General trading companies deal in such a wide range of businesses that they were once said to handle "everything from ramen to rockets." In this installment of Leaders, a column featuring corporate management and senior executives, The Yomiuri Shimbun spoke with Tatsuo Yasunaga, president and chief executive officer of Mitsui & Co., about how a general trading company can generate new business opportunities in a time of constant change.
People are always saying that trading companies have "passed their peak," and that once manufacturers or their customers can do what we do, we'll no longer be needed. For that reason, a trading company is worthless if it just keeps doing the same things. We're constantly changing our business model.
[In his first year as president, falling resource prices caused Mitsui's consolidated financial results for the fiscal year ending March 2016 to enter the red for the first time in the company's history.]
We have more of our business in resources than other trading companies do. The resource business is important for Japan, which lacks resources of its own. But resource markets are subject to large fluctuations, so we have to do a good job of developing business in fields other than resources, fields where revenues are stable.
We have a variety of projects, in fields ranging from automobiles, ships and railways to chemicals, lifestyle products and even information and communication technology (ICT), a field that's going through revolutionary changes. We're constantly advancing into new, unexplored business areas as a kind of advance guard, a role I refer to as "jungle guide." For the sake of opening up a new market, we will go not just to the tropics, but to the desert and the tundra as well.
That [March 2016] loss was hard, but losses do have a silver lining, since it's easier to make changes in an emergency than during normal times. It was easy for us to instill in our employees a sense of urgency, a feeling that the company was doomed if things kept on going the same way.
To obtain stable sources of revenue, the first thing we tackle is reallocating personnel, such as from resource segments to non-resource segments, or from support functions to sales. It is said that at a trading company, the fences around the different specialties within the company are high. But it won't be possible to survive the coming era with such a setup, and getting rid of the fences and working together will also create new business.
In East Africa, we have been building infrastructure such as ports and railways, and transporting coal, but we have now begun using this infrastructure to get into the business of modernizing agriculture. We supply them with materials like fertilizers and pesticides, provide guidance on how to make production more efficient, and buy their agricultural products. We also plan to supply them with household goods, and to generate solar power for base stations for cell phones, which are a necessity for them.
In the case of a sugar refinery in Thailand, we have people with experience in petroleum exploitation involved in building the refinery, and power-plant professionals engaging in business to supply electrical power by burning the fibrous matter that is left over after the sugarcane is crushed. They're able to do these things because the team working on the project is a mixed one.
To spread this practice around, we've introduced a system whereby employees spend 20 percent of their working time assigned to a team operating outside of their principal occupation. An example would be having someone who handles the import and sale of grains spend their Friday afternoons taking part in business related to the internet of things (IoT). Changing the organization and making different ideas confront each other should lead to a chemical reaction.
Finding uses for AI, IoT vital
Although the digital revolution is proceeding apace, there's a limit to how much we can directly pursue IoT and artificial intelligence (AI) as lines of business. What's important is learning to make full use of IoT and AI in our own business operations for tasks such as predicting failures and forecasting demand.
At a power plant that we operate in Mexico, we've attached sensors to the power-generation system to monitor things like vibration and noise. We're looking into whether it might be possible, using analysis, to predict failures and thereby reduce maintenance costs and increase the rate of use.
We've also started trying to make use of demand forecasting in the sale of tickets for performances and other events. In Japan, ticket prices for things like sporting events and concerts typically remain pretty much the same year-round. But demand varies depending on factors such as the athletes who will be playing or the date of the event, so the price, too, could naturally vary.
In the United States and Europe, there are already systems that forecast demand on the basis of past data, and that calculate appropriate prices based on factors such as the weather and what a show will consist of. And to keep the tickets from being resold, it would also be possible to print each ticket with the purchaser's name on it and check the name of the ticket holder at the gate.
Our company is entrusted with the operation of facilities such as Mazda stadium for Hiroshima Toyo Carp. By also operating all the restaurants inside the facility, we're able to forecast demand efficiently, which also lets us reduce food losses. Anyway, the business of a trading company is quite broad.
Foreign contact drives change
I was born in Ehime Prefecture, and I came in contact with foreigners surprisingly early. There was a refinery nearby, and foreign tankers carrying crude oil apparently made port calls there. There's a picture of me with an Italian person when I was 9 months old.
I lived in a rural area until I was 18, so I had a strong desire to see the outside world. So I got a job at a trading company. My father had worked for an insurance company in places like Hong Kong before the war, and I think my interest in things overseas grew from the conversations I had with him about his time abroad.
Japan cannot fully provide for itself in terms of food and resources, so the country can't survive without relationships overseas. And unless overseas ties are strengthened, there probably won't be any growth. There are still many companies in Japan that have technology or services that are worth taking overseas, and that is why trading companies are necessary.
For that reason, I also want to promote internationalization inside the company, by overcoming borders and languages and removing fences between people. We need our employees to go out and hone their skills by working alongside highly talented foreigners on the world stage. I think that this, as well as the digital revolution, is a driving force for change at our company.
[Yasunaga was seconded to the World Bank in 1993 for two years.]
I had a valuable experience in diversity at the World Bank. The World Bank is an organization where one's nationality, career background and gender do not matter. My immediate superior was an American woman, and the team had an Indian woman, a German woman and a Pakistani man. There were people who had been at the Bank ever since they finished college or graduate school, people who had left a government office or a bank to work at the World Bank, and people seconded from the private sector like myself. Everything was new to me, from how they talked to each other to how they planned the work.
How careers advanced was also different. Essentially it was "think for yourself." You got your next job by finding a vacancy, applying for it, being interviewed and getting hired. You were also responsible for how you improved your skills, such as by getting an MBA at your own expense.
It will become that way in Japan, too. Up to now, everybody has been joining a company at the same time and retiring from the company at the same time, with the company deciding the individual's career path. At Mitsui, our goal is to be an organization that people can join or leave at will, where those who are in a hurry to be the president of their own company will leave the company and start a business, or where, conversely, someone who has been assisting business indirectly as a consultant, but wants to be involved in actual business, will come and join our company. We are now in an era in which the experiences I had at the World Bank can be put to use even in Japan.
People say, "Mitsui is people." I want to take a conglomerate that is a fusion of people who are diverse, and put the strength of that conglomerate to the very best use.
-- Tatsuo Yasunaga / President and CEO of Mitsui & Co.
Yasunaga was born in Ehime Prefecture in 1960. In 1983, he earned a degree in engineering from the University of Tokyo and went to work for Mitsui & Co. He spent considerable time in the company's plant department, dealing with plants such as refineries and liquefied natural gas (LNG) facilities. After serving as director of business planning and then as managing officer and chief operating officer of the integrated transportation systems business unit, he assumed his present post in April 2015. His appointment as president gained considerable attention because he was chosen over 32 higher-ranked executives.
-- Key Numbers: 440 billion yen
In the new medium-term management plan that it formulated in 2017, Mitsui & Co. set a goal to record a net profit of 440 billion yen on a consolidated basis in the fiscal year ending March 2020. The result for the year ending March 2017 was 306.1 billion yen, putting the company in third place in the industry behind Mitsubishi Corp. and Itochu Corp. The company currently operates in 66 countries and regions around the world. Established in 1947, it had 42,316 employees on a consolidated basis as of the end of March 2017.
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