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The Path of the Little Samurai

Kazuto Yamaki
Tomasz Kulas PL
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The Path of the Little Samurai

In the recent years, what has become the most popular recipe for dealing with emerging unanticipated challenges is agile development, modeled on modern digital era companies. Meanwhile, SIGMA Corporation, a Japanese family company, combined in a remarkable way modern technologies with a traditional approach to doing business. This management model has perfectly proven its worth during the current crisis.

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Droga małego samuraja 

Tomasz Kulas PL, Kazuto Yamaki

W ostatnich latach najpopularniejszą receptą na pojawiające się niespodziewane wyzwania stało się zwinne zarządzanie, wzorowane na nowoczesnych firmach ery cyfrowej. Tymczasem japońska firma rodzinna SIGMA Corporation w niezwykły sposób połączyła zaawansowane technologie z tradycyjnym podejściem do prowadzenia biznesu. Ten model zarządzania doskonale sprawdził się podczas obecnego kryzysu.

Even before I took over management from my father, SIGMA faced an enormous challenge of rising manufacturing costs. When we were launching our operations, manufacturing in Japan was relatively cheap compared to other countries, thus we could produce everything we wanted at home – and export our products at competitive prices abroad. However, along with the rise of standard of living in Japan, production costs have also been rising. This is why in the 90s almost all Japanese manufacturers of photography equipment decided to relocate manufacturing abroad.

Indeks górny Kazuto Yamaki, CEO, SIGMA Corporation. Indeks górny koniec

At that time, SIGMA owned one factory only, located in Japan, in Fukushima Prefecture. We made a key decision then that production should stay at home. This is why we began to look for a solution that would still make it profitable. One of possible solutions would be to try to further lower radically the production costs, while another one would be to markedly raise the quality of our products, which would allow us to sell them at higher prices.  We chose the second option, and I made all the employees aware that it’s the only way for SIGMA to survive.

In fact, I believe I have been lucky, as essentially we had no choice and there was nothing to think about. The thing was simple – product quality improvement was a must, if SIGMA was to survive. There was no other option.

Culture of engagement

The one wonderful thing handed over to me by my father was the culture of collaboration within the company. All, really all of the employees understood what changes needed to be introduced and worked with high commitment to execute this new, quality‑based course of company development. I believe that also now, when many of our competitors can afford to offer their products at lower prices, as they have lower production costs, what distinguishes us is the level of commitment of our employees. They identify incredibly strongly with the company, while being at the same time really passionate about photography and about what they are doing.

This difference may not be obvious to everybody, but it is key for us and determines our competitive advantage. If you are passionate about photography and manufacture photography equipment, at the same time to a highest possible degree you know what your customers need – as they are passionate about the same thing. This is the foundation on which we build customers’ trust for our company. To our advantage, it is impossible to launch production of highest class lenses overnight, as it requires not only the best technologies, but also many years of experience. This experience and commitment constitute our advantages and I believe, although of course I cannot be sure of that, that in spite of radical external changes that have taken place recently, they will allow us to continue operating under the current business model.

Resilience in the times of crisis

Many company CEOs are currently facing the challenge of falling employee commitment. These CEOs are treated by these employees as “outside people” – professional managers whose task is about efficient management, no matter whom they manage and what the company does. However, my path was different, as I didn’t just take over the company from my father and didn’t just begin managing it.

Right after graduation, I began to work at  SIGMA at various different positions and in different departments – and it took almost twenty years.

At that time, I met most of the people in various operational areas – designers, engineers, factory workers, business development, marketing and sales people. Of key importance was the fact that when I became the CEO, I already knew the people who worked there – and they knew me. Many of them, for that matter, have worked in a company for a dozen or a few dozen years.

What does SIGMA Corporation do

SIGMA Corporation is a Japanese family company, known first of all as one of the major global camera lens manufacturers. It also makes digital cameras, flash lamps and other photography accessories, but it’s the lenses for the photo and video interchangeable‑lens cameras constitute its core business. It was founded in 1961 by Michihiro Yamaki, and since 2012 its CEO and owner has been his son, Kazuto Yamaki.

Currently, the company employs 1,725 persons, with annual turnover (as of August 2019) at ca. PLN 1.4 billion. Company headquarters is located in the suburbs of Tokyo. The entire manufacturing is also located in Japan – in SIGMA‑owned Aizu factory, located in a small town of Bandai. Outside Japan, the company owns subsidiaries operating in North America, China, France, Hong Kong, Benelux countries, Germany and the UK. SIGMA Corporation products are officially sold and distributed in over 70 countries.

