2
Chapter

Growth Strategy Centered on theConsulting & Cloud BusinessMessage from the President

15

Medium-Term Growth Strategy

16

Perception of the Operating Environment

17Competitive Advantages

18

Growth Potential

19

Approach to Growth20

Increasing Recurring Revenue

21

Increasing One-Time Revenue per Customer

22

Message from the Director in Charge of theOrganizational Development Division
Close-Up: Motivation Engineering as Used in theConsulting & Cloud Business

23
24

Growth Strategy Centered on the Consulting & Cloud Business15

Message from the President

We are allocating management
capital to the Consulting &Cloud Business to fulfill our
mission.
Sakashita Hideki

I have been involved in organizational and personnel consulting since
Link and Motivation was founded, and I feel that this field is on the vergeof an unprecedented wave of change. Momentum for the promotion ofhuman capital management is also increasing as disclosure of humancapital information in securities reports becomes mandatory, among
other factors. It is clear to me that companies will be forced to makefundamental changes.
Specifically, it is becoming progressively harder for a company to remain
the choice of its employees and job applicants. This is the result ofintensifying competition for capable human resources due to factors
including a decline in the working population, a business shift fromproducts to services, diversifying motivation toward work, and technologicaladvances in AI. As a prerequisite for sustainably creating value, companies
must make a meaningful effort to confront two issues—improving humanUnder these circumstances, our current policy is to focus on the
Organizational Development Division’s Consulting & Cloud Business,
which has high growth potential. The number of companies the Consulting &Cloud Business supports has grown to approximately 1,500 in Japan, but
considering that some 100,000 domestic companies have 50 or more
employees, we see ample room for further expansion. The preeminence of
the Link and Motivation Group’s Consulting & Cloud Business stems fromits ability to provide comprehensive support for human capitalmanagement throughout a cycle of identifying issues through diagnosis,
transformation of those issues, and disclosure of the results of thetransformation—all based on our core Motivation Engineering technology
and vast amount of accumulated data and insights. Through support for
the transformation of major domestic companies, our initial target, wewant to play a role in returning Japan to its position as a global leader. We
will also offer value worldwide by working to introduce our services at theoverseas subsidiaries of global Japanese corporations, starting in Asia,
where a rollout is already underway.
Finally, to bring about these changes, the Link and Motivation Group
must demonstrate its own leadership in human capital management. We
will continue to practice what we preach in order to capitalize on thecurrent advantageous conditions and achieve dramatic growth.

Chapter 2

A Time of Fundamental Corporate Change Driven bya Changing Labor Market

A Thorough Focus on the Consulting & Cloud Business,
Our Growth Driver

IR BOOK 2023

President and Representative Director
Link and Motivation Inc.

resource capabilities so that current employees can perform at their best,and improving engagement to retain and acquire human resources. When
talking with senior management of leading companies, I find that many now
consider human resources to be a core management issue, which is a dramaticdifference from when Link and Motivation was founded.

16

Growth Strategy Centered on the Consulting & Cloud BusinessMedium-Term Growth Strategy

We are currently focusing on the Organizational Development Division’s Consulting & CloudBusiness, which has high growth potential, and working to expand the Motivation Cloud
series as the foundation for substantial ongoing growth.

2024 Forecast
Organizational Development Division

Consulting & Cloud Business
IR Support Business

Career School Business
Cram School Business

Revenues¥15.0

Gross Profit

billion+16.4% YoY¥10.6

Monthly Fee Revenue

billion+17.3% YoY¥530

million+24.0% YoY

Progress toward Target

Matching Division
ALT Placement Business
Personnel Placement Business

Consulting & Cloud Business Outstanding Orders*(¥ million)

12,000

9,000

6,000

3,000
0

2023
and
after

2022

2024
and
after

2025
and
after

Orders already obtained for2024 projects

Approx.
2023

2024

Dec. 31, 2021 Dec. 31, 2022 Dec. 31, 2023

¥7.0 billion(Approx. +16% YoY)
* Total amount of orders for future projects obtained at a given
point in time. Figures in the graph indicate the timing of delivery.

Chapter 2

Individual
Development
Division

IR BOOK 2023

Organizational
Development
Division

Motivation Cloud Series

17

Growth Strategy Centered on the Consulting & Cloud Business

Perception of the Operating Environment

Remaining the choice of employees and job applicants has been increasing in importance anddifficulty for companies, and this trend will continue to accelerate.

