Chapter 2

Growth Strategy

2022–2024 Medium-Term Business Plan

Status of Medium-Term Business Plan and Progress
toward Associated Targets

Fiscal 2022 progress summaries
for each strategy

Fiscal 2022–2024
Executing our growth strategy and strengthening our businessbase with the aim of realizing our new philosophy system

Introduction

In 2022, the Net One Group launched a Medium-Term Business Plan that focuses on fully implementing its
corporate philosophy system and its shift toward services. As we carry out this plan, we will reinforce ourbusiness base to facilitate the transition into our next phase of growth while steadily undertaking measuresin association with all plan strategies and tracking progress using management indicators and KPIs.

Achieved steady growth in all three of the focus areas we establishedwith the objective of solving social challenges(shift toward services)

Business strategy¥30.0 billion

Fiscal 2022 result:¥7.2 billion

Smart manufacturing

Digitalization of social infrastructure to realize Society 5.0

Digital government

Fiscal 2022

Fiscal 2022

Fiscal 2022

P.33

Growth strategy
Business strategy

Service strategy

Financial strategy

Reinforcement of the business baseThoroughvisualization

Personnel strategy

Corporate
culture reforms

Bookings¥4.3

Growthstrategy

billionRevenue¥2.0

billionBookings¥3.5

billionRevenue¥1.7

billionBookings¥10.5

Revenuebillion¥3.5

billionGrowth Strategy

Concept and strategy

Fiscal 2024 target:

Value Creation

Revenue from social issue-solving solutions

In accordance with our redefined corporate philosophy
system, we aim to further enhance our corporate value andachieve sustainable growth by implementing growth strategies
and reinforcing our business base to support these strategies

Expanded business scope by providing new value and standardization

Social responsibility

Service strategy

Sustainability

P.34

Facilitated our shift toward services in accordance with a network-based approach(share of revenue generated through services: 44.5% in fiscal 2021 → 45.2% in fiscal 2022)●●

Established systems to support the comprehensive delivery of services
Promoted standardization to clear a path for the generation of new value(figures in parentheses indicate fiscal 2024 targets)

Financial strategy
ROE

Service ratio%+0.7 points YoY+4.3 points YoY■ Revenue (million yen)
■ Operating income (million yen)
● Operating margin (%)

209,680

Personnel strategy
P.37

220,000

226,000

12.0

Reinforcement of
the business baseThoroughvisualization
P.33

Revamped our personnel system to facilitate the implementation of management
strategies and corporate value growth●

Promoted the development of professional personnel

Conducted visualization-related initiatives in pursuit of business base reinforcement
while implementing a company-wide strategy of digital reforms to enable prompt
and appropriate decision-making●●

Established data infrastructure consistent with our KPI logic tree to achieve our ROE target
Continued focusing on reforms targeting improvements in data resolution and literacy

11.2
Corporate
culture reforms

9.8

2022
net one report 2023

24,60027,1002023

2024(Targets)(Targets)

Socialresponsibility

Sustainability
P.37

Fostered our corporate culture by disseminating our corporate philosophy system●●

Transitioned into the “appreciation” phase by ensuring understanding and widespread acceptanceRaised awareness regarding compliance and observed more active use of our whistleblower system

Business Segments

P.38

20,63529

20.1 （20.0%)%

Formulated a capital allocation policy to expedite the achievement of an ongoing cycle of corporate value growth
Conducted share buybacks as we aimed to raise both corporate value and shareholder returns

GovernanceManagement indicators and performance

45.2 （55.0%)

P.35

Management Capital

Fiscal 2022 performance on management indicators

Undertook initiatives targeting the achievement of materiality-related KPIs●●

Promoted empowerment of women and work style diversification while expanding both diversity and inclusion
Developed and secured personnel with multifaceted perspectives

net one report 2023

30

Chapter 2

Growth Strategy

Message from the COO

Medium- to long-term issues

We will create new businessmodels and evolve into
an unrivaled industry leader

In fiscal 2023, the second year of our Medium-Term Business
Plan, we will examine the strategies we currently have in place,
prepare for changes in the needs of the market, and step up
our response to issues we expect to face as we aim to achieve
our Vision for 2030.

Takuya Tanaka

Overview of the first year of
our Medium-Term Business Plan

Last year, the Net One Group launched a three-year MediumTerm Business Plan that serves as the first step of theCompany’s grand design for the nine-year period leading up toand ending with 2030. The plan started off with a good firstyear during which we were able to determine courses of action
for further development.

net one report 2023

Business Segments

net one report 2023

Governance31

Implementation of our management policies
Moving forward, we strive to execute our growth strategy andstrengthen our business base through clearer identification of
pertinent issues. With regard to financial performance, we willcontinue undertaking efforts aimed at improving our cash
conversion cycle and maintaining our ROE. In terms of
personnel, we recognize the need to take especially targeted
and immediate steps toward upgrading and optimizing ourworkforce. By promoting organic reallocation and reskilling
among our personnel in accordance with our objectives, wewill transition toward a highly profitable organizational structure.
In terms of corporate culture reform, during the previous fiscal
year, we achieved significant progress through efforts
undertaken to inculcate our philosophy and raise employee
awareness thereof. We are not content with this achievement
alone and will continue to closely monitor the progress of ourreforms to ensure that they maintain their current momentum
while keeping up with our efforts to engage in dialogue with
our employees.

