The Hitachi Group’s Growth Strategy

Strengthen Lumada
As society and business continue to generate more data, Hitachi’s Lumada acts as an engine that creates new value fromthese data and accelerates innovation. We launched the Lumada business in 2016, and its revenue has grown rapidly inthree years, from ¥900.0 billion in fiscal 2016 to ¥1,127.0 billion in fiscal 2018. Under the 2021 Mid-term Management Plan,
we are promoting measures aimed at expanding our business with the goal of achieving revenue of ¥1,600.0 billion.

What is Lumada?
Lumada creates value from customers' data and drives digital innovation
Hitachi will develop a global Social Innovation Business that will improve thecultivated within Hitachi. Along with the development of information

quality of people's lives, raise corporate value for our customers andtechnology (IT) and the Internet of things (IoT), social and business

contribute to resolve social issues. We will accelerate innovation in each ofactivities continue to generate data at an increasing rate of speed.

the five business sectors, creating solutions that provide new value.

Hitachi has focused on these data as a new source of value in future

Lumada is a general term for the solutions, services and technologies
that utilize Hitachi’s advanced digital technologies to create value fromsociety and launched the Lumada business in 2016 with the goal ofusing large volumes of data to create innovation for the world.

customers' data and drive digital innovation. It is derived from the words

With Lumada as a common platform, we will create new value and“illuminate” and “data” and was created based on the idea of combining

establish an advanced cyber-physical system that links digital and real

the strengths of the operational technology (OT), IT and products

spaces (actual physical things) in real time.

Lumada business model
The Lumada business provides value by analyzing business issues andof solutions, such as income from fees. To this end, Hitachi will

combining Hitachi’s digital technologies to solve customer problems

leverage its strengths in OT x IT x Products to commoditize its

with the lowest amount of customization as possible. In fiscal 2018,

expertise in various industries and operations. At the same time, werevenue in the Lumada business was ¥1,127.0 billion, and its adjusted

will make the shift to digital solutions that can be provided to a number

operating income ratio had already exceeded 8%, the level of theof customers, thereby expanding the Lumada business. Furthermore,entire Hitachi Group. Rather than relying merely on product sales, we

we will intensify our collaborate efforts to build new ecosystems withwill build a profit model based on value created through the provision

our customers and partners.

Lumada Revenues
FY2016FY2017FY2018FY2019 (Forecast)

FY2021 (Target)

Revenues (¥ billion)

9,162.2

9,368.6

9,480.6——

Lumada revenues (¥ billion)

900.0

1,006.0

1,127.0

1,170.01,600.0

Share of total revenues (%)

10%

11%

12%

—

—

* Lumada revenue is included within Hitachi’s consolidated revenue.
The IT sector comprises about 80% of Lumada revenue while the Industry sector accounts for about 20%.

Strengthening our overseas business structure
Currently, about 90% of Lumada business revenue comes from Japan.

2019, we established a joint venture with India’s largest state-owned

We are strengthening our overseas business structure, primarily incommercial bank, State Bank of India (SBI). Through this venture, weNorth America and Asia, with the goal of accelerating the global

aim to build a digital payment service platform for the next generation.

expansion of the Lumada business moving forward. In the future, we

By collaborating with SBI, which has about 400 million customers

will continue to recruit new personnel while acquiring companies(equivalent to roughly one third of India’s population), we are analyzing

capable of collaborating with customers to produce digital solutions

and utilizing vast amounts of digital payment data obtained from point-

and investing in partners. These efforts will contribute to our goal ofof-sale (POS) systems, e-commerce and transportation fare payment

nearly doubling our number of relevant overseas personnel from its

systems in an effort to provide high value-added services in India.

current level of 23,000 to 40,000.
As an example of collaboration with overseas partners, in January

48

Hitachi Integrated Report 2019Collaborative creation processes and customer cases in the Lumada business
Here, we will introduce collaborative creation processes of the Lumada business, as well as customer cases that are models of the digital solutions
that we have cultivated thus far.
Concept of Lumada

Customers
Solutions and services

Co-creation

Issue analysis

Prototyping andvalue verification

Hypothesis building

Provision tocustomers, operation

Customer OT assets
Field data

Customer IT assets
Co-creation with customers and partners(NEXPERIENCE, etc.)
Domain expertise(Solutions, customer cases)