Changes in the Operating Environment
Since the 1990s

Since 2020

Growing momentum forhuman capital management(business shift fromproducts to services)

Diversification ofwork motivation

A management approach thatviews human resources as capitaland maximizes their value toimprove corporate value overthe medium to long term

Improving human resource
capabilities
An issue for ensuring thatcurrent employees canperform at their best

Chapter 2(decrease in working
population)

IR BOOK 2023

Changes indemographics

Changes inindustrial structure

Organizational Issues for Companies
Going Forward

Intensifying competition forcapable human resources amid
advances in AI technology

Improving engagement
An issue for retaining andacquiring human resources

18

Growth Strategy Centered on the Consulting & Cloud Business

Competitive Advantages

We demonstrate our superiority in providing comprehensive support for corporate humancapital management through diagnosis, transformation and disclosure based on Motivation
Engineering, the core technology we have cultivated since our founding.
Diagnosis
Rather than simple measurement, we provide a
precise diagnosis of engagement for transformation.
IR BOOK 2023

One of Japan’s largest databases

4.03
11,360Approx.

million respondents incorporate diagnoses

Disclosure
Rather than simply announcing information, we
support enhanced disclosure based on diagnosis
and transformation.

Number of companies that disclose
Motivation Cloud diagnosis results
Reportproduction

Streaming
video

Comprehensive
support for humancapitalmanagement

Chapter 2(As of December 31, 2023)

Transformation
Rather than stand-alone support for training andrecruiting, we provide one-stop
organizational HR consulting.

Recruiting

Training

116

Number of companies supported
during the year
Approx.

880(As of December 31, 2023)(As of December 31, 2023)
Systems

Corporate
Culture19

Growth Strategy Centered on the Consulting & Cloud Business

Growth Potential

We are working to expand sales by focusing on major domestic companies that have substantial
room for development. We will also roll out Motivation Cloud in Asia with a view toward global
expansion.

Rollout of Motivation Cloudin Asia has already begun,
starting at local subsidiaries
of Japanese companies inThailand and Vietnam.

VietnamNumber of corporate
customers of theConsulting & CloudBusiness in 2023
Approx. 1,500* Determined based on 2021 Economic Census for Business Activity from the Ministry of Internal Affairs and Communications and the Ministry of Economy, Trade and Industry

Chapter 2

ThailandIR BOOK 2023

Number of domestic
companies with 50 or more
employees*
Approx. 100,000

20Growth Strategy Centered on the Consulting & Cloud BusinessApproach to Growth

By increasing revenue per customer and the number of customers for the Motivation Cloud
series, we aim for growth in recurring (subscription) revenue by continuously providing
products and services premised on long-term use.

Recurring revenue
Number of recurring
revenue customers(1) Increase ratio of major companies with high revenue
per customer(2) Increase cross-selling of Stretch Cloud(3) Diversify earnings through M&As

Focus on sales of Motivation Cloud series

Current cross-selling ratio
Approx. 30%

One-time revenue
Consulting services providing
focused transformation as required
based on diagnosis results

One-time revenue per
customer

Number of one-timerevenue customers

Increase revenue per customer bydeepening customer relationships

See here for more details on Stretch Cloud (Japanese Only)

Chapter 2

Recurring revenue per
customer

IR BOOK 2023

Cloud services providing regulardiagnosis and transformation at the
optimal frequency for each company

21

Growth Strategy Centered on the Consulting & Cloud Business

Increasing Recurring Revenue

In addition to introducing our services at major companies, we will ramp up growth in recurring
revenue by cross-selling Stretch Cloud and diversifying earnings through M&As.

(¥ million)(%)

Recurring Revenue in Consulting & Cloud Business

50

6,000

40

30

Chapter 2

4,459

IR BOOK 2023

5,000

4,000
3,458
3,000

2,696
2,310

20

1,933

2,000
2016 2Q
Began offering
Motivation Cloud

1,184

10

1,000
522
142
0

2016

2017

2018

Recurring revenue (¥1 million or more per customer) (left scale)

2019

2020

2021

2022

2023

Recurring revenue (less than ¥1 million per customer) (left scale)2024(Forecast)0Percentage of total revenues (right scale)

22

Growth Strategy Centered on the Consulting & Cloud Business

Increasing One-Time Revenue per Customer

As business issues become more complex, demand is rapidly increasing for comprehensive support
for organizational and personnel issues. We develop numerous top consultants by leveraging theknowledge we have cultivated since our founding.
Evolution of
governance

Ensuring diverse
work styles andworkforce

Trends insustainability
management

Increasingly Complex Issues

LINK

Organizational
Strategy

Chapter 2

Business
Strategy

As business issues become more complex,
comprehensive human capital management
becomes essential.

We develop numerous top consultants who resolve complex
organizational and personnel issues.

