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A Conversation with Our CEO

Yoshinori Yamashita

RICOH Resurgent:
Prioritizing profits over volume

Yoshinori Yamashita
President and CEO

Q: What were your key priorities on becoming president?

I was appointed president and CEO on April 1, 2017. I first set about informing all our stakeholders that I was determined that Ricoh would make a new start and that included challenging conventional wisdom.
Since the global financial crisis in particular, we have been unable to return our performance to levels that satisfied our stakeholders. On top of that, the business climate for our core office equipment imaging business has become more adverse as competition has intensified amid a slowdown in overall market growth.
I therefore found it instructional to look back at Ricoh founder Kiyoshi Ichimura’s Spirit of Three Loves as principles that we can draw on to expand and to deliver new value by bringing together people and information while overcoming the numerous crises. I believe that management must put customers first to make the Sprit of Three Loves a cornerstone of the Group. I am certain that we can innovate and create new markets by focusing relentlessly on what our customers want, pursuing the development of products and services that open new vistas for them and excite them.
I have devoted much of my career to manufacturing in Japan and overseas, and more recently oversaw management strategy, new businesses, and sales and marketing. Based on my experience, I am confident that solutions to frontline problems can only come from the frontlines and not from the confines of conference rooms. Since becoming president, I have continued to visit the frontlines to see what is happening so I can identify the very essence of these issues. I am determined to ensure that Ricoh remains a company that values what’s really going on.

Q: Tell us about your growth trajectory to date and your current business climate.

In making a new start, I decided it was vital to make a clean break from the past.
The Ricoh Group has passed through three stages over the past quarter of a century. The first was in 1990, when we reached ¥1 trillion in net sales. We generated around 70% of that amount in Japan. It was at that point that we grew the number of copiers, printers, and other office machines in field, mainly in Japan, and established our strong after-sales earnings* model. In our second stage, we boosted revenues for 14 straight years, through 2007, when earnings peaked. It was during that time that we acquired sales channels overseas and rolled out internationally the earnings model that we established in Japan. Our prime growth drivers were a switch from analog to digital technology and moves from monochrome to color machines. Phase three was from 2008. In developed nations, we endeavored to reinforce our services businesses as demand matured for color machines. We bought IT service providers and moved to a strategy of maintaining income levels that we had secured from after-sales earnings with office equipment. But, it was in this third phase that market growth slowed down in the aftermath of the global financial crisis and price competition intensified making it tough to maintain previous earnings levels.

We established a business model to generate after-sales earnings and deployed that model overseas to secure new customers. We did this while rolling out our digital and color technologies to existing customers. It was during that process that we cultivated five major principles predicated on market growth, on which we based our decisions. These principles were to pursue market share, expand the number of machines in field, maintain a full lineup, emphasize in-house manufacturing, and maintain a direct sales and service structure. These principles impeded our efforts to shift strategies as the business climate changed.
The spread of mobile devices and the information technology infrastructure will likely hasten a decline in paper use and drive prices lower, making the going tougher for our core office imaging equipment business. So, under our 19th Mid-Term Management Plan, a three-year initiative through the fiscal year ending March 31, 2020, we decided to put our five major principles behind us and switch the emphasis of our strategic focus from volume to profitability.

*After-sales earnings
This is income from consumables, support, and service for MFPs, printers, and other equipment that we have sold

The Ricoh Group’s trajectory

The Ricoh Group’s trajectory

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Overhaul five major principles approach

Overhaul five major principles approach

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The fiscal year ended March 31, 2017

Consolidated sales declined, reflecting lower revenues from our Imaging & Solutions business and foreign currency impact offset the steady progress in the industrial and other areas that are our growth domains. Operating profit was down. This was due to higher expenditure having embarked on structural reforms to cultivate future growth businesses, an impairment charge for the camera business, and India-related expenses.

The fiscal year ended March 31, 2017

Outlook for the fiscal year ending March 31, 2018

We will deploy policies to transform our business structure so we can generate earnings amid even the greatest changes in the operating climate. This improvement thrust encompasses driving cost structure reforms, undertaking business process reforms that boost productivity, and pursuing extensive business selectivity. Our forecasts in light of those endeavors are as shown on the right.

Outlook for the fiscal year ending March 31, 2018

Shareholder return policy

Ricoh will set aside internal reserves to reinforce its corporate structure and cultivate new businesses while striving to deliver stable dividends to shareholders after comprehensively considering such factors as its medium-term earnings projections, cash flows, and financial position. We intend to allocate retained earnings to reinforce core businesses and concentrate investments in businesses offering medium- and long-term growth potential.

Q: What are your basic strategies under RICOH Resurgent?

We have three key RICOH Resurgent objectives under our 19th Mid-Term Management Plan . The first is to reform our cost structure by driving structural reforms. The second is to prioritize growth businesses centered on our strengths. The third is to reinforce our management systems.

