DENSO challenges “True Purpose-Driven Management” where the company’s mission and associates’ aspirations resonate with each other. Dialogue between Akie Iriyama and Shinnosuke[...]

Oct 23, 2024

VISION & IDEA

• Shinnosuke Hayashi / President and Representative Director of DENSO.

  President Shinnosuke Hayashi graduated from the School of Science and Engineering at Waseda University and joined Nippon DENSO (now DENSO) in 1986. He began his career in the Electronic Engineering Department as a software engineer, where he contributed to the development of the world's first fully electronically controlled diesel common rail system engine ECU, leading to its mass production and global business rollout.
  He held roles such as General Manager of Electronic Engineering Department 3 and Project Director in charge of Electronics Manufacturing Department.
  He was appointed as Senior Executive Director of DENSO in June 2015, where he led the company's transformation and new product planning for integrated vehicle systems and mobility electronics. By June 2020, he was appointed Chief Software Officer (CSwO), and in January 2021, he became Senior Executive Officer of DENSO Management, where he led company-wide transformations to enhance the value of cars with software-driven technologies. After serving as Head of the Mobility Electronics Business Group in 2022, he assumed the role of President and CEO of DENSO in June 2023.

• Akie Iriyama / Professor at Waseda University Graduate School of Business and Finance.

  Graduated from the Faculty of Economics, Keio University and completed the Master's program at the Graduate School of Economics, Keio University. After working at Mitsubishi Research Institute, he earned his Ph.D. from the Joseph M. Katz Graduate School of Business, University of Pittsburgh, in 2008. He served as an assistant professor at the State University of New York at Buffalo Graduate School of Business from 2008 to 2013, and as an associate professor at Waseda University's Graduate School of Business and Finance (Business School) from 2013 to 2018. He has been in the current position since 2019.
  His publications include What's in the Mind of Business Scholars in the World Now, The World's Most Advanced Business Administration that You Can't Learn at Business School, and Management Theories of the Global Standard.

In the age of VUCA, the future remains uncertain. Companies can no longer rely on a clear, predefined path. Instead, they must navigate uncharted waters. The automotive industry exemplifies this shift. With the rise of electric vehicles, automated driving, and software-defined vehicles (SDVs), the industry is experiencing a once-in-a-century turning point.

It's not only car manufacturers that are facing a sense of urgency. DENSO, the largest manufacturer of automotive components, has committed to not only continuing its focus on the evolution of mobility, but also leveraging its technologies to create new value-both within the mobility sector and beyond. This approach aims to address and help resolve critical social concerns.

What needs to be done to bring this vision to life?
What is DENSO striving for as it works to maximize value through solving social concerns in the areas of the "Green" and "Peace of Mind"?

These questions were explored in a dialogue between Shinnosuke Hayashi, President of DENSO and Akie Iriyama, a management scholar and professor at Waseda University Business School.

Contents of this article

Akie Iriyama (hereinafter Iriyama)：The most important aspect of corporate management in uncertain times is "ambidextrous management". It is necessary to strike a balance between "deepening expertise," -where existing technologies and business models are deeply explored and refined-and the "Exploration of Knowledge," which involves acquiring new insights through extensive research in distant, unrelated fields.

Japanese companies remain underdeveloped when it comes to the "Exploration of Knowledge." How does DENSO approach this?

President Shinnosuke Hayashi (hereinafter "Hayashi")：We have consistently deepened our expertise and explored new business domains in cycles of 10 to 20 years since our founding.

From the beginning, we have worked on improving key automotive components like starters (motors for starting engines) and alternators (generators for automobiles). Simultaneously, we began pioneering innovations in thermal air conditioning systems for automobiles. Recognizing the potential of thermal systems, we continued to deepen our expertise in this field. At the same time, we expanded our exploration into powertrain and electronic control systems. As these products became a key component of our business, we expanded our focus to include advanced safety features, supported by software development. Over the years, DENSO has consistently contributed to society by continually deepening its expertise and exploring new business domains and products that constantly adapting to the social concerns in the automotive industry.

However, as you mentioned, companies tend to focus on short-term figures if left unchecked, which carries the risk of weakening investment in exploration. To counter this tendency, we are committed that short-term results don't take priority over our long-term exploration plans.

Especially in the era of CASE (connected driving, automated, shared and services, and electrification), we must adopt an even stronger mindset focused on exploration. We are determined to uphold DENSO's original DNA of "Deepening" and "Exploration."

Iriyama：President Hayashi, you mentioned that you aim to increase sales in new value areas-such as energy, food, and agriculture-to 20% of total sales by 2035, utilizing the technology DENSO have developed in the automotive sector.

Hayashi：In the fields of food and agriculture, to help ensure a stable supply of food and enhance food safety, we acquired the Certhon Build B.V.Group, a Dutch horticultural business operator. We have applied robotic technology, automation, and image analysis-originally developed at our automotive manufacturing sites-to factory-based agriculture. This is truly an area of "Exploration of Knowledge," and we are approaching it with a long-term perspective, rather than focusing on immediate profits.

