human beings, such as taste, humor, 和 It's not enough to just experience it on a screen. It’s a and playfulness. These added values are exactly the "wa ( 輪話 universal value that goes beyond time and space: the essence = harmony), wa ( = circle), wa ( = dialogue)" angles that of traveling is to touch with your hands, to listen to sounds, to others cannot imitate. feel the atmosphere, and to enjoy scents and flavors. A number of international events have been scheduled and We could say that Kyoto's charm inspires the five senses and Japan has been getting more attention these days. Japan's this charm can be shared globally. Wannovation activities, which are conducted through Japan's "five sense values" that go beyond mere symbols, should be able to become something that has the kind of charm to attract people from all over the world.

Author: GK Kyoto, CEO, Nobuyuki Enomoto

> An affiliate company of GK Group. Founded in 1972. Operating primarily in Kyoto as a design firm, GK Kyoto designed the doors for the RB Digital Room. They have recently begun developing the "Creative Hub" project, further deepening their design Photo: Hanamikoji, Weekdays in Kyoto (Provided by GK Kyoto) management skills. 4 Think:Act "Wannovation and Our Partners"〜 Colleagues Getting Together with Vision 〜

和 Wannovation Partners 和 Wannovation Partners Profile No. 2 ： YUKI HOLDINGS Profile No. 3 ： EXAWIZARDS

Creating Systems that Bring Innovations to the AI Venture ExaWizards - "Cooperation Manufacturing Industry between AI and Manufacturing"

YUKI Precision was founded in 1950 as a screw manufacturer It has been 5- 6 years since AI began attracting more attention called Otsubo Rashi Seisakujo by my grandfather. Since then, due to the rapid technological development of deep learning. Until our company has been cutting metal in a highly precise manner only recently, AI was mainly associated with the world of robot to create precision parts, and has been growing as a company. In animations, especially in Japan as well as the fantasy world of sci- 2006, I changed jobs from a venture capital company, which was fi movies. These days, however, it has become possible to use AI in trying to bring innovation to manufacturing through cutting various business settings and manufacturing sites (Gemba) thanks edge digital technology, and started working for YUKI Precision, whose business was struggling despite the economic boom to the development and popularization of cloud computing at that time. The sales at that time were about one hundred technology as well as the use of big data. million yen and the company had 20 employees. Back in the AI technology development requires data. The more balanced days, its automatic lathes had been working for 24 hours non- the quantity and quality of data input into AI are, the more likely stop, even on Saturdays and Sundays, but at this time they were the data can output appropriate results. In a sense, this is similar to hardly used even in the middle of the day. Eleven years later, how humans grow through quality education. For that reason, in with our backs against the wall, the company scaled its size of order to make use of AI effectively, it is crucial to have the presence sales 5 times by shifting towards the kind of industry where of data natives who are in close contact with Gemba and their high quality is demanded and by continuing to innovate. We are specialized in cutting materials used in special environments with an acceptable error range of only a few microns, such as parts used in the aerospace field and medical equipment. Materials like these are extremely difficult to cut in the first place. My biggest takeaway from these first-hand experiences is that even skills acquired over a few decades can go away in a moment if we lose track of the needs of our clients. People who develop skills and people who apply these skills are not necessarily the same. In January 2018, Yuki Holdings, Inc., which was founded with the aim of bringing innovation to small and mid-size businesses, acquired the majority of the shares of VTC Manufacturing Holdings, Inc., which is a conglomerate of 8 manufacturing companies. Through this move, the company has become a group made up of 11 companies and Image ： PIXTA 540 employees, with domestic sales of 6. 6 billion yen. Small and mid-size manufacturers sell skills that can be turned into elements. Holdings connect these manufacturers horizontally and give support to them in every way possible, including due to innovations in AI, VR, cryptocurrency, and high-speed strategy, PR, applied technology, and resources like human, connections. Everything has potential to become a detonator to material, and financial resources. The relationship between these initiate "Wannovation" for traditional manufacturing. We would two parties itself forms a business environment that makes like to be a company that can demonstrate these possibilities of it easier to innovate. As I stated above, my previous job was connecting element technology developed over many years and in the field of digital manufacturing and my colleagues from cutting edge tools to the world. this company are still active in the front line of manufacturing. Author: Yuki Holdings, CEO The trends have changed significantly in the last 10 years or so Masato Otsubo

> Founded in 1950. Developed their business by specializing in precision cutting technology. Famous for drilling a hole in a grain of rice and projecting a picture through it during a demonstration. They seem to be aiming to become the LVMH (Moët Hennessy Louis Vuitton) of manufacturing with such precise Photo: Rocket engine parts (Provided by YUKI Precision) and meticulous work! Think:Act 5 "Wannovation and Our Partners"〜 Colleagues Getting Together with Vision 〜

> Founded in 2016 . Working on a > Founded in 1980 . A German variety of projects from developing control equipment maker. multi-modal AI robots to HR Connecting opportunities with support systems with AI. Also opportunities, and people with works on big business challenges people. Let’s connect digital and that make use of AI. analog as well!