19th Mid-Term Management Plan

1. Reform the cost structure

There are two focuses to our structural reforms. The first is cost structure reforms, through which we are reviewing our in-house manufacturing and direct sales and service approaches, consolidating business units, paring down the number of models that we develop in-house, and optimizing our sales and service structure. We are accordingly overhauling the overall structure of headquarters, the supply chain, and other areas.
The second component is business process reforms, through which we are reviewing businesses themselves, improving productivity, and pursuing efficiency by deploying information technology. Specific objectives are to reduce costs by expanding shared services to consolidate and streamline common operations among companies and departments, reform maintenance processes for office models, and expand cost reductions through production automation.
Our greatest management challenges under our extensive business selectivity thrust are to review our portfolio of existing businesses, services, and products and shift to a structure that can generate revenues during our 19th Mid-Term Management Plans. We aim to transform our business structure, investing cash in growth businesses created through structural reforms to make them profit engines.

2. Prioritize growth businesses centered on our strengths

We are refining and prioritizing our strengths and targeting growth based on those strengths.
In the office market, we are deepening ties with customers around the world, augmenting the capabilities in the core printing domain by providing new services. They include meeting support systems that help to enhance customer workflow and business productivity. We will leverage our strengths in printing technology to help create new customer value by broadening the potential of printing. Examples include commercial and industrial printing and laser printing solutions* that employ thermal technology.
We redefined our segments and business areas to build the ideal structure for implementing these strategies.
For a start, we put our Office Printing and Office Service businesses in the Office segment. The Printing segment incorporates the Commercial Printing, Industrial Printing, and Thermal businesses. In the Office segment, we are switching the emphasis of our strategic focus from volume to profitability. In the Printing segment, we are concentrating resources, funding, and other elements to determine the direction for each segment. We are also clarifying accountability for each business domain to accelerate decision-making and reinforce our growth potential.

*Laser printing solutions
Solutions that enable customers to print within their production lines

3. Reinforce our management systems

We set up the CEO Office, which reports directly to me, to implement structural reforms from the top down. We have put directors in charge of acting on priority companywide themes, delegating authority to speed up reforms.
To deploy our business strategy, we created a vertically integrated system for each business to reinforce PDCA (Plan, Do, Check, Act) management and accountability for results. At the same time, we are transferring oversight for some businesses to the most advanced markets including the Americas and Europe, as part of efforts to enhance the quality and speed of our strategic deployment.

Q: What are the Group’s medium- and long-term objectives?

When we embarked on our 19th Mid-Term Management Plan, we formulated a new value proposition for Ricoh - EMPOWERING DIGITAL WORKPLACES. It guides the efforts of all Ricoh employees to expand the notion of workplaces beyond the offices that we have traditionally served to also encompass operational frontlines and society at large. We aim to realize new growth opportunities by digitizing all workplaces so people can work smarter and by providing new value to individuals, teams and organizations.
We established five material issues that we must tackle through business and new environmental targets to reinforce our contributions to resolving social challenges. The issues are in keeping with Sustainable Development Goals* adopted by the United Nations and Ricoh’s Mission, Vision, and Values.
We formulated and are reinforcing implementation of the Ricoh Group Environmental Goals to drive decarbonization and the circular economy. On the decarbonization front, we established a new green-house gas goal for 2030 based on the Paris Agreement, which entered into force in 2016, and we aim to eliminate greenhouse gas emissions across our entire value chain by 2050. We will undertake extensive energy conservation activities and harness renewable energy to reach our targets. We were the first Japanese company to join RE100, an international initiative striving to increase the demand for and delivery of renewable energy. We will endeavor to improve the energy efficiency of our products while collaborating with business partners and customers to help decarbonize society throughout our value chain.
The Ricoh Group will swiftly and dynamically transform itself to stay ahead in a rapidly changing business environment. We will continue striving to deliver value that exceeds customer expectations while resolving social issues to grow with communities and enhance sustainable corporate value.

*Sustainable development goals
This set of universal priorities and goals through 2030 under an accord with the United Nations comprises 17 goals and 169 targets.

Resolving Social Issues and Creating Value

Sustainable Environmental Management

Ricoh’s five materiality issues

Ricoh’s five materiality issues

Ricoh’s approach

Ricoh’s value proposition

EMPOWERING DIGITAL WORKPLACES

Ricoh improves workplaces by using innovative technologies and services to enable individuals to work smarter

Ricoh’s value proposition

Value proposition positioning

Ricoh formulated its value proposition in keeping with its corporate philosophy and corporate brand message to express the concerted commitment of Ricoh employees everywhere to its customers and the communities in which it operates.

Value proposition positioning

Workplace expansion and our value proposition

Workplace expansion and our value proposition