Iriyama：DENSO embodies the DNA of "Exploration of Knowledge." To further this pursuit, "Purpose-Driven Management" is crucial. It is important to understand the company's founding principles and the motivations behind its operations. Furthermore, we need to consider the long-term value and contributions the company will bring to society over the next 30 years.

Conveying this vision to associates, investors, and business partners, secure their "Buy-In," and move forward together. We will be able to fully commit to the "Exploration of Knowledge" by doing so. Recently, "Purpose-Driven Management" has become a popular term, but conveying it effectively to ensure full "Buy-In" is crucial. In some cases, Japanese companies are content with simply defining a purpose without conveying it in a way that ensures full "Buy-In."

Hayashi：At DENSO, we define our purpose as "Great Cause." In the past, our focus was on "environment, safety, comfort, and convenience". Now, to address the challenges brought by automobiles, we place the highest importance on "Green" and "Peace of Mind", which reflects our great cause: contributing to society in these critical areas.

I believe there are two key elements to "Purpose-Driven Management". The first is having clear, unwavering guidelines. I deeply agree with the idea that "a company exists for the public good," and this serves as my guiding principle as president. The second is "individual aspirations," investigate the reasons behind why you work. When individual aspirations align with the company's purpose, it results in personal fulfillment and societal contribution, thus bringing "Purpose-Driven Management" to life.

Iriyama：You're absolutely right. Individual aspirations-or personal purpose-are extremely important. While the company's purpose is often discussed, it's equally essential to focus on individual purpose. This might be challenging in Japanese society, where people are not encouraged to consider about "what they want to achieve in life." This issue stems from the education system. In Japan, education has traditionally focused on finding correct answers-getting good grades, entering a top university, and securing a stable job at a large company until retirement. This system has left little room for individuals to reflect on what truly makes their lives fulfilling and happy.

Iriyama：President Hayashi, have there been any moments in your life where you had the chance to reflect on your own purpose?

Hayashi：I worked very hard in my 30s, but things kept going wrong. One day, my mind suddenly went completely blank, and I felt empty. It was at that moment that I started asking myself, "What am I living for? Why did things turn out this way?"

Iriyama：You hit a roadblock. How did you manage to overcome it?

Hayashi：Through reading. I read various books, with a particular focus on history. This allowed me to explore the histories and philosophies of Japan, the East, and the West. Applying these learnings in practice, any failures led me back to books for further insight. This helped shape my own values about the purpose of work and life.
I made the decision to "learn and embody the unique philosophies and ways of thinking in Japan, and to pass them on to the next generation through my work. This is the purpose that guides me in both life and work". This is not about nationalism; it's about contributing to the world while taking pride in the culture and history of my country.

Iriyama：What President Hayashi has described is essentially a philosophy. I believe that a top executive who cannot articulate their philosophy is at a disadvantage. Today, the Western concept of dualism is reaching its limits.
It's becoming more difficult and less meaningful to draw clear lines between concepts like good and evil, or nature and humanity. As AI becomes more prevalent, an integrated worldview from the East, rather than rigid dualism, may be exactly what the world needs.

Hayashi：I have learned a lot from Eastern philosophy, and it forms the core of my thinking. With AI on the rise, it's more important than ever to figure out "How should we live?" I believe the Eastern concept of interconnectedness is something the world will increasingly need.
The connections between history and philosophy are crucial. To understand Japanese Zen, one must learn about Confucianism, Taoism, and Indian philosophy. Geography, where these philosophies and religions originated, plays a key role as well. Continuous reading and practice have shown how important it is to connect history and philosophy to one's personal beliefs.

DENSO's 75-year history is built upon the aspirations of the people who have been part of its journey, with those ideals being carried forward. As we look ahead, it is crucial to connect our great cause with the production site, while also aligning it with the individual aspirations of our associates.

Iriyama：What do you keep in mind to reflect the great cause throughout the production site and gain associates' "Buy-In?"

Hayashi：I believe that the only way to accomplish this is through cascading dialogues.
However, dialogues alone will not be enough to spread the great cause throughout the entire workplace and secure "Buy-In" from all associates. Building a culture is never a straightforward matter.

First, it's important to provide opportunities for each associate to reflect on their personal aspirations through dialogue. These conversations help associates tie the company's great cause to their own aspirations.

To achieve this, DENSO has started holding events such as "Conversations with our President and Vice Presidents" and "Town Hall Meetings" with associates, where small groups of associates engage in meaningful and interactive discussions.

Our goal is to cultivate an environment where discussions about the great cause and personal aspirations occur effortlessly in daily conversations.

Iriyama：Could you share your thoughts on how you ensure diversity among your personnel? When a company is headquartered in Japan, it often attracts a relatively homogeneous group of associates.
While this can be beneficial for deepening existing knowledge, it can limit the exploration for new knowledge. How do you manage this balance?

Hayashi：Indeed. In the past, it might have been sufficient to conduct exploration primarily centered around our headquarters in Japan.

Nonetheless, we are focused on leveraging the strengths we have developed in the automotive field to transition from a Tier 1 supplier that supports the auto industry to a Tier 1 supplier that supports a mobility-centered society. Our mission is to contribute to the resolution of global societal challenges.