Recruiting•S trengthen recruiting of humanresources with high aptitude for
consulting•M aintain and increase sympathy
with our philosophy

Training• Add new employee training programsfor rapid development of consultants

Systems• Improve compensation for consulting
specialists

IR BOOK 2023

Promotion ofdigitaltransformation(DX)

Technologicalinnovation

Corporate Culture• Introduce a new award system for
projects that demonstrate themost value for customers during
the year23

Growth Strategy Centered on the Consulting & Cloud BusinessMessage from the Director in Charge of the Organizational Development Division

We are leading society bybringing Japan up to speed
in the organizational andpersonnel sector.
Kawauchi Masanao
Managing Director
Link and Motivation Inc.

Driving the Future of Link and Motivation
Motivation Cloud has grown steadily since its launch in 2016 as Japan’s firstcloud-based service for organizational improvement. However, Japan is thought
to lag 10 years behind the United States in the HR Tech field. We must establish
a greater presence as a pioneer in organizational and personnel consulting,and I strongly feel that employees of my generation must be the ones to lead
Link and Motivation in doing so. While treasuring our accomplishments, we willcontinue taking on new challenges as the drivers of further growth with thedetermination to change the world.

Chapter 2

I joined Link and Motivation in 2003 after graduating from university. At thetime, in Japan the word “motivation” was only heard in the field of sports, but
now it is common in corporate management, and the idea that the power ofpeople and organizations is the most important aspect of corporate management
has taken hold throughout society. I take pride in Link and Motivation’s contribution
to this social trend. At the same time, I feel somewhat disconcerted because
we have not yet been able to fundamentally change society at large. Over the
past 20 years, waves of change have swept through the field of human resources
in Japan, bringing in performance-based pay and work style reform. In eachcase, broadly speaking, Japanese companies have struggled to adapt. They
merely copied or applied superficial elements, ignoring the essence of theirobjectives and reasons for changing, and as a result have not truly changed.
No matter how many new technologies and ideas emerge, it is up to people
and organizations to incorporate and utilize them. Now that changes morewidespread and rapid-fire than ever before are bearing down on Japanesecompanies, will their people and organizations be able to change? I feel asense of urgency and responsibility for Japan as it stands at a crossroads.

Link and Motivation’s Consulting & Cloud Business has been growing steadily
by addressing these changes in the operating environment. However, considering
the world we aim to create and the expectations of the market, I believe wemust grow at a faster pace. The Consulting & Cloud Business generates two
types of earnings: recurring revenue, mainly from cloud services that provide
regular diagnosis and transformation at the optimal frequency for eachcompany; and one-time revenue from consulting services that provide focusedtransformation solutions when the diagnosis results uncover issues that cannot
be resolved through the cloud service. Increasing recurring revenue is apressing matter, both to provide ongoing support for resolving corporate
organizational issues, and to reinforce the foundation for achieving substantial
growth. In addition to broadening support for and increasing the number ofcustomers for our services, we will focus on improving total revenue per
customer by increasing the ratio of major companies (with high revenue per
customer), conducting cross-selling among our cloud-based services, anddiversifying earnings through M&As.

IR BOOK 2023

A Sense of Urgency and Responsibility to Adapt Corporate
Management to a Rapidly Changing World

Increasing Recurring Revenue to Maintain Substantial Growth24

Growth Strategy Centered on the Consulting & Cloud Business

Close-Up: Motivation Engineering in the Consulting & Cloud Business
Since our founding, we have developed a wide range of products and services based on academic findings in our Consulting & Cloud Business.
For example, even individual programs used in training are developed with a thorough grounding in academic findings to support a real transformation for customers. In this way, thehigh levels of practicality and reproducibility lead to a high repeat rate.

Humans are not completely driven by economic rationality.
They are emotional beings with limits to their rationality.

An organization is a cooperative system that is not reducible toits constituent elements.

Because people are emotional beings, it is important to take a
step to “unfreeze” them rather than forcing a sudden change.

As it is a collaborative system, problems tend to arise in thegaps between people, such as misunderstandings between
departments. It is important for managers to play the role ofa “junction point” connecting departments.

Example: First part of management training

Example: 360-degree manager survey

Blind Square
All members other than the instructor
are blindfolded and do not knowwhat to do. The instructor then gives
directions to the members so thatthey form a single shape using a rope.

• Facilitates understanding of the different
positions of managers who have objectives,
methods and information, and members
who do not• Hands-on experience that demonstrates
members’ motivation decreases when they
do not know their objective

Psychologist Kurt Lewin: Three-stage model of attitude change
Unfreeze Change Refreeze

360-degree Survey
Supervisors and team members rate
their levels of expectation andsatisfaction for four items requiredof managers: providing information,gathering information, making
decisions, and providing support.

