Message from the CEO

Becoming Indispensable by Living Our Core Values and Driving Innovations

Creating New Value Through “Integrity and Effort” and “Creativity and Challenge”

Epson began in 1942 as Daiwa Kogyo Ltd., a watch parts factory. Aspiring to make the Suwa region the Switzerland of the Orient, founder Hisao Yamazaki built a watch industry in the area, which developed into a center of the precision technology industry. With a vision of serving the world with accurate timepieces, Epson redesigned watch architecture and produced a new mechanical watch that was unlike anything in the industry. The words “integrity and effort” exemplified the founder’s approach and became fundamental Epson values. Our pursuit of watch accuracy did not end there. The company continued to develop and produce quartz watches that boast far greater accuracy than mechanical watches. During quartz watch development, engineers needed to create parts that did not yet exist. This bred a culture of “creativity and challenge”—the ambition to take on challenges and the drive to innovate and come up with solutions.
Later, Epson grew by living the values of “creativity and challenge,” which led to the creation of numerous culture-altering products that provided new value, such as color inkjet printers that allow people to print photos at home and projectors that popularized big-screen presentations for large audiences. However, somewhere along the way, we allowed our objective to become beating the competition instead of delighting customers. I sensed that to become an indispensable company, we had to return to our roots. We had to not only live the “creativity and challenge” philosophy but also genuinely listen to our customers, understand their expectations, and work with single-minded integrity and effort to meet those expectations.
For Epson to become an indispensable company, we must provide value through innovation, so that people see Epson and its products as key contributors to society. If consumers see us in this light, they will be happy to pay for the value we provide, thus funding further innovation. This cycle will lead to sustained growth of the company. In other words, the value we offer must match the expectations of society, and our goal must be to drive innovation and solve societal challenges rather than beat the competition.
We opened fresh internal debate about what kinds of value Epson will provide to society and how we will contribute to the achievement of the SDGs to which we committed in 2018. In 2019, we also endorsed the work of the Financial Stability Board Task Force on Climate-related Financial Disclosures (TCFD). By living the values expressed by “integrity and effort” and “creativity and challenge,” we will capitalize on our strengths to create new value.

A Solid Foundation Has Been Laid and Products Are in the Pipeline, But Speed Was an Issue

Achievements and Issues Under the Phase 1 Plan

The Epson 25 Corporate Vision maps out a course for Epson to become an indispensable company over the 10-year period from FY2016 to FY2025. Phase 1 (FY2016-18) was designated as a period for laying a solid foundation for growth on our way to achieving the Epson 25 vision. So, during this period we aggressively prepared products and made the needed investments. Ultimately, we fell short of our financial objectives, but I think we showed the kind of innovations we are trying to introduce.
The area of innovation that we focused most closely on under Epson 25 and during Phase 1 is inkjets. While we are seeing some advances toward paperless processes, we question whether paperless solutions are really all that the world wants. Might it be that people just want the ability to print without having to worry about printing costs and environmental impacts? Our mission as a printer manufacturer is to allow people to use paper-based communication in smart and creative ways and to increase their productivity by slashing printing costs and environmental impacts to dispel their cost and environmental concerns. That is why we have focused on perfecting heat-free piezoelectric inkjet technology and developing businesses that apply this technology. Breaking away from the traditional business model that depends on sales of consumables, we will accelerate the development and expansion of high-capacity ink tank printers that sharply reduce printing costs and the amount of resources used for consumables, high-speed linehead inkjet multifunction printers that deliver outstanding print performance while saving energy, and dry process office papermaking systems that recycle paper on-site. Using this technology, we will replace analog industrial printing infrastructure with environmentally friendlier digital infrastructure that is easily adapted to diverse needs and unlocks the creativity to satisfy those needs. For this reason, we will accelerate the development and spread of products and services for the commercial and industrial sectors. These products and actions are our answer to society’s needs. Solving societal challenges is not something we can achieve by ourselves. Broader technological advances and changes in awareness are needed. This will take time, but we are finally beginning to see a move in the right direction.

Epson 25 Corporate Vision Financial Targets and the Mid-Range Business Plans

  • *1 Business profit is very similar to operating income under Japanese accounting standards (J-GAAP), both conceptually and numerically. Epson began using business profit as an indicator after adopting International Financial Reporting Standards (IFRS).
  • *2 Business profit/revenue
  • *3 Profit for the period attributable to owners of the parent company/Beginning and ending balance average equity attributable to owners of the parent company

Some of the actions we took to prepare for growth progressed significantly in Phase 1; others fell behind schedule or did not fully accomplish what was expected. Among the accomplishments was that we switched from ink cartridge printers to high-capacity ink tank printers in emerging markets. We also strengthened our core technology, added production capacity, and launched high-speed linehead inkjet multifunction printers and laser projectors, strategic products that will drive future growth. However, we still have issues with speed. One of our main strategies is to transition from B2C to B2B. We made progress in enhancing our sales organizations in Japan and Europe, and in accumulating customer insights. In other regions, however, we lagged in improving the sales organizations, in providing products and services that capitalize on the knowledge and insights we accumulated, and in establishing effective selling techniques. Moreover, we aggressively invested management resources, but those investments have not yet yielded returns. The reason, I believe, is that we did not do a good enough job of setting overall priorities.
Today, society expects companies to play a pivotal role in achieving sustainability. The adoption of the SDGs and the expansion of ESG investing mirror this. I strongly believe, now more than ever, that the role of enterprise is to achieve global sustainability and make the world a better place. To do our part, we must confidently accelerate our efforts to make Epson an indispensable company. Political and economic uncertainty are increasing and the times are becoming increasingly challenging, but we are putting Epson in a position to produce results during Phase 2.

