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Yokogawa's Uchida Lays Out Plan for Global Leadership

Yokogawa must improve sales in the United States in order to achieve its goal of process control systems market leadership.

Isao Uchida, President and Chief Executive Officer, Yokogawa Electric Corp.
Isao Uchida, President and Chief Executive Officer, Yokogawa Electric Corp.

As part of a coordinated worldwide rollout of Yokogawa Electric Corp.’s new VigilantPlant platform, President and Chief Executive Officer Isao Uchida attended the Performance Driven Management Forum sponsored by ARC Advisory Group, Dedham, Mass., in Orlando Feb. 1-3. Uchida spoke during the opening day session of the Forum, and at a reception where VigilantPlant was formally announced. In between, he took time to meet with Automation World editors to discuss his plan for global leadership in process control by the year 2010.

Having heard of Uchida’s goal of making Yokogawa the leading process control supplier in the world, Automation World asked him how he is going to achieve it. During the next hour, he laid out a detailed and ambitious plan that touched on everything from the current global market share situation to the challenges Yokogawa faces in bolstering its U.S. market share. He mentioned three basic factors that he believes will enable the company to achieve its goal of becoming the world’s number-one process control supplier by 2010.

Three reasons

“The first thing is that we have a highly reliable process control platform,” stated Uchida. “We compiled data from our customers regarding actual production using over 17,000 systems and discovered our reliability was 0.999999953 percent or ‘seven-nines.’ So, in the first place, we always manufacture reliable, dependable, high performance instruments. Customers who are using these products will naturally look at our control systems, as well. With Yokogawa, the customer can obtain a whole system.”

The second thing is that customers are reluctant to spend money to upgrade. “Systems stay in production for 20 years,” Uchida told us. “But there comes a time when they must upgrade to bring their processes up-to-date. Only Yokogawa is focused exclusively on measurement and control. And we have been investing heavily in research and development. For the last five years, we have averaged investments in R&D of about 7.5 percent of sales versus an industry average of about 3.5 percent. This investment has enabled us to launch the safety controller system, and we will have Gigabit Ethernet and custom chips coming out. This will give us a solid product base.”

Yokogawa has the global base from which to build, according to Uchida. He noted that the company has market share leadership now in Southeast Asia and Austrialia, Japan, India, Korea and China. It is a “strong number two” in the Middle East and number three in Europe. “But in the United States we have not done a good job,” Uchida admitted. “We are currently number 5 or 7 in the United States, but we must be in the top three in order to achieve our ambitions. We started with instruments, and customers regard us as an instrument company. Now we must show them we are a total process solutions company. We feel that these new, easy-to-understand products will help. Also, with this global economy, there is a good possibility that sister plants of those in the United States located overseas will already be using Yokogawa products. There should be some spillover there. The United States will be our target market.”

10-year plan

“It is pretty unique for a company these days to have a 10-year plan,” said Uchida. “When I became chief executive five years ago, I had a five-year plan to become a profitable company, then a five-year plan to become number one. It has been five years, and we have achieved the first goal.”

The company achieved the goal partly through an extensive cost cutting campaign, something unusual in Japan. Uchida cut costs and personnel. He also instituted a compensation system that paid for results. Further, he established a retirement plan not unlike 401(k) plans found in the United States, throwing out the traditional Japanese pension plan.

“Because we had to compete like other companies, we could not spend money for many things, but we decided that research and development spending was essential. So, we went to our labor union and asked them to take a temporary 5 percent pay cut for five months, with all of that money going to R&D. They agreed, so we were able to spend 7.3 percent of sales on research even in that tough year.”

The VigilantPlant system launched during the Forum is built on three elements: See Clearly, Know in Advance and Act with Agility. These elements tie together the Yokogawa system of intelligent instrumentation, process control and asset management software.

Nice fit

At least one industry analyst sees the VigilantPlant system as covering the necessary bases. ARC Advisory Group Research Director Larry O’Brien stated in a recent report, “The core building blocks of the VigilantPlant solution fit well into the model of operational excellence that consists of a continuous improvement cycle of measurement, control, and optimization. At the measurement level, VigilantPlant includes Yokogawa’s solutions for analysis, quality control, sensing and actuation. The control domain encompasses production control and safety management, as well as data acquisition and logic control. The optimization domain within VigilantPlant consists of production management, advanced control, asset management, and operational efficiency.”

Uchida has laid out an ambitious goal for his company. He believes that the pieces are in place to make it happen. The question is—can he execute this plan as well as his first?

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