Outside Director Dialog

A weakness is the widely dispersed nature of NTN’s business units. This geographic separation prevents any real benefits of scale from being generated when sales increase. Even when the business units are busy, the profits do not follow. It is clearly a difficult industry to be in. A company would normally consider centralization to reduce the number of operations or make stock management easier. But instead of centralization, NTN is using systemization to make its widely dispersed business units more efficient. It is very difficult to maintain high quality consistently as scale expands, which could bring about governance issues in future. NTN needs to check whether quality and cost competitiveness are being properly monitored. NTN has a large number of business units, including several from acquired companies. So it is difficult to keep track of them all and solve problems as they arise. Optimizing business units and business partners requires a lot of effort.

I think the head office should have the mindset that our business is developed "globally." Head office has several functions such as human resources, legal affairs,etc., however, they apparently focus on domestic issues mainly in NTN itself and its subsidiaries. NTN needs to consider more than just Japan when approaching various problems. NTN is working on globalizing head office functions, but we do not yet know if this globalization will be possible. We are currently in a transition period. When I attend the Board of Directors meetings these days, I feel that a lot of weight is given to discussion of domestic issues.

We do have a global perspective, but it is true that most agenda items at the Board of Directors are about domestic issues. So I suppose in that sense, it is a bit lacking in global perspective. The head office needs to function as a global holding company, so I think it will be forced to transform into a globally oriented organization.
I also think establishing a responsible profit control organization is a key requirement. The system of responsibility areas has already been established in Japan. But corporate general managers are mainly focused on domestic business units, and responsibility areas are unclear in overseas global management organizations. Bearings are used by either the industrial machinery or automotive industry, so the same product can have different applications. While I understand the difficulty, the responsibility areas of corporate general managers need to be global and not just domestic. In that sense, the current situation of the company is still unclear. Matrix management organizations seem to work well upon superficial examination, but their complex structures prevent unification and make governance difficult to apply.

Yes, it is a difficult problem. NTN makes bearings at multiple business units for use in industrial machinery as well as automobiles. So although the overseas and other business units have organized the breakdown of responsibility areas for each region, it is not always clear who is responsible for handling particular problems when they arise. That is a weakness that NTN has.

This year will be my seventh year as an NTN outside director. When I started in this position, the Board of Directors lacked energy. It was a Board that just went through the motions, following along with what had already been discussed by the Executive Committee. For example, the seating order called for outside directors to sit at the end, and our role was more to receive a report than to ask questions and influence the meeting. But the Board is now seeing quite lively opinions being shared. The seats in front of the chairman have been assigned to outside directors since last year. I feel that it has changed to an atmosphere to be more conducive to speaking than ever.
But there is almost no concrete discussion of areas such as collaboration with other industries. A lot of the discussion is just an extension of past discussions of the direction NTN should take in future as a bearing company. There is not much discussion that approaches the end user’s perspective.

The Board discussed how to handle new business areas when creating the Medium-term Management Plan. But although NTN is working on applications like wind power and hydroelectric, these businesses are not going as specified in the initial plan. The employees who develop technology are proficient at developing new products, but NTN has a hard time when it comes to marketing. NTN may be able to provide new products to current customers, but it has difficulty getting new products into other areas through marketing. Employees' motivation is aided by painting a clear picture-such as by showing how products for environmental applications can help solve major issues of public concern, for example. So for that reason, NTN needs to boost its marketing ability. But it is a case of easier said than done. As an outside director, I feel I should be asking the Board whether enough human resources have been allocated to marketing. The Board is currently focused on business for the automotive industry. I want to continue providing my input to get it to move away from that focus.

In general, the selection of the product to manufacture is usually a very important factor in gaining a technological edge in the manufacturing industry. The technology team will examine their technology closely, asking themselves if the quality is high enough and the product good enough. But the most important thing is how the market will assess the product. However it is quite difficult to compete for a technological edge in this industry. Successful manufacturers usually produce good products that sell well and get positive feedback from the market. But for this industry, the emphasis seems to be more on just blindly creating more competitively priced high-quality products for delivery by the set delivery date.
As an outside director, I think NTN’s technological edge needs to be precisely assessed to provide a clearer understanding of what the market needs and what technologies NTN excels at.