Business data

P.49
Collaborative
creationprocesses andcustomer casesin the Lumada
business

P.53
Lumada platform

Platform products and technologies(IoT platforms)

Lumada ecosystem

Methodology and services aimed at accelerating collaboration with customers and partners
Support ranging from the discovery of potential issues and strategic planning to value verification(1) Issue analysis and hypothesis building through
NEXPERIENCE, a collaborative creation process

Overview and Process of NEXPERIENCE

Before creating innovation, one must first discover potential issues.
However, corporate issues are becoming more complex as society
globalizes and diversifies. When collaborating using Lumada,
Hitachi uses NEXPERIENCE, its unique collaborative creation

Collaborative
creationprocess

process, discover issues, propose solutions and verify value.

Sharing our vision
with customers

New concept creation/prototype
development and demonstration

Environmental analysis

Customer analysis

Discovery of
future business
opportunities

Analysis ofmanagement
issuesPlanning

Plan implementation

Verification

Evaluation ofbusiness feasibility

To solve a variety of issues through collaboration withcustomers, NEXPERIENCE combines the perspectives ofservice engineering researchers and designers andsystematizes methods and IT tools that support the entire

Creation of Business model
service ideas
designService profitability
assessment

Techniques
and tools

collaborative creation process. Specifically, NEXPERIENCE

Business value simulation

involves analyzing issues related to management and business
operations through workshops with customers and partners
and designing measures, such as new services and business,that solve these issues.

Collaborative
creation
space

49

The Hitachi Group’s Growth Strategy

Strengthen Lumada(2) Prototyping and value verification conducted through the Lumada Competency Center
If we can clarify issues facing customers and society, as well as

necessary for PoC*1 that follows hypothesis planning by offering ahypothesized solutions, through NEXPERIENCE, we can use

variety of services, including Pentaho, a data integration and analysis

resources including the Lumada Competency Center to determine

platform that is also Lumada’s core software; services withwhether we are capable of solving these issues by using them to build

development and management tool environments that support agile

solution prototypes that help us analyze whether proposed solutions

development *2; and Hitachi AI Technology/H, our own artificial

will produce their intended results.

intelligence technology.

The Lumada Competency Center provides system testing
environment services that support rapid prototyping conducted*1 Proof of concept*2 A group of development methods employed in software engineering with the goal of achieving rapid andadaptive software development.

through the use and application of data and hypothesis verification. We
support the speedy establishment of the system environments

Accumulation of industrial and operational expertise
Quickly providing reliable digital solutions to customers’ management issues by utilizing our abundantcache of customer cases(1) Customer cases(2) Customer cases that support the entire value chain

Hitachi has accumulated a wide range of industry and business

As of the end of March 2019, we have established more than 650

expertise and knowledge in the form of Lumada customer cases withcustomer cases and are continuing to steadily expand this number. We

the goal of rapidly utilizing them to collaborate with customers in a

are also pushing forward with our establishment of customer cases

variety of fields. Lumada customer cases are models of digitalthat can be used by customers to support efforts common to a wide

solutions that have created new value through collaborative creation

variety of industries, such as predictive maintenance for equipmentwith customers. Each customer case organizes elements such as how

and devices. Examples include cases related to medical devices,value was created using data and which technologies were applied in

power generating equipment and other machinery equipment.

terms of artificial intelligence and analytics.

In the future, we will continue to conduct investment aimed at further

When promoting new collaborative creation with customers, Hitachi

strengthening our lineup of reusable solutions while working to solve

makes use of Lumada customer cases that fit customers’

customer problems throughout the value chain, including inmanagement issues, as well as Lumada solutions based on an

management, sales, planning, design, procurement, manufacturing,abundance of expertise, to establish appropriate mechanisms for eachlogistics and maintenance.

customer and swiftly achieve digital solutions that create true value.