Enhancing consulting-related proposals
and improving service literacy
As professionals providing solutions related to cloudtechnology and other building blocks associated with ICT
platforms, we will strengthen our consulting capabilities toensure comprehensive optimization of a wide range of
operations spanning from system implementation to utilization.
At the same time, we will develop personnel capable ofidentifying the lifecycles of ICT systems and delivering optimal
proposals, while also formulating proposals that support thedigital transformation strategies of our clients. System
operation plays an important role in the ICT field, and dataobtained through the performance of system operation cancontribute greatly to the promotion of digital transformation.
We are confident that we will be able to further accelerate ourshift toward services by establishing a proposal methodologythat allows us to render services for an all-encompassing
scope of processes ranging from digital transformation
strategy formulation to system operation.
We will also work to improve the expertise we bring to thetable when providing consulting-related proposals. As we shift
toward services, we must ensure “service literacy,” whichrefers to our ability to identify both what our contributions to aclient’s operations will be and how the Net One Group’s
interests will be served through these contributions. Our clients
will inevitably need to conduct a variety of ICT investments, butmany of these clients encounter difficulties when attempting to

Rapid advances are being made in the ICT industry, and thepace of change within the industry is accelerating as emerging
forces revolutionize conventional commercial flows and businesspractices. The Net One Group concentrates primarily on ICT
platforms, but we will not remain satisfied with our current
business scale moving forward. Partnerships with industry peers
specializing in unique fields of expertise constitute one avenue
through which we could expand our business scale. At thesame time, we could secure the additional personnel thisexpansion would necessitate through M&A involving companies
employing the engineers we would require. By collaborating withemerging forces providing services that raise questions
regarding the future significance or relevance of integration, weare confident that we can achieve mutually beneficial progress
as we head into the future. Net One Systems is blessed with alarge staff of talented engineers. We also have a range ofunmatched strengths including our ability to effectively apply thecore network systems-related technologies we have developed
throughout our existence while adapting them to new andadvanced technologies. Thanks to these advantages, we areable to collaborate with a wide range of vendors and partners,
including emerging forces with the potential for substantial
market impact. Aside from these attributes, we also possess theflexibility that comes with being an independent company,
allowing us to make our own decisions and generate favorable
strategic changes. Our ideal approach is to proactively generatechange rather than react once it occurs.
As society undergoes rapid changes due to digitalization andthe exchange of massive and wide-ranging volumes of
information continues unabated, our clients will expect us toprovide proposals formulated based on a true understanding of
their needs. Customers themselves may not be aware of issues
with their current services and accordingly may not recognize
problems associated with obsolescence, blackboxing, or the
emergence of new risks. Net One Systems recognizes the criticalimportance of generating a greater number of opportunities tomeet directly with customers and hold discussions with them,
thereby improving our understanding of their ideas and priorities.
Accordingly, we will accelerate our development of personnel
capable of mapping out master plans of ICT systems together
with our clients while also adjusting the services we provide
according to external environmental changes.
Applying its unique strengths, the Net One Group will
maintain a mutually beneficial coexistence with emerging forces
while exploring the potential advantages of M&A and allianceswith partners equipped with new technologies. At the sametime, we will steadily perform conventional integration throughcollaboration with existing vendors. Through this two-sided
approach, we will continue to secure our unique identity andsuperior position in the market.

Management CapitalBusiness progress
We have accurately identified the customer and market needs
associated with each of the three focus areas in our MediumTerm Business Plan and have thereby achieved steadyprogress within all of these areas. In terms of digital
government, we plan to accelerate the digital transformation ofmunicipal operations through the application of cloudtechnologies and security measures while also speeding up
our delivery of proposals for the future expansion of cloudconnectivity among government systems. With regard to social
infrastructure to realize Society 5.0, we have begun to
generate true progress through our efforts to facilitate digitaltransformation on a society-wide scale via ICT application. On
the subject of smart manufacturing, we are observing growthin demand for network and data infrastructure capable ofproducing visible and understandable measurements of power
consumption in factories. Given this favorable businessenvironment, we believe in the importance of focusing on thequality of the outcomes we generate through each project
while also establishing a launchpad for the operations we willconduct over the next three years. We should only regard an
objective as accomplished when we have generated
contributions that have an impact on society as a whole; forexample, when end-users not counted among the customers
served by the Net One Group enjoy improvements inconvenience resulting from digital transformation. Regarding
our current Medium-Term Business Plan as a period during
which we can boldly continue to take on new challenges, wewill aim to create exceptional and unprecedented new
solutions and transform these solutions into services that will
evolve the Net One Group’s business model.

