Introduction

The turbulence of a new age is re-writing all the rules of business. Old dinosaurs are dying, as new leaders emerge.

As editors, writers and business observers, your job is to chart the course to the Future, identify significant technology, report major events, spot burgeoning growth as it emerges, toll the bell for declining markets.

Jim Pinto Purpose

I'm here today as a catalyst – to trigger fresh thinking, to open your mind, to help by generating thoughts and ideas that can make a difference.

I’m here to provide a futurist’s perspective regarding the growth and success of a unique company – Omron.

Omron – the company

• Revenue approaching $ 6B
• Largest Japanese industrial automation company
• Unique among multi-billion $ corporations, Omron devotes significant attention to its ethical, social and philosophical positions.

The Omron difference

• Innovative yet practical entrepreneurial philosophy traced to founder, Dr. Kazuma Tateisi.
• Read his book: “The Eternal Venture Spirit”.
• “At work for a better life, a better world for all”
• Compass guiding Omron’s management for 30 years
• Predicts a shift to “Optimization Society”

Corporate Governance

• Omron Chairman Yoshio Tateisi places highest emphasis on 3 specific elements:
  • Management accountability
  • Management transparency & strong disclosure
  • Pursuit of high business ethics

Grand Design 2010

• Omron Group long-term plan
  • Formulated in 2001
  • Primary goal to maximize long-term corporate value
• Profitability – through proprietary products
• Growth
• Stability
• 2001 – major downturn
  • Structural reforms, cost reductions
  • Return to GD 2010 in 2004

Omron Growth Objectives

• 2004 -2007 – GD Phase 2
  • Offensive/defensive balance
  • Balance growth & earnings
  • Double total business value by 2007

The global automation scenario

• US & Europe growth flat
  • High emphasis on Services, Financial, Telecomm, Bio-pharma, Entertainment
  • Few new industrial plants and factories
• Global growth strong
  • Surging growth in developing countries
  • High interest in industrial development

Automation business overview

• 1b+ companies only 10-15
  • Very few mid-size ($ 100m – $ 1b)
  • Large number of small suppliers (under $ 10m)
• Current major automation suppliers
  • who will be left standing when the dust settles?
• Who will be the new leaders?

Automation products have become commodities

• Features-Advantages-Benefits easily duplicated
• Quality manufacture of commodity hardware
  • Available from several sources with marginally different features and benefits
• Software easily copied
  • Functional equivalents widely available
• Low margins
• Stiff competition
• Drastic price reductions

Automation Majors strategy

• Shift to solutions/integration
  • Low margins
  • Services intensive
  • Compete with SI customers
• Going offshore to reduce costs
  • Losing technology advantage
  • De-motivating employees
• Consolidation
  • M&A: Pig + pig = more pigs

Automation Technology Shift

• Old technology has sprouted commodities
  • PLC, DCS, SCADA now available from catalogs
  • Software, HMI – everybody has the same
  • Sensors, valves, equipment – old-line companies
• New technology – inflection points
  • Nanotech, MEMS
  • Wireless everywhere
  • Pervasive Internet
  • Complex adaptive systems
  • Old dinosaurs will die, new leaders will emerge

Productivity is the key

• Productivity is now a global race between regions and nations
  • Those who can make things cheaper, faster, better – win!
  • US and Europe losing technology advantage
• Factories & process plants moving
  • Closer to customers
  • Closer to raw materials

Knowledge work – located anywhere

• Internet makes physical location irrelevant
  • Low-cost communications
  • Availability of trained people
• Knowledge is power
  • US is losing the big advantage
• Outsourcing moving up the food-chain

Offshore Outsourcing

• It's NOT cost
  • Better, cheaper, faster
  • Local investment in automation & equipment
  • Availability of trained people
• Job losses—especially in manufacturing
  • US does not like manufacturing – puts roadblocks
  • Little or no investment in equipment & automation
  • Offshore locations provide BIG tax breaks and assistance

