Where We Are Going

CEO Message

Dynamic Hitachi

sophisticated and intelligent social infrastructure through theecosystem with partners around the world and working touse of digital technology and providing it to the public. As aconstruct digital infrastructure at major global sites. In April

leading company advancing the digital transformation (DX) of

2019, we established “Kyōso-no-Mori,” a new researchsocial infrastructure, Hitachi aims to help raise the quality of

initiative for a generation of innovation within our Central

life (QoL) for people throughout the world and increase the

Research Laboratory. Furthermore, in January 2020, weSocial Innovation Businessvalue of its globally expanding client companies.

launched Hitachi Vantara, which will lead the development of

Digital technology is at the core of our Social Innovation

digital solutions on a global scale.

Despite COVID-19

Business; to enhance it, Hitachi is building an innovation

Continues to Accelerate its

Construction of a Globally Competitive Business Portfolio

First, I would like to express my deepest sympathies to those suffering from COVID-19,
as well as their families and other affected individuals. At the same time, please allow
me to express my condolences to those whose family members have passed away due
to this tragic disease. Furthermore, I would like to share my deep gratitude to everyone
working to prevent the spread of COVID-19 and maintain social function.
Toshiaki Higashihara
President & CEO

To simultaneously increase social, environmental andOverall, in fiscal 2019, we strengthened our North American

economic value, our 2021 Mid-term Management Planbusiness through measures such as our acquisition ofidentifies five business sectors that underpin our Social

JR Automation, a leading company in the U.S. robotic

Innovation Business (IT, Energy, Industry, Mobility and Smartsystems integration (SI) business. we made progress toward

Life). Under this plan, we are building a globally competitive

our goal of constructing a globally competitive businessbusiness portfolio. We assess our global competitivenessportfolio through tactics such as our decision to transfer

based on whether our businesses can secure a leading

our diagnostic imaging-related businesses to FUJIFILM

market position. One major move we have made to secure

Corporation. In December 2019, we reached a settlementa larger market share in the automotive systems industry

with Mitsubishi Heavy Industries, Ltd., regarding a South

specifically is the merger between Hitachi Automotive

African boiler construction project that was being handled

Systems, Ltd., and Keihin Corporation, Showa Corporation

by Mitsubishi Power, Ltd. (formerly Mitsubishi Hitachi Powerand Nissin Kogyo Co., Ltd., which are affiliates of Honda

Systems, Ltd.). By reaching this settlement, we resolved aMotor Co., Ltd. The “electrification” of vehicles will be key

long-standing management issue and took a significant stepas the automotive systems industry responds to tightening

forward to accelerate the proactive management strategies

global environmental regulations. This merger will enablepreviously mentioned.

us to secure a top share of the global market for core parts

Progress During the First Year of the 2021 Mid-term Management Plan

used in electrification technology while also helping generateenvironmental value.

In fiscal 2019, Hitachi achieved an adjusted operating

and proud that, through continuous adaptation, we haveincome ratio of 7.5% despite the impact of COVID-19. We

successfully achieved a V-shaped recovery since fiscal 2008

achieved this result thanks to the success of profitability

and constructed a solid and unwavering earnings base in the

improvement measures implemented under our 2018 Mid-face of COVID-19.

We revised the capital policies of our group companies based

subsidiary in May 2020, and I believe that Hitachi High-Tech’s

on considerations for how to reorganize listed subsidiaries

measurement and analysis technologies are the best in theto compete on a global scale. Our general philosophy wasworld. We anticipate that our acquisition of Hitachi High-Tech

Co-Creation with Customers and Partners Around the World Enhances
Digital Infrastructurethat the subsidiaries capable of competing on a global scale

will enable us to identify further synergies among our fiveshould be retained within the Group, whereas those that werebusiness sectors; for example, promoting highly competitive

not should pursue their own growth. After conducting reviews

clinical chemistry and automatic immunodiagnostic analyzers

In last year’s Integrated Report, Hitachi shared its aim to“social innovation” was coined by Hitachi and refers to bothof our subsidiary companies, we transferred Hitachi Chemical

through our partnership with Roche Diagnostics and retaining

become a global leader in the Social Innovation Businessthe transformation of social and industrial infrastructureCo., Ltd., to Showa Denko K.K. in April 2020. Meanwhile, wedata related to semiconductor manufacturing.