Securing market dominanceby continually generating change

Growth Strategy

Generating further development througha focus on both the quality of use cases
and the creation of unique added value

Progress on our shift toward services
Due in large part to our proactive ICT investment, we feel wehave generated substantial progress through efforts aimed at
facilitating our shift toward services. Recently, our clients haveexhibited strong demand for spontaneous and unconstrained
proposals from the Net One Group. We view this trend as anindication of the increasing difficulty our customers encounter
when attempting to identify issues impacting their own digitaltransformation initiatives. Since issues differ from customer tocustomer and change over time, we cannot appropriately keep
up with these developments unless we remain in close contact
with our customers and confront these issues on a consistentbasis. COVID-19 forced us to conduct operations remotely,
but now that the pandemic has subsided, we are taking a
fresh look at how we interact with our customers. One major
objective of Net One Systems is the enhancement of its
customer-facing activities, which require the sales andengineering divisions to cooperate side by side while
establishing optimal systems and frameworks for each phaseof the problem-solving process. While addressing thisobjective, we will also strive to improve the accuracy andvisibility of the metrics we utilize to ensure timely and precise
verification of operating income as we aim to raise our service
ratio and improve profitability.

Collaboration and critical assessment ofmarket conditions
Both the ICT industry and vendor services are transforming on adaily basis. Moving forward, we expect to encounter services
that will enable easy integration of ICT platforms without theneed for integration. Accordingly, our success will be largely
dependent upon the extent to which we can collaborate withvendors and incorporate these services into our own solutions.
We are confident that we will be able to provide clients withforward-looking proposals if we remain sensitive to changes
occurring throughout the world. However, we also recognize theneed to pursue efficiency from a broader perspective, and weplan to undertake this pursuit using a variety of methods, suchas leveraging tools provided by vendors and partners when
launching new services. At the same time, we must maintainintense scrutiny to ensure appropriate pricing and sustain andimprove our profits. Furthermore, circumstances require us toassess our competitiveness from the standpoint of profitability todetermine whether the services we offer are appropriate for themarket. Accordingly, we will further accelerate our shift toward
services by dividing the market into specific areas of focus andenhancing our critical assessment of market conditions.

Future outlook

Value Creation

Executive Director, Executive Vice President
Chief Operating Officer (COO)

accurately assess the cost of these investments. We believethat our role and responsibilities require us to maintain service
literacy while providing solutions that only we are capable ofdeveloping and delivering truly necessary services to ourcustomers at fair prices.

Introduction

Pursuing the interests of both customers
and the Net One Group while identifying
changes in the needs of the market

32

Chapter 2

Growth Strategy

Message from the CSDO

Koji Tsuji

Fumihiko Shinoura

Senior Vice President
Chief Strategy & Digital Officer (CSDO)

Senior Vice President
Chief Technology Officer (CTO)

Improve the speed and efficiency of management
strategies through the promotion of digital tactics

Defining data-related parameters that will
form the basis for managerial decision-making

Targeting improvements in system stability
and facilitating the success soughtby customers through new collaborative
relationships involving our customers,
Net One and vendors
With the accelerated adoption of multi-cloud systems,
networks are becoming more sophisticated, giving rise to
demand for both the system integration we have performed todate and solutions that improve system stability and contributeto our clients’ business through the ongoing delivery of added
value. Moving forward, we plan to concentrate on developing
more advanced networks, ensuring security, adopting datavisualization that will facilitate data usage within businessdivisions, and managing data. Networks are ideal formonitoring the flow of data and extracting necessary data
points. At the Net One Group, we believe that extracted data
can be processed flexibly through the cloud by using
advanced technologies such as AI and data lakehouses (datamanagement and processing platforms). Furthermore, we
recognize that the integration of data lakehouses and networks
will enable independent extraction, processing, and linkage ofdata, thereby allowing for data management that does not
require the use of applications. In the future, we will generateadvanced cases that support the creation of new architecturesthat eliminate the need for updates to mission-critical systems.
As we pursue these objectives, we must recognize thecritical importance of establishing more points of customer
contact throughout various phases of client ICT lifecycles anddeveloping deeper relationships with these clients (improving
customer intimacy). Accordingly, the Net One Group is
examining wide-ranging plans that extend to system linkage.
Connecting with customers and vendors through securesystem linkage will speed up support while enabling the virtual
coordination of a comprehensive range of operations, including
AI-based failure prevention, version upgrades, and security
updates. To date, we have taken on challenges associatedwith next-generation networks and optimized ICT platforms.
However, the possibilities surrounding networks remain
unlimited. Accordingly, we will continue to pursue customer
success by collaborating with our clients to develop ICT
platforms that support their business activities and by serving
as a strategic partner indispensable from the standpoint ofbusiness growth.

