(news & commentary)
As usual after the annual shareholder’s meeting, Nikon announced executive management changes. What’s different this time is that there’s a large structural change being made, as well, probably the largest since Nikon went to a “company system” in 1999.
There are now 19 (!) implied lines of reporting up to the Representative Director and President. The Instruments Company, for example, has been broken up into a Microscope Solutions Business Unit and a Industry Metrology Business Unit and the Precision Division is now two separate business units, one for Semiconductor Lithography, one for Flat Panel Display Lithography. A new Encoder Business Unit has been established out of the old business development group, and a new Medical Business Development Division has appeared to work on potential medically-related products.
For the Imaging Company, it now becomes the Imaging Business Unit, not necessarily a change of any note. However, another new division was created that raised my eyebrows: the Corporate Strategy Division. This group is charged with clarifying, planning, and promoting Nikon’s corporate direction and strategy through investing, structural reform, and allocation of corporate resources. Specifically mentioned in the announcement of the formation of this group was “potential M&A or collaboration.” (M&A is short for Mergers and Acquisitions.)
We see the usual “moves up the ladder” in terms of title and authority happening in the announcements. For example Kimura-san is giving up his Presidency while remaining Representative Director and gaining the title of Chairman of the Board. The new President comes out of the Precision group, though for him, too, this is just the next logical step up the ladder. In other words, in terms of the executive management team, it remains intact other than two retiring VPs, though the roles change a bit at the top.
To me, the changes seem to suggest two things. First, the group at the top, headed by Makoto Kimura, are intact and still clearly in charge. If anything, they’re even more in charge than before, as the old “company system” established little fiefdoms within the overall company that had a bit of autonomy. The new system clearly demotes those three old companies more into just being product lines of the overall company. Old: three companies producing sellable products. New: six business units producing sellable products. This will make business units with “growth” stand out from ones in “decline."
The second thing about the changes is the opposite: an apparent notion that something needs to dramatically change. Control is moving upwards in the company, with groups like the former Imaging Company becoming more under the direct control, or at least strong influence, of the President. Meanwhile, the President also has new groups directly reporting to him that are dedicated to defining strategy and new potential markets.
To the Western eye, the changes don’t look like much, and Nikon seems to have too much controlled by too few. Even in the Japanese system Nikon’s changes don’t at first appear to be much more than some definitional shuffling with a few new additions. However, there’s a subtle shift here. A slight shift away from consensus management and delegated authority towards a more direct management with delegated responsibility. Curious is the changes to what are now called Business Units, the groups that actually sell products to others. Imaging stayed intact while the other former divisions were split up and one new Business Unit added. It will be interesting to see how this shows up in changes to the way Nikon reports results, but I expect that it will clearly show where Nikon is strong and weak.
So what new businesses is Nikon moving towards? Clearly two: robots and medical devices. By all appearances, Nikon is no longer going to be defined as a company by which everything they do is derived mostly from their optical expertise. Put another way, cameras are not likely the way they grow the business further. As the only Japanese company whose primary business is cameras, this indicates that Nikon sees the need to diversify, and quickly. The decline of the camera marketplace has to be worrying to Nikon management, just as it was enticing to them during the big digital camera growth period. The structural changes seem to suggest that Nikon wants more new businesses to protect them from single market collapse.
Funny thing is, this isn’t the first time that’s been a problem for them. The Semiconductor Equipment business used to be their primary business until that business collapsed. Fortunately, not only did they have cameras and lenses to fall back on, but the digital revolution was just starting to take off there. So it’s Deja Vu with a twist.
Two other comments: note that nowhere in Nikon’s new structure are customers actually given any attention. Marketing doesn’t rise to be one of those direct reports. Customer Relations is buried in business units, effectively a demotion from being buried in a “company.” Virtually everything about Nikon’s organization says “engineers designed this.” It’s all about product, product, product.
But that product is defined solely in Japan. Actual sales and distribution don’t seem to rise directly to upper management oversight, either. As I’ve written many times, Nikon’s blind side is that they just aren’t customer connected. The new structure adds nothing that makes a better connection. If anything, it demonstrates that they are still blind to how they actually interact with customers.