Yamaha must “pursue true Yamaha-ness and break out of our old norms” if it hopes to increase profitability, says Hiroyuki Yanagi, the company’s president and chief executive officer. In an open letter released by Yamaha, Yanagi discussed what his company needed to do in order to reach its goal of producing 12 million units this year and collecting 2 trillion yen (US$22.5 billion) in sales.
Yanagi’s message offered little in specific details but provided a glimpse of Yamaha’s overall strategy for the next few years. The message provides added context to Yamaha Motor’s “New Medium-term Management Plan” for 2013 to 2015 which includes introducing 250 new models to its motorcycle, snowmobile, marine and powered bicycle product lines.
The company’s plan centers around the Japanese concept of “monozukuri“, a word comprised of the Japanese words “mono” for products and “zukuri” for the creation process. For Yamaha, monozukuri is the combination of engineering, manufacturing and marketing. Moving forward, the Yamaha aims to reduce the lead-in time for product development while lowering prices for its products.
In the past, Yamaha’s business model followed a simple model. Take an existing model and add new features along with a corresponding bump in pricing. Yanagi says that will no longer work in today’s economy where consumers want better value. Going forward, Yamaha’s strategy is to first find ways to reduce the cost of base models, carefully decide what to add or subtract to the existing product, and then offer find ways to reduce the cost even more.
“Before, adding new value to a product and raising its price was viable, but that is no longer the case in most of today’s markets,” says Yanagi. “In the markets of both the emerging nations and the developed nations, value is now a relative trait (defined by market standards) and efforts must be made in Monozukuri to lower the price of products even when adding value.”
Regarding product development, Yanagi says Yamaha needs to accelerate its development cycles while working more efficiently.
“In new product development, for example, we used to take significant time to develop new products with strict adherence to the standard processes garnered from past experience to be safe and reliable. With the competition in today’s rapidly changing markets, this process is not fast enough, nor is it competitive,” says Yanagi. “From now on, we will be finding more ways to shorten the Monozukuri process like reducing time, eliminating wasted work, substituting processes and conducting parallel development while still continuing to increase precision to ensure high levels of quality.”
Improving efficiency extends beyond research and development and applies to the entire organization and daily work, Yanagi says. Moving forward, Yamaha will continue trying to find ways to eliminate waste and reduce redundancies.
Here is the full text of Yanagi’s message:
Pursuing true Yamaha-ness, breaking out of our old norms
In 2012, we found ourselves in a business environment defined by the economic crisis in Europe, the appreciation of the yen remaining at historically high levels and a slowing of the rapid economic growth that had continued for some time in the emerging nations. The Japanese economy also finally slipped into a state of economic recession. Furthermore, new issues arose from the standpoint of global corporate management, involving developments such as the political problems between Japan and China and labor disputes in the emerging economies.
For 2013, the outlook remains clouded with economic uncertainties as we enter the first year of our new medium-term management plan. It is a plan that was formulated based on debate about business strategies for what products and services will we use to compete in which markets and sectors and with what methods, as well as how we will increase profitability as we work towards the goals of “12 million units produced and 2 trillion yen in sales.” Put shortly, the new plan is to take the standpoint of the customers and “pursue true Yamaha-ness and break out of our old norms,” as we strive for sustainable growth for the future.
“Pursuing true Yamaha-ness”
To this day, Yamaha Motor has endeavored as a company and as a global group to value the uniqueness of our numerous and varied businesses and to offer markets products and services that always exceed the expectations of the customers. Going forward, these ideals will remain a strong core of our corporate management approach. And, to make that core even stronger, we will continue the challenge of pioneering the development of new markets and businesses and creating true Yamaha-ness that makes us shine as a distinct and valuable presence in the markets.
First of all, in the area of “Monozukuri” (engineering, manufacturing and marketing), we will create winning, competitive products for each market that are strategically focused and clearly differentiate us from the competition. These will be products defined by a compelling, integrated mix of original and innovative concepts, outstanding functions and performance and design that expresses “the refined dynamism.” We will take on this challenge defining our goals with technologies expressed through clear-cut words and numbers.
Secondly, in the realm of marketing we will continue to create points of contact in line with the needs and behavior of the customers and bring creativity to those contact points that builds strong bonds with said customers. This will help grow the number of lifetime customers who are truly satisfied with our products and continuously choose to purchase a Yamaha. All of our efforts in formulating product proposals, building the sales networks, organizing sales promotions and introducing new models, etc., will be conducted with a clear brand vision and numerical targets. Furthermore, we will be introducing this new unified Brand Vision this year.
“Breaking out of our old norms”
For an organization, its norms include the knowledge, opinions and judgment that its members should share. These norms reflect commonly shared ideas of a society at a given point in time and are not unchanging universal truths. Today, the huge potential of markets in the emerging economies and the new companies being born there are bringing major changes to the way products are engineered, manufactured and marketed what we call Monozukuri. Meanwhile, the competition between companies to win and keep customers in the developed markets is intensifying. So, we have to ask ourselves if the norms we base our work on still fit this current business environment, and challenge ourselves to break out of the ones that do not.
The first of these norms involves cost. Before, adding new value to a product and raising its price was viable, but that is no longer the case in most of today’s markets. In the markets of both the emerging nations and the developed nations, value is now a relative trait (defined by market standards) and efforts must be made in Monozukuri to lower the price of products even when adding value. Taking new model development as an example, until now the accepted norm has been: “the cost of a new model = the cost of the current model + the cost of the newly added features that raise its value,” thus justifying the increase in price. Today, that increase will undermine the competitiveness of the new model. The necessary approach is to add value but “produce the new model at a cost lower than the current one.” So, we will be working to reduce the cost of the base model, carefully decide what value should be added or substituted in the new model and reduce the cost of that new value. As for manufacturing, the norm until now was to add new work processes to increase manufacturing capabilities and quality. Now we must find new solutions to achieve the same results without increasing the number of work processes, through measures such as integration or substitution of processes as well as reducing overall cycle time.
The second norm involves lead-time. In new product development, for example, we used to take significant time to develop new products with strict adherence to the standard processes garnered from past experience to be safe and reliable. With the competition in today’s rapidly changing markets, this process is not fast enough, nor is it competitive. From now on, we will be finding more ways to shorten the Monozukuri process like reducing time, eliminating wasted work, substituting processes and conducting parallel development while still continuing to increase precision to ensure high levels of quality.
The third norm we must rethink is our organization and daily work. Organizational structure and work processes are sometimes just based on past habits and inward-directed ways of thinking. Complications resulting from various managerial issues and societal demands caused segmentation, division of responsibilities and redundancy. This is creating waste. We will continue our improvements to eliminate, integrate or combine whatever possible to yield more efficiency, while also connecting these efforts to structural improvement reform. We will continue working to create an organization that is clear, understandable and encourages vitality in the individual and the company.
We will tackle all of these tasks diligently to levels above and beyond everyone’s expectations, so all at Yamaha Motor can speak about our achievements with pride. I am confident that this will connect to the larger aims of “pursuing true Yamaha-ness and breaking out of these old norms” and that every employee will continue to use all of their intelligence to take on the tasks at hand with persistence.
President, Chief Executive Officer and
Yamaha Motor Co., Ltd.