net one report 2023

Business Segments

net one report 2023

In fiscal 2022, both revenue and bookings were commensuratewith our projections, confirming that our strategy of focusing onsocial challenges was appropriate. Within our three focus areas,
we are ensuring that we accurately perceive changes incustomer needs that arise from the development of ICT. In
terms of digital government, performance was primarily driven
by projects related to security reinforcement, the promotion ofdigital transformation, and work style innovation. As an
additional business opportunity, we are exploring possibilities
associated with the redesign of network systems compatible
with the government cloud environment. With regard to smart
manufacturing, we are observing demand for security
reinforcement amid the establishment of networks linking factory
production lines. We are confident that this demand will persist
moving forward due to increasingly intense efforts aimed at
relocating production bases to Japan. In the case of social
infrastructure to realize Society 5.0, we are witnessing a trend
toward activities targeting enhanced group security governanceamong companies responsible for social infrastructure. We plan
to leverage the expertise we have accumulated through ourestablishment of security cloud and service platforms totransform these business opportunities into new projects.
In the future, emerging demand will require more rapid
problem solving and changes in certain elements of technology.
Net One Systems will continue to provide consistent value, but
this value will take the form of services that customers can utilize
toward favorable ends. We are currently striving to standardize
our service development models and are confident that these
efforts will accelerate our business by heightening thesophistication of our services and raising the value we deliver
while simultaneously improving our profitability.
Personnel capable of generating new ideas are indispensable
for both the transformation of business models and workflows
using digital technology and the cohesive enhancement ofvisualization. As essential technologies and mechanisms
change, we are viewing efforts targeting the resolution of social
challenges as an avenue through which personnel can honetheir abilities and broaden their perspectives. Accordingly, we
will share our own efforts and activities associated with thesechallenges to serve as a reference for both our customers andindustry peers who face similar issues, thereby helping toaddress the challenges confronting society at large.

During the first year of our Medium-Term Business Plan, we
successfully established a three-year service strategy execution
system while expanding our service portfolio. As a steppingstone toward achieving our long-term strategy, we have set
common goals for our three engineering divisions (Sales
Engineering Unit, Customer Service Division, and Business
Development Division) and established KPIs and KGIs forachieving these goals.
With the full-scale arrival of the cloud computing era, we are
beginning to witness changes in the systems utilized by
vendors and transitions in the way ICT assets are being held
due to the shift toward multi-cloud systems. Previously, support
from vendors consisted primarily of faulty equipment
replacement and software updates. However, moving forward,
vendors will attempt to transition toward programs predicatedupon stable operation (e.g., monitoring of operational statuses
and version upgrades that do not interrupt system
performance). Net One Systems has long established thesystem environments required by its customers using various
combinations of products from vendors while delivering
services that maximize product performance. As multi-cloudenvironments become increasingly complex in the coming
years, we believe the key to growth rests upon the extent towhich we can raise the value of our comprehensive services
while demonstrating the unique strengths of the Net One Groupand assisting customers as they aim to ensure stable operating
conditions and establish the system environments that fulfill
their needs.
When making system-related proposals moving forward, we
will not fully standardize these proposals, which requires toomuch time, nor will we fully customize them, which causes
difficulties associated with operation. When dealing withparticularly challenging systems, we will work toward
standardization by organizing necessary elements into systemcomponents. We will work to increase system integration
speed, which is a high priority for our clients, and at the sametime fundamentally revise our proposal methods while
concentrating on preventing system failures through operational
automation. Additionally, we will aim to radically improve
productivity by optimizing and increasing the visibility ofworkflows through process mining while effectively applying
generative AI, which will be a crucial element of innovation
moving forward. By undertaking these new initiatives, we will

Service strategy outlook

Governance

As we aim to maximize our corporate value, we recognize thecritical importance of both establishing organic links between
our sales, engineering, and corporate divisions through digitaltechnologies and uniting the Net One Group into a single
integrated team. “Visualization” is one of the strategies we are
employing to strengthen our business base as we pursue
these objectives; this term refers to the real-time sharing ofdata on which all employees rely to make prompt andappropriate decisions. Furthermore, fostering a culture underwhich decisions and actions are based on data can also
contribute to corporate culture reform. Currently, we are in theprocess of verifying what data to share and how it can best be
dispensed in support of our decision-making. Our Corporate
Data and Analytic Office is fulfilling a central role as we carryout these processes.
During fiscal 2022, in accordance with the KPI logic tree wehave adopted in pursuit of ROE achievement, we preparednecessary data for all divisions and established environmentsthat allow this data to be viewed by all division heads. As asubsequent step, we are ensuring consistency between ourdata and our KPI logic tree, which breaks down the missionsof individual divisions while illustrating the paramountimportance of ROE, which is set at the top of the tree, as amanagement indicator. Through these efforts, we will ensurethat our business operations remain effective and cohesive

Increasing the versatility and productivity ofmanagement and operations to respondpromptly to changing customer needs

Revising our service delivery systemand providing comprehensive and highly
competitive services

accelerate the Net One Group’s forward-leaning service
strategy.