China – Manufacturing

• Manufacturing prowess
• Good, repetitive quality
• Worldwide market-share – 50% of cameras, 30% of air conditioners and televisions, 25% of washing machines, 20% of refrigerators
• One private Chinese company - 40% of all microwave ovens sold in Europe
• City of Wenzhou, Eastern China - 70% of the world's metal cigarette lighters
• Wal-mart – Buys $ 18 billion per year from China

China – Hitech looms

• 700,000 engineers a year, 37% of all college graduates
• University system – growing in size and quality
• Engineer pay ranges - $4,000 to $8,000/yr.
• New competitors in all hitech markets
• Biotech advances – genome sequencing
• Space technology advances

India in a new century

• World's most populous country (mid-century)
• The world's largest democracy
• Advantage – English-speaking
• US Software – $6-8 billion, 60% growth
  • Infosys – Revenue $1.5B, profit 30%, growth 50%, Nasdaq market-cap $18.6 billion
  • Wipro – Revenue $ 1.9B, profit 19%, growth 50%, NYSE market-cap $14B
  • Strong growth intentions
• Global growth targets

World competition brews

• Other regions/countries are competing strongly
  • Central & Eastern Europe, Russia, Brazil, Mexico
  • Third-world
  • Innovative. Competitive
• Capitalist “bait” – big tax-holidays
• Fundamental drive
  • Hungry for upward mobility
  • You cannot simulate hunger
• Read Tom Friedman’s book “The world is flat”
  • Business Week #1 best-seller

New-age business models

• The old “industrial mindset”
• New-age turbulence – companies must adapt to survive and thrive
• New business and revenue models for growth & success.

World structural changes

• The Achilles heel of Capitalism
  • Selling/losing knowledge advantage with short-term profit motive
• Old globalization was “cheap labor”
  • New globalization is “knowledge”
• Globalization and free trade
  • Massive disruptions in where and how world’s goods are produced

McWorld vs Tribalism

• Growth of multi-nationals
  • Pure profit motive, sell consumerism
  • No cultural context
  • Integration and uniformity
  • No allegiance to any specific country
  • Too much political power
• Tribalism
  • Culture is pitted against culture, people against people, tribe against tribe
  • Sub national and ethnic links
  • Terrorism – high cost of control

China – new world power

• Capacity to launch nuclear weapons on intercontinental missiles
• Space technology
• Orbital communications, GPS satellites
• Military surveillance
• Seriously affect commercial and security aspects
• NASA - high costs price US out of outer space
• Limited US ability to control militaristic advances
• Long term (Political) problem with China

Future global challenges

• Global energy problems
  • Energy independence
  • Environmental concerns
  • Water & Waste
• Humanitarian dilemmas
  • Growing Poverty gap
  • Terrorism – increasing vulnerability & cost

Futures prognostications

• The “good old days” will not return
  • The “good new days” are here
• Look for inflection points
  • Future is exciting
  • Not just a reflection of the Past
• New leaders will emerge

Editors’ meditations

• Who or what drives your business?
• What’s your magazine circulation?
  • Compare with “Wired”, INC.
  • Compare with Singapore, Brazil
  • How can you generate World circulation?
• Content changes needed
  • Same old, same old – driven by advertisers
  • Print vs. Internet – content on demand
  • Local vs. global audience

Leadership

• Leadership should start from you and your magazine
• Opportunities develop – from your customers, from your suppliers, from the market
• To grasp opportunities, you must be ready, your magazine must be agile, and you must have the attitudes that make a difference

Omron faces the future

• Dr. Tateisi predicted a shift to “Optimization Society”
  • Omron is following the founder’s guiding advice
  • “At work for a better life, a better world for all ”
• Omron is one of the growth companies in this new era - ready, willing and able to make a difference in the Future.

Weblinks

Omron – Success with a Unique Philosophy

ISA 2004 Keynote – Global Shifts in a New Age

Industrial Automation Inflection Points

Automation: Old Dead-ends, New Directions

The decline of the large automation exhibitions