through its 2021 Mid-term Management Plan. The term

– such as railway, energy and water facilities – into moreconverted Hitachi High-Tech Corporation into a wholly owned

term Management Plan. Hitachi is immensely confident

10

Realigning Group Companies

Hitachi Integrated Report 202011

Where We Are Going

CEO Message

Thoughts on COVID-19, Employees and Future Management

COVID-19 Has Highlighted a High Level of Employee

Deep Gratitude Toward Employees

Awareness Regarding Contributions to Society

The first action Hitachi took when COVID-19 began in thesafety of employees for whom shifting to remote work is

world, was to establish an on-site emergency headquarters

difficult, including staff working on the front lines at medical

on January 27, 2020, to protect employees. We also

institutions, employees responsible for on-site system

donated computed tomography equipment to speed up

support and maintenance, and personnel who commute

medical examinations, with the aim of containing the virus’s

to workplaces to maintain administrative functions, suchspread in China. In February, we established a system

as expense processing and payment of salaries and otherin Japan that prioritizes the health of employees andobligations. I am deeply grateful for their ongoing daily

their families, our customers and our business partners,

commitment to safety measures as they bravely continue toprimarily by encouraging a work from home (remote work)

perform their work.

model whenever possible. I am concerned about the

Job Satisfaction Reforms Will Resultin Major Changes at Hitachi
Incidentally, I do not believe that these changes andopportunities will come from other people; rather, I believethat positive, large-scale results will only be achieved once wehave proactively seized upon relevant opportunities. In timesof crises, such as current COVID-19, I consider it importantto frequently converse with employees, and I have been
sending messages to employees nearly every week since
March. Employees have proactively shared their thoughts
with me in response. Many of these replies contained positive

12

Our Ability to Respond to Change Will Strengthen Our Company

messages, such as, “I feel like this is the time to make aarea. At the time, transportation management for many rail lines

Now is the Time to Implement Cash-Positive Management and Adjust Our
Policies to Prepare for a “New Normal”

positive contribution to the world” and, “I anticipate that thiswas still conducted by directors and station staff, who manually

pandemic will lead to a variety of new ideas.” Our “Challenge

operated signal lamps and communicated using telephones.

to COVID-19” competition, which leverages submissions from

The main goal behind the adoption of the ATOS was to improve

COVID-19 has brought to light a number of large-scale social

involvement or intervention. These popular technologies

our “Make a Difference!” internal idea contest, has generated

passenger service by increasing the efficiency of transportation

issues, including income inequality and hidden discrimination,

can help resolve issues brought about by COVID-19. Whilea variety of splendid ideas from around the world. We havemanagement operations and providing train operating conditions

as well as the challenges facing our own Company. In

promoting its Social Innovation Business, Hitachi has

implemented those ideas that were immediately applicablein real time. For several years, I was responsible for installation

terms of corporate business administration, companies

clarified issues and established procedures for finding theirand are sequentially reviewing other visionary proposals, withwork between the Kofu and Tokyo stations on the Chuo Line,that maintain a measurable cash surplus during times ofsolutions. I believe that applying these procedures will enable

the ultimate goal of adopting them for practical use. Against

and we encountered a series of problems at the beginning of thecrisis have fared better than those that, in accordance withpeople whose day-to-day routines have been impacted

the backdrop of COVID-19, many employees share mysystem’s launch. At the time, when train delays and other related

previous philosophies, are content with a minimal cashby COVID-19 to resume active lifestyles through new andperspective that the time is ripe to solve social issues throughproblems on the Chuo Line were announced on television, my

supply. In the short term, it is essential that we establish a

unconventional methods. I am also convinced that COVID-19

innovation and, by doing so, contribute to society at large.