Management Capital

Promoting “visualization”

Business strategy

Overview of the first year of
our Medium-Term Business Plan

Growth Strategy

I assumed the office of chief strategy and digital officer (CSDO)
effective from the beginning of fiscal 2023. As CSDO, I will be
expected to devise digital plans aimed at further accelerating
our strategies while also fulfilling the conventional role of chief
strategy officer (CSO) by ensuring the implementation ofbusiness strategies driven by synergy generation performed onan organization-wide scale. As the Net One Group pursues
further development moving forward, I will help ensure that we
prioritize initiatives aimed at raising the sophistication ofvisualization technologies while facilitating business reforms
and internal control enhancements through both improvements
in data resolution and the development of data literacy.
Furthermore, to improve the value provided by our humancapital, we will strive to effectively utilize personnel data while
cooperating closely with chief executives to successfully
implement a data-based management cycle.

while striving to advance digital transformation as a companywide strategy.

Value Creation

Support the acceleration of client operations
by generating always-optimal ICT platforms
and new ways to apply data, leveraging our
expertise as network professionals

Introduction

Accomplishment of growthstrategies and implementation ofcompany-wide business reforms
using digital technology

Role of the CSDO

33

Message from the CTO

34

Chapter 2

Growth Strategy

Message from the CFO

Masayuki Kitajima

My appointment as CFO

Applying prior experience while focusing
on strengthening Net One’s organizational
infrastructure and fulfilling my role as CFO

Fund allocation in support of growth strategies

Effectively allocating funds in accordancewith our capital allocation policy

With the formation of our capital allocation policy, we will establish a cycle of sustainable corporate value enhancement
Cash position
Fiscal 2022–2024

Capital allocation
Achievement of an optimal capital structure

Approximately¥70 billion

35 %Shareholder
returns

35 %Further enhancement of equity capital
Preparations for the flexible delivery of shareholder returns
Preparations for increasing working capital● Debt repayment●●●

Ensuring stable and flexible delivery of dividends while targeting a payout
ratio of about 40%●

Profit distribution that appropriately reflects earnings performance

Strategic investment and investment in business platforms

Investment

30 %Investment in business platforms: business platform maintenance
Investment targeting improvement: thorough visualization, internal digitaltransformation infrastructure, and enhanced security● Growth investment: personnel training and acquisition, R&D targeting new services,sustainability initiatives, and M&A●●

Notes: R&D expenses have been deducted from cash provided by operating activities.
Allocation percentages indicate shares of total capital allocation projected throughout the three-year duration of our Medium-Term Business Plan.

35

net one report 2023

We will accelerate
growth andstrengthen ourearning
capabilities withthe goal ofgenerating
sustained growthin corporate value.

My mission as CFO is to steadily achieve our ROE target of
20% throughout the duration of our Medium-Term Business
Plan. Accordingly, I am ensuring that we adopt initiatives inaccordance with the three perspectives: profitability, asset
efficiency, and financial leverage.
With regard to profitability, we will strategically invest in
growth, infrastructure, and overall improvement. We also
regard visualization as critical toward improving profitability. As
we aim to fine-tune our cost management, our three chief
executives (the CFO, CTO, and CSDO) are working together
from a top-down point of view. Furthermore, we will also target
growth in profitability by adopting measures aiming to eliminate
personnel shortages and improve operational efficiency
through the use of generative AI.
In terms of asset efficiency, we are prioritizing our cash
conversion cycle (CCC). As a consequence of longer productprocurement times stemming from semiconductor shortages,

For CFOs, commitment to achieving financial and numericaltargets is critical. To foster this commitment, we distributevideo messages internally while providing employees with
opportunities to engage in direct discussions regarding bothfinancial strategies and aspects of our KPI logic tree inaccordance with our RCT doctrine*1. Having received
questions directly from employees, we are beginning to sensehigh levels of interest within the Company while witnessing
positive effects from the growing awareness of our KPI logic
tree. Net One Systems conducts a wide range of IR activities,
including conferences with investors both in Japan andoverseas, smaller investor meetings, and IR operations carriedout abroad. Our entire chief executive team, including both the
CEO and CFO, commonly take part in these activities.
Furthermore, the chairperson of our Board of Directors and ouroutside executive directors actively maintain dialogue with ourshareholders, and we have received high praise for thisapproach. While further expanding its two-way communication
efforts, Net One Systems is focusing on activities aimed atensuring that feedback received is reported to the Board of
Directors for immediate action targeting swift improvement.
We will continue to proactively create opportunities for
dialogue regarding both cost of capital and ROE.
Moving forward, we will continue to ensure theimplementation of our financial strategies while further
improving our dialogue with shareholders and investors todrive sustained growth in our corporate value.