To accomplish this, it is imperative to address the distinct characteristics and challenges of each region, which cannot be effectively achieved by concentrating solely on Japan.

Earlier, we discussed the importance of taking pride in our own culture and history. At the same time, associates in each country and region need to identify the true needs in their local areas and provide the best solutions.

As a global entity, DENSO operates 193 group companies across 35 countries and regions, and a total workforce exceeding 160,000 associates. Our international presence includes production and sales operations, as well as strategically positioned research and development centers around the world.

Iriyama：I see. It appears diversity is being secured on a global scale.

Hayashi：We aim to use the transformation within the automotive sector as an opportunity to accelerate our commitment to diversity, ensuring it thrives at every level.
DENSO is fortunate to have talented and dedicated associates across the globe. When each associate takes pride in their country, region and roots, respects one another, and works collaboratively, they deliver meaningful value worldwide. This creates opportunities for individual growth and the blending of diverse talents, which we believe will inspire a significant transformation in our corporate culture.

Iriyama：Japanese companies have struggled to strategically cultivate corporate culture over the years, which I believe is a major issue. In contrast, Western companies, such as Google and Amazon, place considerable emphasis on building corporate culture.

Hayashi：Though Japanese companies may have been able to function well without giving much intention on culture-building so far, as you have mentioned, it's now crucial to adopt a strategic approach and develop the corporate culture purposefully.

Rather than solely relying on the president's ideas, it's critical that we take shared responsibility and collaborate with all stakeholders in this process. Working together, combining efforts will lead us to the development of a unified vision.

Iriyama：The key to corporates' culture-building can be found in the company's origins. By thoroughly exploring the thoughts and aspirations present at DENSO's founding, the corporate culture should become clear.

Hayashi：DENSO marks its 75th anniversary this year, having been founded in 1949 as a spin-off from the electrical components division of what was then TOYOTA MOTOR CO., LTD, now TOYOTA MOTOR CORPORATION.
The associates were young and there was no charismatic leader. The situation at the time of the company's founding was undoubtedly challenging.
Despite these challenges, each associate was driven by the spirit of "Let's contribute to society with our technology! Let's look beyond Japan and embrace the world!" They engaged in passionate debate and pursued their goals, overcoming obstacles along the way.
We were a group of determined individuals who upheld our beliefs. That spirit lies at the very heart of where we began.

Iriyama：It is from that foundation that we have been able to develop various products utilizing our advanced technologies. One notable example is the QR code, developed by DENSO, and I am confident that more groundbreaking technologies - ones that have the potential to change the world-will emerge.
My expectations are high, not only for the evolution of the automobile but also for businesses that will drive the realization of a mobility society, even during this era of significant transformation.
In many ways, DENSO may be the Japanese company with the greatest potential to shape the future.

Hayashi：Thank you. I take great pride in the world-class technologies we have developed over the years. DENSO has been involved in every aspect of the electronic control of vehicles. While further innovation in semiconductors and software is necessary for CASE technologies, the know-how DENSO has accumulated through its 50 years of semiconductor expertise and 40 years of software development provide us with a competitive edge.
In addition, driven by the mechanics field that we have focused on since our founding, we have been continuously refining our expertise in both electronics and software. By integrating these technologies in an optimal balance, we have developed the capability to implement and mass-produce high-quality products, further strengthening our technological and manufacturing foundation.

Iriyama：The first phase of Digital Competition has recently concluded, with Japan falling far behind the U.S. tech giants such as GAFA. However, we are on the verge of the second phase, where physical products that are digitally connected will take center stage. The key factors in this new phase will be software skills and ability to manufacture high-quality products. This time, the combination of high-quality products and software provides a significant opportunity for DENSO.

Hayashi：To take full advantage of this opportunity, a well-defined partner strategy will be critical. DENSO is fortunate to collaborate with numerous business partners within the automotive sector. This privilege brings with it a significant responsibility to the industry as well.

To facilitate the growth of the automotive sector, we must shift from the restricted competitive strategy to a standardization approach that fosters co-creation with other sectors.

The ultimate objective of our partnership strategy is to foster genuine harmony. We are committed to forming strategic alliances across the automotive, software, and semiconductor sectors, ensuring mutual growth and making substantial contributions to society.

Iriyama：Much remains to be discussed with President Hayashi. It's rare to encounter top executives in large Japanese companies, who can articulate their philosophy so profoundly. I Hope this conversation serves as a meaningful chance for others to better understand President Hayashi's character.

Hayashi：This conversation has been truly enriching, and I greatly appreciate the valuable time and insights you've shared.

VISION & IDEA

• TECH & DESIGNJul 29, 2024

  Cars Growing with Society, Moving to a New Chapter in Mobility

  The Challenge of SDx: Shifting Mobility Development to a Software-First Approach

• CAREER & LIFEAug 8, 2024

  Believing in a Faint Light: Obstacles QR Code developer overcame and the source of his idea.

  An interview in commemoration of the 30th anniversary of the QR code