I believe that, for that matter, this is where the advantage of family companies is. Since being a kid I had been learning and growing into the organization, as our apartment was located on the last floor of the headquarters building of our company. Since being six‑seven years old, I had been meeting in a natural way many people who had worked at SIGMA, and my life was developing along with the growth of the company. This is why it was something natural that when I took over the management, employees tried as hard as they could to help me in performing the new role and in further growing the company.

This traditional, family‑based managerial model turned out, in recent months, very resilient against the challenges the pandemic brought. In spite of SIGMA being a global operation, we are a relatively small company, thus it has been easier for individual people to understand the threats we are being faced with – and commit even more to helping the company and other co‑workers.

In April 2020, we asked most of the employees (except, of course, those who worked in the factory) to begin working remotely – and almost 80% began working from home. Thus, our company, just like others, was challenged with maintaining good levels of internal communication. This is when I began to send messages to all the employees – about the present condition of the company, the situation on the market, how advanced individual projects are. In October, we began to admit a possibility of returning to the office, as many teams – the engineering ones in particular – wanted to go back to working this way. In spite of this, daily messages that I send via the internal blog of the company, are being continued – and I still try to provide as much information about the state of the company as possible.

I believe that good organizational culture is an underlying foundation of innovation, this is why I attach great importance to it.

Fortunately, exceptional cases aside, I do not notice any fall in engagement among employees. This might also be caused by the fact that each new product we launched this year on the market has been very well received. Such positive feedback from the market undoubtedly also helps sustain motivation in the entire team in a situation when I am unable – during remote work – to fully commit to all the co‑workers.

Global company, involved locally

Another element which undoubtedly has an impact on a high  level of engagement is our care about the local community. First of all, naturally, it’s about SIGMA employees, who simultaneously belong to the local community. We are a small company and we cannot afford big actions aimed at improving the situation globally, but we still do all our might for a company of that size. First, we care about our customers, our employees and our local community. If we can take care of them, take care of their happiness, it spreads through them all around the world. I believe that if we won’t be able to take care about the local community, we won’t be able to do this for people in other regions of the world.

It is particularly important in current times – the only thing that will help us survive the difficult situation related with the pandemic is efficient teamwork of content, happy, loyal and engaged employees. This is also the second reason – except betting on the quality of equipment we manufacture – for which we are not planning to move production abroad. We want, as long as  possible, to take care of our employees, as opening a factory somewhere with lower production costs would probably mean not only higher profits for the company, but also a necessity to lay off many people from the home factory. We don’t want to allow for that to happen, we feel responsible for those people.

For that matter, when speaking of “Japanese quality”, I do not mean any singular, unique traits of our nation. I mean individual people, who have experience in lens manufacturing – as it is still partly an “analog” production process.

We can quite easily transfer the technology behind manufacturing of our equipment, experience, however, is a quality that you cannot transfer so simply and easily – in spite of very advanced automation and digitization of our manufacturing processes. They still contain many stages where it is the “human factor” that counts the most. It’s not a question of being Japanese, Chinese, Korean or Thai, but of how much experience you have as an employee. In our factory in Japan we have those people – experienced and engaged. This is why we are not planning to move our production anywhere else.

Besides, it depends a lot on what we are producing. If we were to consider producing digital camera bodies only, it could be easily moved outside Japan. Production and assembly of digital cameras are not – in spite of appearances – that complicated. Manufacturing of high quality lenses, on the other hand, is an incredibly ambitious challenge, which requires the best technologies – and the best people.

From father to son

My father was the founder of the company, a strong and charismatic leader of the entire organization. He always set ambitious business goals for it – and it’s where we are very much alike. However, I see certain differences in our managerial styles – he had been raising the bar so high that it had been almost impossible to achieve the assumed goals, and, first of all, the goals themselves weren’t precisely defined. The employees weren’t receiving an entirely clear message about which areas of activity, which product features are of particular importance in order to achieve the intended goal. They weren’t sure whether they should focus on product efficiency, their quality, or maybe on their size or on lowering production costs. As a founder and a go‑getting leader, my father was very effective, brilliant even, in running the company and he managed to combine all those elements on its growth path, but it was a management method that was hard to understand for others.

I also set ambitious business goals for my employees, but I raise the bar only slightly above how they appraise their capabilities. These are attainable goals. First of all, however, I bet on a clear, precise setting of priorities the company should pursue in order to achieve those business goals: efficiency and quality. I told the engineers and all employees one simple thing: costs are not important. I agreed to them designing as expensive products as they wish on one condition: that they will help them achieve the aforementioned goals. And this works – with this clear message about the priorities, the effects of work of our engineers are currently at the highest level.