Business Segments

Cash provided
by operating
activities

Financial baseenhancement

Adopting a multifaceted approach targeting
steady achievement of 20% ROE

Focusing on enhancing dialogue as CFO
and a member of the chief executive teamGovernanceCapital allocation policy

Achieving an ROE target

Maintaining dialogue with shareholders and investors

Management Capital

The Net One Group’s financial strategy aims to enhance
corporate value through three pillars: the strengthening of
profitability through strategic investment, the pursuit of an
optimal capital structure, and the proactive delivery ofshareholder returns.
In May 2023, the Net One Group moved to facilitate its
implementation of management with an emphasis on capitalefficiency by announcing its capital allocation policy. Under thispolicy, the Group will primarily draw funds from cash generated
through operating activities in accordance with growthstrategies included within its Medium-Term Business Plan.
Furthermore, we will target further improvement in corporate
value by allocating funds to three objectives: strategic
investments, financial base enhancement conducted in pursuitof an optimal capital structure, and steady and flexible deliveryof shareholder returns.
First, with regard to strategic investments, we havelaunched an Innovation Center and aim to facilitate visualizationand establish digital transformation infrastructure while

Growth Strategy

For many years, I previously held finance and accounting
positions at a major general trading company, where I also
served as CFO of the business group for which I was
responsible. While fulfilling my duties, I gained a wide range ofexperience in areas including financial settlement, investment
project review, and tax affairs. I also contributed to the successof business integration projects involving affiliated companies
and the management of overseas subsidiaries while gaining
on-site experience with investee companies.
Net One initially struck me as a highly profitable company
backed by high-level expertise and technological capabilities.
However, I also experienced the Company’s implementation ofrecurrence prevention measures it announced in 2021 and theefforts it undertook to strengthen its governance structure andinternal controls. As a result of this experience, I realized that I
wanted to contribute to the enhancement of Net One’sorganizational infrastructure. Accordingly, I joined Net One’s
management team with the objective of focusing on protective
initiatives grounded in my own professional experience. After
having served as chief risk management officer (CRO) andchief compliance officer (CCO) in fiscal 2022, I began
performing duties as CFO in April 2023. The entire Net One

team is working diligently to strengthen governance andinternal controls, and I am confident that we are generating
steady progress through these efforts.

Value Creation

Senior Vice President
Chief Financial Officer (CFO)

inventories have grown and projects have become increasingly
prolonged, temporarily raising the number of days in our CCC.
However, we are committed to improving this situation and areaiming to eventually return our CCC to lengths reported before
product delivery times began to lengthen.
Concerning financial leverage, we are chiefly focusing on
the need to further strengthen our equity capital. Companies in
the network integration industry, a category that includes Net
One Systems, do not require large amounts of capital
investment and tend to have high equity ratios. Whileremaining aware of the equity ratio of industry peers, we mustalso adopt a leverage-based perspective as we explore
effective uses of debt financing for business expansion andavenues through which we can diversify our debt financing
methods. Our interest-bearing liabilities are partly characterized
by growth in lease obligations, which is largely the result of
expansion in recurring-revenue businesses that we achieved inaccordance with our growth strategy. Through theestablishment of strategic procedures and mechanisms, we
successfully provide services without having to retain assets.
However, depending on future cash positions and profitability,
we also view the retention of assets as an additional option.

Introduction

We will commit to achieving
the goals of our Medium-TermBusiness Plan and ensure
effective fund allocation

improving our service platforms for business and investing inhuman capital. As we aim to facilitate visualization, we willconcentrate on increasing the precision of our costmanagement and utilizing information gained throughvisualization to arrive at more sound business decisions. In
terms of service development, we are witnessing a trend
among vendors to shift toward subscription-based models
predicated upon assumptions of ongoing usage. Under thesecircumstances, we are confident that we can improve
profitability by pushing forward with our shift toward services
and enhancing our efficiency. We are also prioritizing
investment in personnel. The Net One Group’s technologicaland critical assessment capabilities are the driving forces
behind its business activities and are major sources of its
overall strength. As we invest in the personnel who provide
these capabilities, we will proactively target recruitment, thedevelopment of employees able to facilitate digitaltransformation and deliver high added value, and employee
reskilling efforts. In addition, we will enthusiastically undertake
measures aimed at nurturing new opportunities for inorganic
growth, including strategic investments, business investments,and M&A. Next, with respect to financial base enhancement,
we will steadily strengthen our equity capital and repay
borrowings while ensuring that we maintain working capitaland the capacity to provide shareholder returns. Our target
dividend payout ratio is 40%, and we achieved a consolidated
dividend payout ratio of 42.1% in fiscal 2022. In May 2023, weannounced a resolution authorizing the acquisition of up to¥7.5 billion in treasury shares by the end of December 2023. If
our cash position is more favorable than anticipated, we willconsider delivering additional returns in accordance with ourcapital allocation policy. At the same time, we will aim toachieve targets in our Medium-Term Business Plan whileremaining mindful of external environmental risks, such as
supply chain disruptions caused by geopolitical risks andsoaring costs.