Bearings are products that form the base technology for many different items. It is important to develop the products that current customers demand and only NTN can provide. These products are not special items that can distinguish themselves from other products on the basis of quality. NTN does not have any points of direct contact with end users-finished items containing our products are assembled and sold by manufacturers of automobiles and industrial machinery. That is NTN’s business model. Should bearing manufacturers just continue providing bearing technologies, or do they need to start approaching end users? I do not think any bearing manufacturers have properly answered this question at the present time. If NTN does not stay sharp, it runs the risk of having the uniqueness and dominance of the manufacturing expertise it has accumulated over a century deprived of by emerging nations.
Over the next hundred years, NTN may need to get and advance to business areas more closely resembling customer solutions business. I think NTN may need to start solution business areas with direct connections to the systems demanded by customers, and made possible by non-interchangeable products that cannot be replaced by competitor models after being mounted in systems.

We are now required to collaborate with several different industries. There is a limit to what a single company can do by itself. The selection of collaboration partners will be the key. Collaboration will be difficult if NTN does not partner with companies having a close presence to end users early on. There are companies close to end users in several different industries. As a member of a conglomerate, the chemical company I was previously with had many points of contact with a wide range of industries.
I do not think manufacturers of automobiles would be able to suggest any approaches for starting the sort of solution business as Mr. Wada has mentioned. I think we need to work with non-automotive industries to find applications for friction-reducing technologies. The automotive and bearing industries are both controlled by a small number of players, so NTN needs to find out what its unique abilities are in this type of market. When producing bearings for the usual applications, the important questions to ask have always been how to increase production efficiency, how to increase cost competitiveness and how to improve quality, delivery time and overall efficiency. But when developing new business areas, another important question to ask will be whether collaborations with other industries are possible.

When providing dependable products for the automotive and industrial machinery industries, NTN has no problems with technology expertise. But it relies too much on business from the automotive industry. It still has not worked enough on collaborations with different industries to develop new business areas, or on providing solutions for the needs of different industries. The initial requirement for providing these solutions will be training employees to have the ability to selectively screen through market needs identified by marketing departments.

I think NTN is a good company that implements above-average human resources education. It is an outstanding company that generates both sales and profits. That is why I would like to see this company attract applicants with a bit more ambition and drive. I think its brand image still has not achieved nationwide penetration in Japan, so I think the TV commercials which have started since last fiscal year play a great role to improve brand image. But I feel some things are lacking. Its recognition level in Osaka prefecture, Japan, is not very high despite it being an Osaka company. Tokyo, the capital of Japan, has a wealth of human resources, and raising the recognition level there will be an important issue. NTN should appeal a point that we can provide our employees with attractive job opportunities.

While location and TV commercials are both important considerations, I think it is also important to consider new employee training methods and to set training plans when new employees are hired.
There is currently no room for the sort of flexibility that employee placements require. But to meet future employee training needs, I think NTN will need to establish systems for handling employees flexibly and enabling overseas postings. The head office organizations will need to draw on their expertise to devise and implement these systems. Factories will also need to reduce their workforces at the same time. I also think employees with international experience will need to be placed in the head office organizations themselves.

There are a lot of very sober and serious people among NTN's top management. That’s a very good thing, but it is also a shortcoming. I would like to see some more spirited people in management. I would also like the employees who are in contact with customers to incorporate an awareness of the company’s brand image into their dealings with them. Although it will be important to get input from all the employees on the question of how to improve the company’s brand image. NTN produced some TV commercials in Japan when it marked its centennial year. The ads have introduced NTN to people with no prior connection to the company, so I would like to see the company use this opportunity to work on improving its brand image.

Since I came to NTN from the different industry, I see a lot of things that the insiders miss. NTN is a company with a long history in a small industry, but does not know much about things outside its area. As an outside director, I am struck by how open an environment NTN has. I enjoy being able to speak my mind in this company. We outside directors often speak our minds at Board of Directors meetings, and there are long and unrestrained exchanges of opinions. NTN has a lot of growth potential. Our mission is to find out how much we can help that growth.