Customer Case Examples
Customer Case

Industries

Goals and issues

Manufacturing industry

Manufacturing plan, inventory management

Common across industries

Security enhancement

digitalization of refined skills

Manufacturing industry

Improvement of product quality

Customer-centered marketing

Retail industry

Marketing

Improve credit analysis

Financial industry

Decision-making support

Inventory optimization

Wholesale, retail and manufacturing industries

Manufacturing plan, inventory management

Service industry

Marketing

Crop growth analysis

Agriculture

Productivity improvement

Predictive maintenanceCommon across industries

Preventive maintenanceElectricity, gas, heat and water supply industry

Facility management

Transportation industry

Delivery and transformation management

Revenue/Loss simulation
Streamlining of cybersecurity monitoring operations

Analysis of fan club member information

Improvement of operating rates and fault diagnosis
Delivery optimization50

Hitachi Integrated Report 2019

(3) Lumada customer cases
CASE
1

Overall optimization of production sites used for high-mix, low-volume production in the manufacturing industry­
Collect and analyze various data on people and other elements of the production process to improve its efficiency

Customer needs are diversifying and digitalization is progressing at a

production model using IoT technology and succeeded in reducing the

rapid rate while global competition intensifies. These trends have resulted

production lead times of its flagship products by 50%.

in demand for high-mix, low-volume production that reaches the same

Overall optimization of production sites using Lumada

level of productivity as mass production through mass customization.

Think

Hitachi’s Omika Works handles controls systems manufactured for social
infrastructure such as electric power, railways and water and sewage
systems through high-mix, low-volume production, and, under thesecircumstances, faces the need to monitor the progress of production
processes in real time. In response, the Omika Works installed about
80,000 RFID tags and approximately 450 RFID readers, collecting

Monitoring systems
for progress andoperation

Operational
improvement
support system

Monitoring for the movementof people and goods
Visualization of on-site logistics

Bottlenecked operations
Analysis andcountermeasures

Modular design
Quick design
Feedback system

Factory
Simulator
Countermeasure andprocess planningOn-site logistical
forecastingdetailed data concerning the progress of work conducted by employees
and the flow of goods. Furthermore, the Omika Works combined and

MD methodshared a variety of information gathered by existing systems, including

Built-in tag

process and production management systems, and analyzed the

Database
accumulation

Bottlenecked operations

movement of people and goods throughout its production site. This
enabled the establishment of a more precise production plan.

Production lines at the Omika Works

Sense

Act

Furthermore, the Omika Works improved the efficiency of its design
process through the effective use of design assets and improved theprecision of its production plans using a factory simulator. Throughthese efforts, the Omika Works established a high-efficiency

CASE
2

Image
depictingoperations

Image
depictingoperations

Image
depictingoperations

Predictive maintenance for machinery and equipment­Collecting data from sensors installed in machinery and equipment to diagnose and detect issues, thereby avoiding failure and reducing maintenance costs

Failures and unplanned downtime at facilities that compose ourdata collected from sensors attached to equipment and detect signs ofindustrial and social infrastructures have a major impact not only on ourabnormalities. We also color code and display various information,businesses but also on society. Accordingly, we recognize the need toincluding equipment operation statuses, relevant changes andensure the continuous and stable operation of these facilities, whichindications of possible defects, making it easier to view and identify.

requires proper equipment maintenance and quality control.

This will enable the customer to detect situations in which equipment

However, many operators do not have analysis methods despite

statuses or product quality differ from the norm at an early stage, thereby

having gathered data indicating the status of their equipment andpreventing breakdowns and unplanned downtime. As a result, we canresort to conducting analysis manually. This results in a large workload

expect to be able to reduce maintenance costs by raising equipmentthat prevents the proper use of valuable data.

operation rates and ensuring the suitability of replacement parts.

With this customer case, we examine and analyze large volumes ofNote: P. 39-41 "Strengthening core technologies supporting Lumada."

Machanical equipment

Predictive Diagnostics Solution
Collect operational data measured by sensors

Customer value
By addressing anomalies before a failure occurs,
the company was able to gain various benefits

Detect anomalies, examine the cause, and address
anomalies at an early stage

Register countermeasures (identify probable causes)(1) Use automatic diagnosis technology to diagnose the status of the facility (detect
warning signs of impending failures).
(2) Visualize the diagnosis results on screen(3) Identify possible causes based on past events.