*1 Respect, Communication, and Teamwork (RCT): A shared communication approach
designed to create strong links between management and employees, share ourcorporate philosophy, enhance workplace environments, and foster our corporate culture

net one report 2023

36

Chapter 2

Growth Strategy

Message from the CHRO, CRO, and CCO

Mitsuru Kiuchi

Overview of the first year of
our Medium-Term Business Plan

Encourage co-creation among diverse members tocreate value as a team
TAKUMI

Support the enhancement of expertise in each area,
so that each person can contribute to their team as a TAKUMI
Fairness

Reward contributions to the organization
in a fair and impartial manner

Medium- to long-term strategy

Adopting holistic perspectives as we develop
personnel strategies to drive further growth
for the Net One Group
Bringing our management strategy and personnel
strategy into alignment
Moving forward, we will adopt even broader perspectives as
we develop personnel strategies designed to facilitate theachievement of our management strategies. By looking
forward to 2030 and establishing an ideal vision for the state of
the Net One Group at that time, we will ensure our ability tovisualize discrepancies between our present state and thisvision by determining the types and quantity of personnel
necessary for its achievement. Identifying the expertise,qualities, and manpower we need will benefit our training
strategies while supporting optimal personnel allocation. With
these ideas in mind, during fiscal 2023, we will establish apersonnel strategy framework that reflects our approaches torecruitment, placement, training, evaluation, and benefit
systems, thereby enabling us to respond flexibly to possible
medium- to long-term changes in our business environment.

Facilitating more diverse knowledge and experience
The Net One Group recognizes the essential importance ofrecruiting diverse personnel with knowledge of various
industries and enhancing its overall strength as it aims to
conduct business based on a deeper understanding of client
operations. Our materiality-related KPIs include our ratio of
female managers. However, we believe that we need to digeven deeper than empowerment of women and work style
diversification as we target further diversity and inclusion andmore through knowledge and experience. With this idea inmind, we will maintain a multi-dimensional approach as we
intensify our efforts to develop personnel with unprecedented
experience and expertise, while also concentrating on securing
new personnel.

Business Segments

net one report 2023

Team

Risk management and complianceWith regard to risk management, in fiscal 2021, we defined
various types of risk, including extreme risk, critical risk, andgeneral risk, and as of April 2023, we had identified 101 specificrisks. Currently, we are striving to improve the precision of our
response to existing risks while reexamining the prevalence ofrisks associated with our Group as a whole. Additionally, wemust verify ex post facto the frequency at which we
encountered incidences of these risks and determine whether
losses incurred were within our expectations. On the topic ofrisk awareness, we believe that we must also share andcompare data with external stakeholders as supply chain risks
become increasingly significant. Furthermore, when
encountering unanticipated risks, we believe in the importanceof sharing information with partners regarding our initial crisis
management response measures and our general approach torisk management.
Compliance awareness is also on the rise, and increasingly
active utilization of our whistleblower system is a sign of thistrend. However, in some cases, reports have been filed for issues
that could also be resolved through workplace-level discussions.
These cases are an indication of the growing awarenessregarding internal reporting, and we believe that the sharing ofeven seemingly minor concerns is a positive outcome. We areconfident that employee feedback of this type will lead to
productive proposals for the Net One Group moving forward.
The Net One Group is enhancing its internal control, and I
personally feel that the Group is becoming more thorough withthe response efforts it conducts in accordance with clearly
defined rules and regulations. At the same time, we are still facing
challenges in areas for which rules have not yet been established.
We will intensify efforts aimed at encouraging employees to share
information promptly and maintain a heightened awareness of ourprinciples and Code of Conduct while using these guidelines as abasis for decision-making. Under our next Medium-TermBusiness Plan, we are also considering the possibility of exploring
integrated risk management, which involves quantifying risks andassessing them based on both the resulting statistics and theirfinancial impact.
net one report 2023