• To visualize the level of relationships oftrust, everyone takes the survey (a coworker version or a supervisor version).
• Items are positioned as points on theupper, lower, left, and right sections of
two axes.
• Co-workers and supervisors attend ameeting to share results

Sociologist Niklas Luhmann: The ultimate function of social systems is
to reduce complexity and build relationships of trust. (paraphrasing)

Chapter 2

Perspective of Organizations

IR BOOK 2023

Perspective of Humans

25

Growth Strategy Centered on the Consulting & Cloud Business

Close-Up: Practicality and Reproducibility of Motivation Engineering in the Consulting & Cloud Business
The Consulting & Cloud Business provides support to approximately 1,500 companies in Japan (as of December 31, 2023), and has received positive feedback from many customers for
its practicality.
We continue working to increase practicality and reproducibility through technological development by the Motivation Engineering Institute.

Corroboration of Practicality

Customer Feedback

Initiatives to Increase Practicality and Reproducibility

Motivation Engineering Institute

In addition to consulting on the indicators we use in disclosure, Link and Motivation also helped us set up
core measures and KPIs, looking ahead to implementation and improvements after disclosure. In short, it
was everything we needed.

Thanks to the support Link and Motivation provided for disclosure in our medium-term management plan,
our price-to-book ratio rose above 1.0. We also received practical support for improving the indicators we
disclosed in areas including revising our personnel system, strengthening management and devising recruiting
strategies, so we are very grateful.

shown to be effective.

Human
We are actively involved in popularizing
Motivation Engineering through methods
resource
development including study sessions held by Chairman Ozasa.
We collaborate with industry, government andTechnology
academia to develop management technologies
development based on Motivation Engineering and to conduct
research studies.

Representative Research2024 Award Winners
Major Companies Category
1st place: SBC Medical Group
Holdings, Inc.
2nd place: Marubeni Corporation

3rd place: T he San-in Godo Bank, Ltd.
The Best Motivation Company Awards are an
event that recognizes companies with highengagement scores. Since we inaugurated theevent in 2011, numerous companies have won
Medium-sized Companies/Startups
awards, demonstrating that they have used「our要素還元論ではなく関係論を前提にすると、5人のチームではなく、10本の関係性のある集団」
Category
services to transform their organizations. Theyという視点が得られます。
組織に向き合う際に「問題は“人”ではなく“間”にあり」という効果的な見also use the award in branding
when conducting
1st place: KOSHO CORPORATION
human
capitalmanagement,
and
we
share
the
方もこのような背景から導かれています。
リンクアンドモチベーショングルー
2nd place: PROGRITプが、Inc. 組織問題の解決
initiatives of award-winning companies in helping
3rd
place:
NorthSand,
Inc.
に
「コミ
ュニケーション」「信頼醸成」などの重要性を啓蒙しているのはこのためです。
to build
organizationsやat other participatingcompanies.

Results of Research on Engagement
and Corporate Performance

Results of Research on Engagement
and Investment Metrics

Joint research with the Iwamoto Laboratory at
Keio University’s Graduate School of Business
Administration showed that the higher acompany’s level of engagement, the higher its
labor productivity and operating margin. These
results are also published in the Report of theStudy Group on Improvement of Sustainable
Corporate Value and Human Capital (known as
the Ito Report for Human Capital Management).

We found that companies with higher engagementscores tend to perform better in terms of the investment
metrics ROE, ROIC and PBR.

Engagement Score (ES) and Operating Margin

Engagement Score (ES) and ROE

Operating Margin

ROE
40%

40%

30%

r＝0.45***

20%

20%

10%
0%

0%
Score
Line of best fit

-20%
30

40

50

60

70

80 ES

Score
Line of best fit

-10%
-20%

35

45

55

65

75 ES

**：p＜0.01 ***：p＜0.001

Source: Link and Motivation Inc., Research Results on Engagement and Corporate Performance and Research Results on the Relationshipbetween Employee Engagement and Investment Metrics

Chapter 2

Best Motivation Company Awards

We focus on developing unique solutions, andProduct
provide customers with new products anddevelopment services that have been tested in-house and

IR BOOK 2023

There really wasn’t any other company in our industry that explained its businesses and organizations fromthe perspective of its corporate philosophy to the extent we did, so I think Link and Motivation helped us
communicate our uniqueness. The experience also served as a reference for how we formulate our policies
for developing human resources and make in-house improvements to our securities report.

The Motivation Engineering Institute develops
management technologies, products and services
through advances in Motivation Engineering,and continues to seek out and deepen insights
by combining academic findings with praxis,
both inside and outside the Company. Our
total commitment to practicality and reproducibility
in product development means that we provide
customers with only those products and services
that have been applied in-house and shown tobe effective.