The Hitachi Group Value Creation Story

Value Creation Process
Comprehension of Issues and Trends
Global trends

Social issues
Climate change
Issues concerning energy, water andother natural resources
Population growth and urbanization
Aging infrastructure
Cybersecurity

Input

P.24

Customer issues

Accelerating digitalization
Appearance of geopolitical risks due to the globalization ofpolitics and the economy
Paradigm shifts (shifting from possession to sharing, fromobjects to things and from closed to open strategies)

Safety and security
Reduction of energy consumption
Response to diversifying consumerneedsImprovement of productivity

Comprehend social issues and global trends while identifying
customer issues through collaboration with those same customers

Human capital• Strengthen front-line and digital talents• Promote diversity• Establish a globally unified evaluation standard
and training system for the development of
human resources• Consolidated number of employees (numberof overseas employees):
295,000 (133,000)

Intellectual capital• An IoT platform (Lumada) with morethan 100 years’ worth of operational
technology (OT) and more than 50 years’
worth of information technology (IT), andaccumulated know-how• Open innovation industry-academia-government
cooperation• R&D investment: ¥323.1 billion

Manufacturing capital• Lead time reduction by enhancement ofsupply chain management

Diverse partners(open innovation)

Extract widely applicable industrial andAccumulation of Lumada
OTIT

Operational technology with a trackrecord of more than 100 years

Information technology withmore than 50 years of history

Source of value (competitive ad
Social capital• Establishment of NEXPERIENCE, acollaborative creation process• Enhance disclosure of information to investors• CSR audits of suppliers• Improve dialogue between management andemployees

Natural capital

Lumada platform (system for converting data into value)

Capital Allocation Strategy

Financial and Capital
Strategy

P.34

Accelerate Innovation

P.36• Total energy input (crude oil equivalent): 2.27 GL• Raw material input: 4,403 kt• Total water input: 37.02 million m3

P.38

Sustainable growth strate

Financial capitalAt the start of the 2018 Mid-term Management
Plan (April 1, 2016)• Total Hitachi, Ltd., stockholders’ equity:¥2,735.0 billion• Total Hitachi, Ltd. stockholders’ equity ratio:
21.8%• Free cash flows: ¥81.4 billion

22Hitachi Integrated Report 2019

Risk and Opportunity Management

P.65

Information Security

P.68

Standards onOccupational Safety

P.70

Foundations supporting sustainableVision: Improving the Quality of People’s Lives,
Raising Customers’ Corporate Value and Achieving a Sustainable Society
Social value

Environmental value
Healthy lives and a safe,
secure, comfortable andefficient society

Economic value
Redistribution of added
economic value tostakeholders

High-quality andenvironmentallyconscious manufacturing
Reduction ofenvironmental burdenthrough the value chain

Simultaneously improve three types of customer value through five solutions

Output/ OutcomesP.24(as of end-FY2018)

Human capital• Ratio of female executive and corporate
officers: 5%• Ratio of non-Japanese executive andcorporate officers: 8.8%
• Number of female managers: 635(Hitachi, Ltd.)Intellectual capital• Number of Lumada customer cases:
over 650

Platform expansion

Manufacturing capitalbusiness expertise• Lead time reduction 20% from order
receiving to shipment for large industrial
products. (Compared with FY2016)

customer casesProducts

Social capital

We have developed andmanufactured products with ourown technology since our foundingvantage)

Value Creation Story• Number of meetings with institutional
investors and analysts: 550• Number of town hall meetings: 20• Number of suppliers who received CSR
audits: 24

P.26

Innovation ecosystems that constantly
create groundbreaking new value

Accumulation ofdiverse industrial andbusiness expertise
Environmental Vision and theDecarbonization Business

P.46

Strengthen Lumada

P.48

gies

Natural capital• Reduction in CO2 emissions through improved
environmental performance of products andservices: 34% compared with FY2010• Reduction in energy use per unit: 14%compared with FY2005• Reduction in water use per unit: 34%
compared with FY2005• Reduction in waste and valuables generation
per unit: 16% compared with FY2005

Goals to which we contribute through our business strategies

Financial capital
Engaging in Responsible
Procurement

P.71

Compliance

P.73

Corporate
Governance

P.18 P.78

growthGoals to which we contribute through all of our corporate activities• Total Hitachi, Ltd. stockholders’ equity:¥3,262.6 billion• Total Hitachi, Ltd. stockholders’ equity ratio:33.9%• Free cash flows: ¥447.1 billion• TSR* over past 10 years: 209.6%* Total Shareholder Return: Return obtained from stock investments over a certain period oftime; calculated as dividends+capital gains÷share price23