Governance37

Personnel Management Policy

Management Capital

Since the launch of our Medium-Term Business Plan, we havebeen revamping our personnel system to ensure effective
adherence to the key themes of our personnel strategy:
professional personnel training and providing an environment
where personnel can thrive. Over the past year, we have held
discussions targeting the creation of a new personnel systemthat brings our management and personnel strategies intoalignment, and in April 2023, we overhauled our evaluation
system before updating our grading and compensation
systems in July. Moving forward, we will concentrate on
administering this system in the most effective manner possible
while pursuing further reforms.
At the core of our personnel system reform efforts is our
Personnel Management Policy, which is based on theprinciples of “Team,” “TAKUMI (experts),” and “Fairness.”
To date, the Net One Group has achieved businessexpansion primarily through individual strengths. However, if
we aim to broaden the scale of our operations, increase our
profits, and achieve further growth moving forward, we believethat we must establish organizational management thatleverages these individual strengths to the fullest extent
possible. Many of our clients are now demanding digitaltransformation that supports the resolution of fundamental
business issues while contributing to business growth. To fulfill
these needs, the Net One Group must also change. In addition
to fully understanding the value chains of our clients in their
entirety, we must be able to determine the objectives we needto achieve in order to facilitate client success. As we aim toachieve these capabilities, we must bring together individuals
with different specialties, thereby establishing a highly
knowledgeable team capable of addressing the issues
confronting our clients.
Through its Personnel Management Policy, the Net One
Group aims to achieve growth by molding itself into a large
and cohesive team that maximizes individual strengths andskills of TAKUMI and fosters a culture that encourages
individual members to contribute to the overall success of theteam. We believe that these objectives reflect our policy’s
principles of “Team” and “TAKUMI.” With regard to “Fairness,”

Creating a foundation for the support of employee growth
Currently, we are tackling the challenge of developing personnel
capable of managing organizations and building teams. Whenaiming to raise their management skills, personnel need togradually increase the sizes of the organizations for which they
are responsible. Accordingly, we will establish environmentsthat enable our personnel to take on the challenge of managing
large organizations. In fiscal 2023, we will continue to holddiscussions aimed at developing an ideal vision for ourorganization that can be applied to our next Medium-TermBusiness Plan. At the same time, while ensuring that middlelevel managers remain accountable to their team members, wewill build a personnel framework that avoids multi-levelstructures, thereby enabling management to speedily apply
feedback from employees.
When conducting personnel evaluations, we will emphasizeteam building and assess both behavior and performance.
Instead of handling tasks and generating results alone, we willencourage employees to delegate work to younger employees
while providing support, thereby providing them with
opportunities to develop and grow. Additionally, we will evaluate
more than just the results of our work; we will also examine andassess the processes that generate these results and theindividuals who develop and support our personnel.
Furthermore, we will strive to achieve impressive results byensuring that the job skills and expertise that were formerly held
only by individuals are shared with all team members. Throughthese efforts, we will generate ongoing growth for the Net One
Group.

We are confident that the increasingly widespread awarenessof our newly formulated corporate philosophy system isgenerating positive effects. Furthermore, we believe that ourperiodic engagement surveys are also helping to foster
employee awareness.
There is no final goal line when it comes to corporate
culture reforms. Through growth in understanding andawareness, the development of our corporate philosophy has
at last entered the “appreciation” phase. Next comes the“harmonization/resonance” phase. Moving forward, we willtake concrete steps to resolve the issues we identified throughour organizational culture surveys. At the same time, we willencourage our employees to remain aware of, and act inaccordance with, our corporate philosophy, which forms thebasis of all our business activities, as well as our daily
operations, personnel systems, and organizational structures.

Growth Strategy

New personnel system emphasizing
team-based operations that maximize
individual strengths

we will ensure impartial and unbiased assessments ofperformance. Our new personnel system allows employees tobe confident that their individual achievements, as well as
those of the team and the Company, are all integral parts of a
unified whole.

Reforms are progressing steadily
and are now moving into the “harmonization/
resonance” phase

Value Creation

Executive Director, Executive Vice President
Chief Human Resources Officer (CHRO)
Chief Risk Management Officer (CRO)
Chief Compliance Officer (CCO)

Corporate culture reforms
Introduction

Aiming to be a company that functions
as a cohesive team, delivering value
through its personnel strategy

Through our KPIs, we will also track the extent to which
personnel measures are contributing to the improvement of ourcorporate value. Despite difficulties stemming from a complex
web of intertwining factors, we intend to explore KPIs on thebasis of quality, quantity, and productivity while determining
through visualization which personnel-related figures are linked
to business growth. Based on the results of these efforts, wewill logically identify the best ways to conduct personnel
investment in accordance with our capital allocation policy.
Meanwhile, to enhance employee engagement, we prioritize
the continuous administration of engagement surveys. In
addition to providing insight into the effectiveness of various
measures through fixed-point measurement, we are confident
that these surveys facilitate understanding of the trajectory the
Net One Group aims to follow going forward by providing
employees with an annual opportunity to view survey items.

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