family would apparently conclude that I would not be returningsolid cash management system that will not falter under any

will be a driving force for acceleration in the Social Innovation

Moreover, ideas from employees who are conscious of theirhome that day. Now, the ATOS facilitates smooth travel bycircumstances. To this end, Hitachi has secured liquidity ofBusiness.

connection to society and the importance of giving back aresupporting safe and stable train operation on a large-scale rail

¥1.3 trillion. My commitment to cash-positive management

Hitachi has always been able to adapt to surrounding

functioning as a driving force for Hitachi as a whole. Seeing

network that transports about 14 million passengers per day.

is not simply a product of the COVID-19 pandemic; we will

circumstances, but we will embrace agility and change eventhis trend unfold has been emotionally moving for me.

When working on this project, I drew a tremendous amount ofcontinue to strengthen our cash management strategy tofurther in response to the global shifts caused by COVID-19.

For Hitachi to become a true global leader, each employee must

motivation and job satisfaction from the fact that both my family

enable swift responses to a wide variety of future changes.

We will implement a business structure that is based on thebe aware of his or her personal connection to society, as well as

and I understood how my efforts contributed to the betterment

COVID-19 has caused massive changes in people’s lifestyles.

“New Normal” conditions resulting from the pandemic. In

the importance of social and environmental value. In addition,of society. Economic value is extremely important in terms of

I do not believe that the world ever completely returns to

addition, we will restructure the way our employees work

our employees must all become capable of perceiving social

management. However, employees might feel an overwhelming“normal” following a global event of this magnitude; however,while simultaneously striving to improve their productivity. To

and environmental issues as personally relevant. More relevant

amount of pressure if management overemphasizes a top-

this notion is not entirely negative. Changes are sometimes

achieve this goal, we will implement a remote work modelin this regard than “work-style reforms” are “job satisfaction

down approach when pursuing income targets. Our key todifficult but can also be viewed as opportunities, enabling us

as well as shift to job-based human resource management.

reforms.” To relay a personal story: in 1995, as a member ofresolving this issue is to expand businesses that promote

to accomplish things that were not previously possible.

Hitachi’s global employee base is growing, requiring the

Hitachi (since 1977), I became involved with work connectedsocial and economic value on a global scale, while integrating

Due to the spread of COVID-19, public focus has shifted

Company to clarify individual job descriptions. We currently

to the Autonomous decentralized Transport Operation control

and achieving balance between bottom-up approaches, suchto “remote,” “contactless” and “automation” – in otherplan to complete our shift to job-based human resource

System (ATOS), a transport management system adopted

as “Make a Difference!,” and top-down approaches. I believe

words, enabling processes to be conducted without humanmanagement by April 2021.

by East Japan Railway Company for the Tokyo metropolitan

that these efforts will make the Hitachi Group even stronger.

Hitachi Integrated Report 202013

Where We Are Going

CEO Message

The COVID-19 Pandemic Will Not Alter Our Investment Plans

Hitachi provides solutions in five sectors: IT, Energy,

maintenance in addition to supporting stable water supply

Accelerate the Social Innovation Business While Responding to Issues

Industry, Mobility and Smart Life. I believe that we canand reuse. Furthermore, we would conduct video analyses

contribute to the construction of smart cities by combining

aimed at gauging the number of park visitors on line andSome aspects of management have remained unchanged

have become particularly apparent. We’ve modified ourthe solutions we provide within these sectors. Let us

ensuring social distancing. One of Hitachi’s major goals

even during COVID-19, including our basic capital allocation

supply chain in response to Great East Japan Earthquake

examine an amusement park as a smaller-scale “smart

is to platformize solutions such as these so that it canpolicy. In the 2021 Mid-term Management Plan, weand tragic flooding in Thailand in 2011 and have establishedcity,” for example. We would provide stable energy andprovide customer value globally in each of the five sectors

projected total funds of ¥4 trillion–¥4.5 trillion and have madea backup system for our production lines, as a significant

mobility services that are essential for the park’s operation.