atmosphere. to think that these two things were different from each other. Of course, ExaWizards has its Gemba for developing technology, But, the barriers between them became extremely low due to and operates its business working closely with Gemba. Every technological development, and now I've started feeling that one of our research and development staff members discusses they are just different interpretations of the same phenomenon. passionately about what defines quality data and how to collect It's just like whether to interpret light as waves or particles. If we attractive data. They also work on the challenge of how to convert consider analog and digital as the true interpretations of reality, improvement activities that are conducted daily at Gemba, which then we can just choose whichever is convenient and move from are globally known as "Kaizen" into AI. We are working on one to another as we like. If we want to feel value and happiness visualizing the wisdom and know-how of veteran engineers and from touch, then we choose analog. If we want to go beyond the skilled experts on-site, and utilizing tacit knowledge. One of our physical constraints of time and space, then we choose digital. And accomplishments is a system where AI learns the characteristics if we want to push this further beyond choice between the two of relevant tacit knowledge and coaches new employees and and want to take the good from both at once, then we have AR, technicians as a veteran engineer would. Other than that, we are augmented reality technology. working on AI that gives cues and stimuli for growth and AI that helps maintain mental and physical health. My current role is about contributing to the increase of Gemba is merging with AI Gemba. People who work in the productivity in manufacturing by utilizing technology that is field of manufacturing figure out what kind of help they need being democratized rapidly. This way of thinking helps my role. from AI, and report this to the field of AI. We hope to increase, in This is because there is limitless room to fill between the Gemba the field of manufacturing, the number of data native human that master the world of analog and the technology that keeps resources who can shorten the distance between manufacturing going on in the world of digital. If we can create sensors and and AI. If we can do this, we believe we will be able to accelerate actuators that can measure and control any physical amount at the the cooperation between Gemba and AI technology development capacity of 32bit/100GHz, then we won't be able to recognize the Gemba, and create a future where humans and AI work together difference between analog and digital in principle, but this would as one. require an infinite amount of resources. What I learned through our attempts at making industrial robots work with deep learning Author: EXAWIZARDS, Director, is that we must have humans as part of this system in order to Makoto Aou fill this gap. I'm convinced that we can increase productivity of production goods and human creativity by combining the four - production goods as the body of the mind and simulation models as AI's body - together, by iterating learning and inference over and over, and by blending analog and digital step-by-step.

A wrist watch that blends analog and digital into all in one completely. What would it look like? I want to pursue this with our 和 Wannovation Partners Wannovation partner companies. ： Profile No. 4 Beckhoff Automation Author: Beckhoff Automation, Managing Director Toshimitsu Kawano "Aiming at Blending Analog and Digital through Wannovation" People often ask me why I wear a mechanical wrist watch on my left wrist, and a smart watch on my right wrist. The answer is because my passion is to blend analog and digital.

I 4. 0, IoT, and AI, etc. The essence of these trendy concepts is about blending analog and digital. The intention behind using IT at manufacturing sites (Gemba), extracting value by connecting everything with the internet and giving cognitive abilities to computers are all supported by the motivation of blending continuous reality and discrete information. I used Photo: Machine Intellectualization: Hypothesis cycle (Provided by Beckoff Automation) 6 Think:Act "Wannovation and Our Partners"〜 Colleagues Getting Together with Vision 〜

for the cognitive abilities that human beings themselves had employed thus far. 和 Wannovation Partners Humans have consciousness. Along with consciousness, Profile No. 5 ： when people with emotions meet each other, chemical DreamArts reactions will be created. Beliefs and ambitions go beyond logic derived as a result of analysis. Aren't these the driving force for innovation? Power of "Gemba", "Genbutsu", and individual This may sound paradoxical, but humans are finally freed from various tasks thanks to the evolution of computer and DreamArts solves real problems that are present in the field network technology, and now we can spend our time on of business, with IT technology. And I dare say... visiting Gemba, touching real things (Genbutsu), and meeting It's a fantasy that IT technology like AI can solve everything. real people, which I think is a splendid way of using our time. Over the last 50 years computers have been increasing The products and services DreamArts produces, such as productivity by ‘ improving efficiency’ and ‘ eliminating "Chiwawa" and the web database "Hibiki", are designed to waste’ from the ways business had been conducted in the help people spend their time on creative activities rather than past. Of course, there are a lot of things that became possible activities that make them busy, and to inspire them to innovate. for the first time thanks to computers and networks, but the Today, I'm feeling excited that I'm in a position to initiate a essence of computers, which is to eliminate human efforts and digital industry revolution that creates a world where new ideas specialize in fast processing at a high volume, hasn't changed at are produced again and again through IT technology. all. So then, what will I create today? E v e n though AI has evolved, Author: DreamArts, CTO, the current Kensuke Ishida AI can just p r e d i c t what comes next based o n p a s t * "Gemba" and "Genbutsu" means that person shall knowledge "understand the real objective at the operation site". and classify f u t u r e events into the past - i t o n l y substitutes > Founded in 1996. Running Chiwawa, a business chat service, with Photo: Provided by DreamArts "producing analog time" as its keyword.