Big factory, Small office

For all of these reasons SIGMA is not a typical company, where sales is mostly based on effective marketing. We focus on the product – and its quality. Our marketing budget is – honestly –remarkably limited compared to other departments, as we are not trying to artificially build the power of the brand or to arouse emotions among potential customers. In contrast to many other companies, we almost don’t spend any money on advertising, which does not mean that we believe marketing activities to be unimportant. Instead of big advertising campaigns, we try to show something else to our customers – a true passion with which we design and manufacture our equipment.

We touch here an issue of identification of a given brand with its CEO. I frequently try to personally demonstrate our passion for photography to our customers, for example when presenting new lenses during their global premieres. Frankly speaking, I am quite a shy person and I would be happy to avoid these activities, but I believe – precisely for marketing reasons – that sharing with the customers our passion and commitment to creating new products is of extraordinary importance. And it’s good if it’s done by the company owner or the CEO. Take winemakers, for example – when it’s the owner of the vineyard who speaks about a given vintage, he is able to convey emotions, the passion related to wine, and will do it better than anybody else. He needs just a moment to convince you why his wine tastes better than some anonymous products from a supermarket. And this is what contemporary customers expect – they want to consume not just the product, but also the emotions, the joy and the passion that are associated with it.

The quality of this product, however, is what’s most important, this is why sales and marketing teams are relatively small. For example, in our headquarters (the company headquarters in the Tokyo suburbs, not the Aizu factory – editor’s note) 75% of all employees are engineers who design new products. The other 25% must be shared among sales, marketing and customer support people. The same goes for investments we make – R&D is always a priority. It was already by father who adopted a principle, which he summarized as “Big factory, Small office”. In a sense, we are still following it.

Solutions for our times

With such priorities a vast majority of technologies we use in manufacturing is the know‑how developed and owned by SIGMA. Optical systems design, technologies related to creating and polishing of lenses, production of bodies for lenses and cameras – all these constitute elements of a coherent and complementary ecosystem. We need to cooperate with other companies and research centers only on acquiring certain materials for production and in the area of electronics, which is why our supply chains are not very complex and quite resilient to market turmoil.

As regards the use of electronics, SIGMA is not a traditional company, but rather a very modern one – modern lenses more and more often resemble computers, equipped with processors, memory or internal software.

Honestly speaking, SIGMA, which is, after all, an optical products company, currently employs more engineers who work on software than optics.

It is not only because we also produce – aside from lenses – digital cameras, but also because of the fact that software is incredibly important in modern lenses. Development of such software requires team effort from many people, while a modern, high‑quality optical system can be designed by one experienced engineer.

SIGMA is not big enough to build a business model in the form of a broad platform – as Apple or Tesla do – in order to perform many different types of services via this platform and make money in a variety of different ways. I believe that in our case it’s the company size which determines the fact that we focus on making and selling products, and not services.

It does not mean, of course, that we neglect the service side of our business. Each product is only one of the value elements we strive to provide to our customers. When a customer buys a lens for a given amount of money, he/she pays not only for the object itself, but also for the joy and satisfaction it will bring to him or her – and which he values more highly than the price of the equipment itself. This customer also gets advisory services before the sale, a wonderful maintenance care and an invitation to participate in many photography events and courses we organize. The product itself is just a part of a larger whole.

The future lies in passion

It’s true that the photography market has been systematically shrinking for years – in keeping with more and more people simply using smartphones to make photos and videos. Less cameras sold also means less potential customers interested in buying a lens, which is why our short‑term strategy indeed involves a possibility of introducing lenses with new mounts – to such photography systems as Nikon Z or Canon EOS R. So far, however, the number of orders for our lenses is still above our manufacturing capacities, and especially the capabilities of our R&D department.

In the long‑term perspective, on the other hand, do we allow a possibility of other solutions, such as broadening our offering with lenses for smartphones, medical equipment or cars? Yes and no.

Yes, because once again we come back here to the issue of responsibility for our employees. In order to maintain these employment levels, we need to ensure a certain level of revenues, which in turn is a result of sales volume. Thus, when, at some point, the sales volume for lenses falls below a certain figure, we will have to look for an opportunity to introduce to our offering products or services aimed at some entirely new market. Besides, we already have a special team at SIGMA dedicated to seeking new growth avenues for our business and new business opportunities. It’s not that simple if we assume that we want to maintain our production in Japan, as it automatically limits us to high‑quality products – and sold at quite high prices. Meanwhile, lenses for smartphones or cars are usually first of all cheap. This is why in our case producing them does not seem profitable.