mentioned earlier.

no changes to our plan to use ¥2 trillion–¥2.5 trillion of thisnumber of our production processes are conducted across

We would collect data using sensors built into the park’s

total for growth investment and the remaining ¥2 trillion

international borders. There is still more to be done, however.

attractions, detect signs of failure and perform preventive

for shareholder return and capital expenditure. We have

We must focus on optimizing the Hitachi Group as a wholealready decided that ¥1.8 trillion of growth investment will

as we build a supply chain system capable of flexible

be allocated to the acquisition of ABB’s power grid business

response. It’s also important to stay abreast of evolving

and other projects. Meanwhile, we plan to use the remaining

geopolitical risks, such as the impact of Brexit and trade¥700 billion primarily to strengthen our front-line sales teamfriction between the United States and China.

Earlier, I mentioned that new needs around remote,our specific environments; AI should never be able toin the IT sector, predominantly through M&A. In terms of

As living environments change rapidly due to COVID-19,

contactless and automated solutions have arisen due toreplace our ability to make decisions about our lives. AI isshareholder returns, we have consistently raised dividends

Hitachi is encountering an increasing number of opportunities

the COVID-19 pandemic. Moving forward, we will likely

programming at its core, so providing ethical training forsince I assumed my position as CEO in 2016. Moving

to support its goal of creating social, environmental andsee growth in digital technology that provides solutions

engineers who create algorithms and other problem-solving

forward, we will look into conducting share buybacks while

economic value. Moving forward, COVID-19 will function

for the restraints and inconveniences placed on society

operations, as well as making adjustments from a legal

maintaining a stable dividend payout ratio.

as a major trigger, providing us with the impetus to further

due to the pandemic. Important in this regard is theperspective, will be important tasks moving forward.

The COVID-19 pandemic has brought many issues into theaccelerate our Social Innovation Business.

creation of “human-centric” societies. Smartphones, theWe must not forget the importance of a “human-centric”

Internet and other modern technologies have dramaticallyapproach when considering innovation generated throughchanged our lives, and the belief that AI will play a role in

AI. This approach supports the core policies of the Social

innovation moving forward has become common. However,

Innovation Business, through which Hitachi is promoting

COVID-19 has taught us that humans, not technology, areadaptation to the “New Normal” brought about byat the center of these changes. As humans, we determine

COVID-19.

spotlight. Operational risks associated with Hitachi’s factories

Development of the Social Innovation Business

Package a Multitude of Solutions Generated Through Hitachi’s IT, OT and
Products and Roll Them Out Globally

14

The Importance of Human-centric Innovationand shape our lifestyles based on the circumstances ofSince 2016, Hitachi has utilized Lumada as a digital platform

accumulated expertise on how customers use products,

for providing value to its customers and has established

namely concerning operational technology (OT). Since

frameworks for packaging individual solutions. In total,

1960, we have supplemented this expertise with knowledge

the Lumada platform has accumulated more than 1,000

and skills related to IT used in banking, industry and othercustomer cases. Our collaborative creation efforts in thefields. Hitachi’s status as a singular group possessing IT,

U.S. to improve the operating efficiency of trucks are an

OT and products expertise has afforded it a strength that

The ratio of Hitachi Group’s domestic and overseas employees

Once our employees, who come from diverse backgrounds,

illustrative example of our use of Lumada. These efforts

other companies do not have and has led to solutions forhas shifted due to strategic decisions made to establish ahave shared their opinions and held thorough discussions

have resulted in a mechanism that utilizes Lumada to collecta variety of issues. To share an example from our railways

more global business foundation, such as the acquisition

on a matter, they unite toward a common set of objectives.

data on automotive parts and other important factors

systems business: we delivered train cars and an unmannedof ABB’s power grid business. Traditionally, the value of a

