By Takashi Yamazaki / Yomiuri Shimbun Senior Writer Kao Corporation has a long history of manufacturing daily commodities popular with Japanese consumers, including soaps, detergents and disposable diapers. The driving force behind its competitiveness is its steady investment in basic research. For this installment of Leaders, a column featuring corporate management and senior executives, Michitaka Sawada, president of Kao Corporation, emphasizes his belief that maximizing human potential is the key for future growth.
We had been calling employees “human resources,” but I changed one kanji to create the term “human assets.” The word resources gives the impression that the company views our staff in the context of labor expenses. Employees are actually the company’s assets.
[In January, Sawada was put in charge of employee development for one year.]
The company will naturally grow as long as staff are motivated. I want each employee to be energetic and work on their own initiative. However, I wonder if a number of customary practices that remain here and there are hampering our efforts to build such an atmosphere. In most cases, they are just conventions we’ve inherited from the past. With this in mind, I decided to lead the transformation within the company.
As a first step, I changed the format of the ceremony to welcome new employees that is held every April 1.
The ceremony used to start with remarks from various managers, followed by a representative of the new employees declaring, “We will give our all.” People stood up from their chairs and bowed after each remark.
Does this kind of ceremony inspire new workers? Of course not.
This year, we kicked off the ceremony by showing a video about the company’s history. We then showed baby photos of the new employees that they had given to us beforehand, together with images of Kao products that were released the same year they were born.
After my remarks, we showed another video of employees from all over the world offering words of encouragement to new staff in their own languages, such as “Let’s do our best together.” I wanted the newcomers to think, “I will work hard like them.”
I would also like to reexamine our merit-based evaluation system. Performance-oriented assessments are necessary in the United States and Europe, where frequent job-hopping is common. However, many Japanese still work for the same company for years or decades. I want to explore an evaluation system that’s suitable for these Japanese workers and not rely so much on the merit-based approach.
My belief in the need to motivate human assets is based on an eye-opening experience.
It happened during my stint as chief of Kao’s research laboratories in the early half of the 2000s. At the time, sales of the Merries series of disposable diapers — one of Kao’s main products — had been sluggish, and it had gotten to the point where we had to make a decision on whether to keep manufacturing them. The staff became demoralized and I even heard rumblings of discord from them.
I decided to hold one-on-one interviews with all 130 of my employees to hear them out on their ideas. The talks sometimes lasted for three hours, and it took six months to finish all the interviews.
I discovered that not a few of them had lost confidence in their work. In our talks, I made an effort to acknowledge and emphasize their excellence. As I listened, I came to realize that each of them had the same desire to develop good products as a team.
We all shared the same feeling. I called on them to work together with a new outlook. We began to reexamine the material from scratch, seeking to create a product that would prevent a baby’s skin from becoming damp. The result was a much-improved product that increased the popularity of Merries both at home and abroad and came to be regarded as “Japan’s best disposable diaper.”
My main concern was how to motivate my staff, not how to improve the product. The experience taught me that creating an environment in which employees feel a sense of excitement is the best way to develop high-quality products.
Kao Corporation has a long history of prioritizing basic research. In the fiscal year through December 2018, research and development expenses equaled 3.8 percent of net sales. Half of the expenses went to basic research. Compared to rival firms in Japan and elsewhere, we spend a higher percentage on research and development, and the fact that half of our R&D funds go to basic research is no doubt unusual.
Seeing consumers flock to our new products makes us very happy. It makes us more determined to invest in research and development to deliver a good product.
If we compare our products to flowers, our company’s policy is to invest in nurturing the roots. We steadily extend the roots deeper and expand them wider to create something capable of bearing flowers. I believe our approach is unique in the industry.
A good case in point is our “Healthya Green Tea,” which the government has recognized as having “specific health benefits.” While working to develop a new cooking oil, we researched a wide range of substances and discovered tea catechins — polyphenols in green tea — are effective at reducing body fat. We decided to launch new beverage products that contain catechins.
It takes about 10 years of work to release a quality product on the market. It took us 12 years to develop a new line of laundry detergent called “Attack ZERO,” which hit store shelves in April.
If we spend 10 years on development, the product will remain popular for 10 years. If we spend just three years on development, the product will only have legs for three years. A product that is the result of a thorough research and development process, however time consuming, will retain its popularity despite changes in the times.
Successive presidents have told us that even if this would be a roundabout process, it’s necessary to start by focusing on the underlying roots and not the flower itself. That’s how you create a strong base that can benefit society. I will continue to follow in my predecessors’ footsteps.
[Last November, Kao Corporation decided to take an open approach to innovation by releasing to the public five promising research findings from its more than 50 ongoing basic research projects. ]
We used to wait until after we completed the development of a product to reveal the technologies that went into developing it. However, customers’ needs have diversified and more people than ever are concerned about environmental issues. To meet these changing demands, a closed-innovation approach that relies on internal knowledge has its limits.
Even in the midst of research, we should give customers and experts the opportunity to learn about our efforts. In return, we can receive feedback from various angles on what types of products would be best to make. Through this process, I thought the range of possible products would expand and our technology would further improve.
Since revealing our research findings, we have been surprised by how many proposals we have received via social media and other avenues.
For example, we disclosed the research behind our fine fiber technology, in which superfine fibers are sprayed on the skin to create an ultra-thin membrane. We initially planned to apply the technology mainly to skin care, for purposes such as enhancing the moisturizing effect by spraying it on top of moisturizers already on the skin.
However, consumers and outside experts saw things from a different viewpoint. Many proposals have been related to the technology’s medical and cosmetic applications, including “It could help cover up blemishes or scars on the skin,” and “It could prevent bedridden people from developing bedsores.” We plan to utilize these ideas to conduct joint research with universities and other entities.
Some have said that making technology open to the public at the development stage advantages our competitors. But to stay ahead we simply have to level up our own capabilities. Changes cannot occur in society if no one chases a leading innovator.
Our corporate philosophy, called the “Kao Way,” is the foundation of our business. It includes our mission of “enriching people’s lives” and pursuing the basic values of “Yoki-Monozukuri,” meaning excellence in developing and manufacturing products.
I want to uphold this spirit that has been passed down since the company’s foundation, and continue to be an asset to society through our business.
■ Michitaka Sawada / President of Kao Corporation
Born in Osaka Prefecture in 1955, Sawada joined the company after receiving a master’s degree in engineering from Osaka University in 1981. He has assumed various positions at the company, including manager of the material development research lab and vice president of the sanitary products research lab. Sawada took up his current post in June 2012.
■ Key Numbers
According to the consolidated financial results for the fiscal year ended December 2018, operating income was ¥207.7 billion, a record high for the sixth consecutive fiscal year, and net sales were ¥1,508 billion. Dividends also increased for the 29th consecutive fiscal year. The consolidated number of employees was 33,664 as of December last year. The company was founded in 1887.