First of all, however, the growth avenue we seek must be aligned with another basic principle – of pursuing our passions.

It’s not a precondition you can easily meet, nonetheless we don’t want to just be making money by manufacturing anything that is profitable – it must be connected with the fulfillment of our dreams. And it’s somewhat a “no” answer too – why we are currently not thinking of extending our offering. We love photography – I say it both on my own behalf and on behalf of all our employees, irrespective of whether they work in production, design or sales. This is why we will try to operate as long as possible in the image capturing market – because it’s simply where our passion is.

Photography market is indeed getting smaller – but it won’t be getting smaller infinitely. According to our estimations, it will reach its minimal size next year, in 2021 – and since then it will stay pretty stable. I would compare the ultimate size of this market to the level of camera sales in times of traditional photography, before the great digital revolution. The true number of passionate people, who want to make photos with high‑quality cameras and lenses is now – and was then – probably very similar.

We still intend to produce digital cameras, while not necessarily these have to be models with Foveon sensors (although we are still developing this technology). We will be producing them for two reasons: to honor the memory of my father (who always wanted SIGMA to also be a camera manufacturer, not just a lens maker), but first of all for much more practical reasons. Designing and producing cameras makes it incredibly easier to design lenses as perfectly as possible, as it’s only the combination of camera and a lens that allows us to register an image. Modern camera bodies are as crammed with electronics as lenses, which is why the final quality of an image largely depends on how this electronics communicates and cooperates. Not only equipment, but also software is of utmost importance – nowadays it’s the software that has a decisive impact on the final quality. This is why the experience we gain designing and selling cameras is invaluable for us, though – frankly speaking – we still lose considerable amounts of money in this area. However, until I see even the smallest chance for us to start making money also by selling cameras, we will go on developing them. And so far I believe such a chance exists.

Edited by: Tomasz Kulas, Managing Editor of ICAN Management Review

Indeks górny Images in the article: Provided by SIGMA Corporation. Indeks górny koniec

I am a witness

A business journalist should usually become invisible, giving voice to others and directing the spotlight on scientific pundits or outstanding practitioners from the world of business, most often company CEOs and founders. This time, however, I have allowed myself a small coming‑out, related to the fact that for twenty years I have been also active in the area of photography. To be straightforward – I was and I am a witness to an incredible transformation of SIGMA from a chrysalis, when it was only one of many manufacturers of quite average and rather cheap camera lenses, to a butterfly – a producer of photography equipment of the highest class. I allow myself to say that, that I am a trustworthy witness, having spent hundreds of hours in a testing lab, comparing SIGMA lenses with the equipment of other well‑known brands.

Something really amazing was for me to observe how lenses of this brand cease to occupy lower positions in comparison tests and begin to fight as equals with equipment from other well‑known Japanese photography brands, such as Canon (ca. 190,000 employees), Nikon (ca. 26,000 employees), Olympus (ca. 40,000 employees) or Sony (ca. 115,000 employees). And even more and more often begin to win with them, both in lab comparisons and in practical choices made by the best professional photographers. Let me remind you that we speak of a company that currently employs slightly above 1,700 people globally. It is a company, however, which consciously bet on maintaining its entire production in Japan, in contrast with other well‑known photography equipment makers from this country, so in order to escape the rising costs of production it focused on elevating quality. For me, who remembers an entirely different SIGMA from a dozen years ago, which offered average equipment, but at attractive prices, the results of this turnaround are still mind‑blowing.

I also remember my first previous meetings with Mr. Yamaki, when his hair was still pitch black, and mine – more visible. We were all in shock when he went out to see the journalists for the first time and began to talk about SIGMA beginning an entirely new chapter of its business. It sounded as if Renault CEO said that from now on they will make cars at Audi or Mercedes level – and sell them at adequately higher prices. Kazuto Yamaki, called by his collaborators a “little samurai”, kept his word indeed. He changed SIGMA beyond recognition – and inspired me to write this piece.

Tomasz Kulas
managing editor of ICAN Management Review
former deputy editor‑in‑chief of Digital Foto Video.

Indeks górny Photo: Arkadiusz Uriasz (made with SIGMA 105 mm f/1,4) Indeks górny koniec

YOU CAN ALSO READ THE ARTICLE IN PDF (POLISH) VERSION

Kazuto Yamaki

Prezes SIGMA Corporation

Tomasz Kulas

Redaktor prowadzący "ICAN Management Review" oraz "MIT Sloan Management Review Polska"

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