Because we find ourselves in uncertain times, I think it isusing sensors built into trucks, detect signs of failure andoperation control system to Denmark’s Copenhagen Metro,company has been determined primarily based on quantitative

important that we return to Hitachi’s mission and values inrecommend maintenance before breakdowns occur. I believe

but also endeavored to make the system more convenient

factors, such as ROE. However, as we endeavor to fully

pursuit of achieving a unified “One Hitachi.” To truly achievethat only Hitachi, with its practical knowledge of devices andby installing sensors on station platforms and field testing aestablish our Social Innovation Business, we have come tothe “One Hitachi” vision, we must sympathize with the venture-equipment, can create and leverage solutions like these.

solution that automatically adjusts train schedules based on

believe in the relevance of qualitative value; in particular, we

company spirit through which founder Namihei Odaira and

Hitachi has been manufacturing for 110 years and has

the number of people waiting on platforms.

regard the value of human resource as extremely important.

several engineers created Hitachi in 1910 and strive to achieve

Hitachi Integrated Report 2020

Human Resource Development and Revolutionary Changes to Mindsets

The Hitachi Group is Driven by its Founding Venture Spirit and an Empathetic
Mindset15

Where We Are Going

CEO Message

unity based on the sharing and practical implementation of

To put it another way, empathy enables one to understandthis founding spirit.

the feelings of others; this fosters a win-win mindset. I believe

Hitachi currently has about 300,000 employees. I believethat this is precisely the frame of mind that the front-line sales

that the value of our human resource will greatly increaseteam promoting our Social Innovation Business should have.

if they are able to view social issues and the interests of

Sharing happiness does not cause it to dwindle, but rather

others, including our customers, as personal interests.

to grow. As we move forward, we will focus on developing

People often pursue endeavors that are in their own self-

human capital who are capable of perceiving social issues

interest; however, it is critical to consider the interests andas personally relevant, passionately involving others andneeds of others as well. When our employees balance theirdeveloping shared mindsets focused on achieving common

own interests with a desire to help others, we elevate totargets.

demonstrating empathy.

Opportunities for Hitachi to Continue to Grow

Social and Environmental Value Through the Social Innovation Business
As Hitachi strives to simultaneously increase social,

Japan is far behind the rest of the world in terms of digitizing

environmental and economic value, I feel as if these issues

its public infrastructure. Along with other entities active

have grown in importance to our investors. In recent years,

in industrial circles, we are addressing this problem byclimate change in particular has become an urgent issue fordiscussing data architecture with the government. I believe

humanity.

that Hitachi, which is promoting the digital transformation ofWith the aim of increasing environmental value, Hitachi hassocial infrastructure, is uniquely equipped to provide many

declared that it will achieve carbon-neutral production bysolutions to these issues.

fiscal 2030. In January 2020, our Omika Works becameSocial infrastructure, including power grids and railways,

the first factory operated by a Japanese company tois also aging in North America and requires thoroughbe listed in the World Economic Forum Lighthouse as ainspection. In Europe, infrastructure must be assessed in“most advanced factory.” We will make our CO2 reduction

accordance with environmental policies.

initiatives, particularly those applied during the manufacturing
stage, more visible to customers, which will lead to

All of Hitachi’s global employees have dedicated themselves

subsequent environmental solutions. As soon as possible, I

to the advancement of the Social Innovation Business bywould like to transform Hitachi into an environmental leader

considering social issues personally relevant. Moving forward,

in our industry.

Hitachi will continue to adapt to surrounding circumstances

Large-scale natural disasters are occurring more frequently

as it implements efforts around the world aimed at improvingaround the world due primarily to climate change. Japan

people’s QoL and raising value for client companies. I humbly

is no exception; this year, it is facing many cases of

ask for your continued support as we move forward.

unexpected and abnormal weather. Circumstances likethese underscore the urgent need for maintenance on aging
social infrastructure. In response to the increased frequency

Toshiaki Higashiharaof natural disasters, we will be required to update andPresident & CEO

tighten safety standards for infrastructure and equipment.
The COVID-19 pandemic has also revealed that, overall,

16

September 2020

Hitachi Integrated Report 2020