Japanese tech conglomerate Hitachi has amassed an impressive and diversified portfolio over the years—more than 1,000 subsidiaries, including well-known brands Ricoh, Maxell, and Clarion. But expansion has come with some knotty complications. For many years, collaboration among its subsidiaries was virtually nonexistent. That made it hard to see synergies across Hitachi’s businesses, and there was no visibility into its global talent pool.
"Having 1,000 companies and 1,000 different systems is like herding cats," says Levent Arabaci, Hitachi’s executive vice president of human resources.
Over the past few years, Hitachi has taken big steps to improve communication among its subsidiaries so they can find new ways to innovate and grow together. This includes a plan to boost business outside of Japan: Hitachi’s overseas revenue ratio, which was 47% last year, is on track to reach its target of 55% by 2018.
There’s a strong technology component to these efforts. Hitachi is rolling out a cloud-based human capital management (HCM) system across its subsidiaries to better understand things like geographic skill sets, to identify its future leaders, and to provide a robust talent management framework for employees and managers. This work will make it possible to fully abandon one of the central pillars of Japanese business: the seniority wage system, in which salaries are based on age and length of service rather than performance.
Hitachi is also intently focused on goal alignment, and technology is helping it better manage and gain visibility into goals established for subsidiaries and individuals. In addition, top-level goals are now communicated and cascaded all the way down into the smallest organization.
Why is it important that Hitachi’s 1,000-plus subsidiaries better communicate and collaborate?
We were always very much focused on producing great products and selling products, but I don’t think we had ever looked at Hitachi from the perspective of providing end-to-end solutions based on customer needs, drawing from across our subsidiaries. We are trying to do that now. That’s a huge shift for Hitachi, as it requires a mindset shift as well as a cultural shift.
The most important piece is goal alignment. Through this effort, we’ve been able to shift the mindset of leaders—as well as employees—to think globally, but also to create a culture of accountability.
Why have you shifted your growth strategy beyond Japan?
For 100 years, our focus has been Japan. Most of our revenue was generated there. But Japan’s population today is aging and shrinking, which creates an incredible issue for Hitachi, as well as many of the Japanese companies. We’re in a do or die situation—it’s not a luxury for us to sit back and figure out our revenue. It’s almost inevitable for us to shift our revenue outside of Japan.
But to achieve growth based on geographical expansion, we need to have more people and talent outside of Japan. We are also moving toward what we call "social innovation business."
See also: Levent Arabaci on Transforming Corporate Culture
What is a social innovation business, and how is it different from previous strategies?
We’re not just making a product and selling it. We now take all of our products and capabilities and try to provide a solution to society. We’re tackling urbanization, transportation, smart cities, and more. For example, Hitachi group companies worked together to apply their technology in accelerators, irradiation, and control systems to develop the Hitachi Proton Beam Therapy system, a cancer treatment that targets tumors and minimizes damage to surrounding healthy tissue.
We have a footprint in almost every single industry—we make everything from TVs to nuclear plants—which gives us an incredible advantage when our products and teams talk to each other. We’re looking within our own conglomerate of subsidiaries for comprehensive solutions. That really is our growth strategy.
Hitachi has more than 300,000 employees around the world. How do you identify and prioritize the most promising ideas and not have them fall through the cracks?
Each region has a group of people working together to capture these ideas and produce new approaches to issues identified by customers. We also use our annual employee survey to capture information about what we need to focus on. Last year we had 75% participation in the survey. We had information on employee engagement and leadership, as well as our top strengths and opportunities across each business unit, country, and region.
This article was created and commissioned by Workday, and the views expressed are their own.