Building from Technological Strength to Strength

Strategies and Aims of the Phase 2 Mid-Range Plan

The following three basic policies, created in response to issues that became apparent in Phase 1, will guide our actions under the Phase 2 Mid-Range Business Plan from FY2019.

  1. Accelerate growth by taking maximum advantage of assets and through collaboration and open innovation
  2. Strengthen global operations under Head Office control
  3. Invest management resources in a disciplined manner according to the economy and strategy effectiveness

First, in Phase 1, we refined our core technologies, added production capacity, and accumulated customer knowledge and insights. We need to capitalize on these strengths to increase customer touchpoints and quickly build stronger customer relationships through solutions selling and a stronger product lineup. For this reason, we will strengthen collaboration and open innovation. Epson’s vertically integrated business model leverages our core technologies and core devices as value creation platforms to provide value to end-users. However, there is a limit to what we can do alone. We cannot drive innovation and change the world unless we ally with partners who share our aspirations of creating a better world. We thus plan to seek more open innovation opportunities and expand external sales of inkjet printheads based on PrecisionCore devices. As part of this, we forged capital and business ties with Elephantech Inc., in July 2019. Earlier, in February 2019, we forged similar ties with artificial intelligence (AI) venture company Cross Compass, as we believe that partnering is the most efficient way of acquiring this technology. Epson will also engage in a variety of technology exchanges with overseas research institutes and universities, among others.

Epson’s Vertically Integrated Business Model

Epson’s Vertically Integrated Business Model

Epson is drawing on a storehouse of original technologies to develop and produce unique core devices, such as printheads for inkjet printers and optical engines for projectors. Our deep understanding of these core devices has allowed us to plan, design and use our manufacturing expertise to volume-produce and deliver in a timely fashion finished products and services that exceed customers’ expectations. In addition, we will strive to meet the diverse needs of customers and achieve a more sustainable future in line with the SDGs by embracing open innovation and collaboration as needed to strengthen our product lineup and by selling core devices such as printheads to external partners who share our aspirations.

At the same time, we will narrow down and focus on the areas where we can truly exploit our own strengths to build a formidable competitive edge. In most of our businesses, we assemble parts and technologies in various combinations to provide customers with value. We can create new value by adding unbeatable quality and originality to these combinations. We are looking to build from strength to strength by drawing on Epson’s storehouse of efficient, compact, and precision technologies to develop core devices that have unique value. These core devices give Epson a competitive advantage and enable us to create unique product platforms. These product platforms will be used to develop businesses that can agilely and efficiently respond to a diverse range of needs.
Second, we will strengthen our global operations by having the Head Office take over some of the business activities that have been handled by the operations divisions in the past. Specifically, the Head Office will take over activities where we believe better results can be obtained by taking a cross-organizational approach. For example, the Head Office will exercise more control when selecting priority business areas and regions. To increase our B2B marketing firepower, we will share the sales and marketing knowledge gained in the test markets of Japan and Western Europe with the rest of the global Epson Group and build and improve our sales organizations. We will also provide company-wide integrated IT infrastructure to strengthen operations. Customers will not acknowledge the value of even the best products unless those products provide them with solutions to their needs. We will therefore refocus our attention on addressing those needs.
Third, we will invest management resources in a disciplined manner. In other words, we will rebuild our product portfolios around priorities and will strengthen financial discipline based on the economic situation and the effectiveness of our strategies. In the past, we tended to try to grow all product areas equally. Going forward, however, we will focus more on high priority areas. To do so, we will use IT to gain greater visibility on the state of our businesses and will build systems for making rapid decisions based on common data. Taking an approach that is both disciplined and dynamic, we will articulate common objectives, decide on what needs to be done to achieve those objectives, and respond flexibly to challenges as the situation demands.

Advancing the Frontiers of Industry and Achieving Sustainability in a Circular Economy

Epson’s Contributions to Sustainability

Society expects companies to play a large and ever-growing role in achieving sustainability. I am confident that Epson can contribute substantively to sustainability because a low environmental impact is a hallmark of our products. In 2018, we amended the 2050 environmental vision that we articulated in 2008 and committed to helping to achieve certain of the Sustainable Development Goals (SDGs) adopted by the United Nations.
We are looking to advance the frontiers of industry and achieve sustainability in a circular economy through innovations in the office environment and on the production floor. We will use the efficient, compact, and precision technologies that are in Epson’s DNA to innovate, create new value, and contribute to the realization of a sustainable society.
Our goal is to solve the world’s problems with innovative solutions and make Epson an indispensable company by living our core values.

The SDGs That Epson Can Most Directly Help to Achieve

The SDGs That Epson Can Most Directly Help to Achieve

(as of June 2019)

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