Last Word

Wannovation's initiative has not been fully realized yet. Our challenge is this: we haven't been able to express "arimono" (or things we already have) adequately in an easy-to-use form, and we haven't been able to reach every employee of our partner companies with arimono. It's such a shame. What we would like to happen somehow is this: every employee of our partner companies to choose and equip themselves with their favorite weapons from arimono, and they use these weapons freely in the course of day-to-day activities. In order to normalize this as part of our daily activities, we are planning to welcome new partners and hack a path to solution. Please be prepared because we will announce this plan soon. By the way, the initiatives of our Wannovation partner companies are not just about creating value for our common clients. Our activities have been receiving significant support and collaboration in the areas of human resources and general affairs, which support our foundation, as well as in marketing and media relations. We have initiated discussions about co-hosting training and BCP and attending events together. Gemba is constantly producing results. As various layers and departments of our partner companies connect with each other freely, it feels as though a sense of unity and solidarity has gradually begun to spread. Why not try finding partner companies that could collaborate with your company in moving Wannovation forward? I think it would bring the same sense of excitement and inspiration that I feel right now. Think:Act 7 "Wannovation and Our Partners"〜 Colleagues Getting Together with Vision 〜 ABOUT US Roland Berger is leading global consultancy firm, headquartered in Munich, Germany. Founded in 1967, with nearly 50 years of continuous growth behind us and over 2,400 employees at 50 offices working in 34 countries, we are leading players in global top-management consulting. In Japan, since it was established in 1991, we have built the long-term relationship of trust with many clients including Japanese companies and government agencies. In recent years, we are reforming Japanese companies with our proposed Japan-style innovation "Wannovation" .

FURTHER READING OUR PARTNERS: Links&Likes Ｂook information Roland Berger Tokyo office is promoting collaboration with external companies. ORDER AND DOWNLOAD Distribute knowledge and ability beyond the www.rolandberger.com boundaries of companies and industries. We will think and create new value together. By STAY TUNED doing so, we will accelerate the creation of www.twitter.com/RolandBerger innovation. LIKE AND SHARE Finding missing pieces www.facebook.com/RolandBergerGmbH

AI Gemba Power Capability Innovation DB covered worldwide - Generate Overwhelming Strength Through “Wannovation” Author: Satoshi Nagashima, Manage resourcesToyota Production System Managing Partner (Japan) Roland Berger Ltd. Publisher: Nikkei Publishing Inc. Democratization of AI ・ HR Tech

Equipment sharing and prototype production

Nikkei Bizgate “Ultimate awareness sharing” from business chat "Let's start with Wannovation! by Satoshi Nagashima" Under the era of uncertainty, we need an VR ・ AR Sommelier approach that we imagine the world which I want to see and shape it. Fortunately, individual abilities and skills that industry and research organization has Mass-production of prototype cultivated in the field have great spread and depth. What is necessary to realize "Wannovation"? This is a series of dialogs to introduce persons Compass of manufacturing companies who challenge the future with overwhelming energy. Signal of restoration of element technology https://bizgate.nikkei.co.jp/series/DF220320183599/ Publisher Roland Berger Ltd. Public Relation: Satoko Nishino, Yuko Yamashita ARK Mori Building 23rd Floor, 1-12-32 Akasaka, Minato-ku, Tokyo 107-6023, Japan Tel: 81 3 3587 6660 Fax: 81 3 3598 6670 e-mail: [email protected] https://rolandberger.tokyo

Managing Partner (JAPAN) DR. SATOSHI NAGASHIMA [email protected] After completing the doctoral program in The School of Science and Engineering at Waseda University, Japan, Satoshi stayed on as an assistant, and was employed at Waseda’s Kagami Memorial Laboratory for Materials Science and Technology. He holds a PhD in Engineering.

His work focuses on the automotive industry, oil, chemicals, energy consumer goods and other manufacturing sectors. His expertise likewise extends to the plotting of grand strategies, business roadmaps, change management, digital transformation of workplaces （Gemba） and other cutting- edge genres. Recent years have seen him channel particularly keen attention into the area of customer-driven value creation, spearheading activities to improve the competitive strength and global presence of Japanese companies.

He also currently serves in an advisory capacity at the following companies: astamuse company, Ltd., ExaWizards Inc., XVI Inc., Kaizen-Meister Co., Kabuku Inc., Dream Arts Corporation, GK Kyoto Inc., Beckhoff Automation K. K., Linkers Corporation and Yuki Holdings Inc.

This publication has been prepared for general guidance only. The reader should not act according to any information provided in this publication without receiving specific professional advice. Roland Berger GmbH shall not be liable for any damages resulting from any use of the information contained in the publication.