!

What is an anomaly?
An anomaly is a warning sign of an impending failure.

OperatingstatusSensorvaluesRunning (normal)

Running?

Facility status view

StoppedChanges in operating status(status is different fromnormal)Affected sensor view

Anomaly

FailureBreakdownTime

Sensor status view

51

The Hitachi Group’s Growth Strategy

Strengthen Lumada
CASE
3

Raising credit analysis accuracy through the use of AI­
Improve the accuracy of personal loan screenings through AI-based data analysis

Upon understanding customer income and financial conditions, it

we expect will allow loans to be granted to more customers than was

becomes necessary for financial institutions to predict future credit

previously possible.

losses based on factors such as global economic trends. This requires

One developmental effort involving this customer case is Hitachi’s

high-level expertise. Mortgages have been particularly difficult to

May 2019 establishment of Dayta Consulting Co., Ltd., a joint venture

predict using conventional data analysis methods due to their long

formed through collaboration with SBI Sumishin Net Bank, Ltd., that

payback periods.

provides screening services using artificial intelligence. The Company

With this customer case, Hitachi utilizes internal data from financial

plans to provide screening services for various types of lending,institutions (e.g., card loans, mortgages), as well as external data (e.g.,

including mortgages and card loans, to financial institutions including

economic indicators, GIS information) using “Hitachi AI Technology/

regional financial institutions.

Prediction of Rare Case,” an artificial intelligence it developed in-houseto predict the occurrence of rare events, thereby ensuring highly
accurate screenings. This allows for more detailed screenings, which

Data
Internal data
• Card loans• Mortgages, etc.

AI equipped with new algorithms from Hitachi
Improvement of credit analysis systems for personal loans using artificial intelligence

Data compilation andprocessing

External data

Probability of default (PD)estimation model

Customer value• More detailed loan
screenings become
possible• We expect to be granted
to more customers• Economic indicators• GIS information, etc.
GIS: Geographic Information System

Development of an AI-based production planning system through collaborative creation with
Suntory Beverage & Food Ltd.
In recent years, beverage manufacturers have faced the need for

Under these circumstances, Suntory and Hitachi have begun

prompt and flexible product supply in response to diversifying

collaborative creation based on the concept of “Harmony between

consumer requirements and fluctuations in demand caused byPeople and AI,” combining the former’s expertise regarding planningchanges in weather and climate. In addition to fulfilling theseand the latter’s AI technology to develop a system that enables theneeds, it is necessary for these manufacturers to formulate optimal

creation of optimal production plans in the face of changing

production plans that account for complex constraints, such as

demand and complex constraints. We applied this system todelivery times, production capacity and production andproduction planning conducted at Suntory’s actual manufacturingtransportation costs. Suntory Beverage & Food Ltd. (“Suntory”)

bases and verified that it was possible to reduce the amount ofhas been basing its production plans on the experience ofwork time put into planning from its previous average of

responsible staff. However, creating plans that account for

approximately 40 hours per week to approximately 1 hour. Aiming

complicated restraints requires a high level of planning ability and ato optimize its production plans throughout Japan, Suntory

huge amount of time. Furthermore, production plans are drawn up

launched full-scale operation of this system in January 2019 and isfor each area, which means that the most optimal conditions will

currently working to build a stable supply system that can provide

differ for each location. For these reasons, Suntory has been

immediate response to fluctuating demand and to improve

unable to formulate an optimal plan that effectively utilizes all of its

productivity by raising operational efficiency.

production resources.

52

Hitachi Integrated Report 2019

Lumada platform
Quickly build appropriate systems by utilizing open and secure IoT platforms(1) IoT platform architecture
Lumada has established an open and secure IoT platform that can

The platform's structure for flexibility combining technologies isquickly provide digital solutions by swiftly combining advanced

defined by six elements. These elements make the achievement of an

products and technologies from both inside and outside Hitachi Group.

open and flexible platform possible with architectural specifications andThis platform enables us to comprehensively provide a variety ofconnection methods that meet global and industrial standards.

mechanisms, such as advanced analytics technology and asset
management functions, thereby allowing for the prompt realization ofThanks to these attributes, digital solutions utilizing Lumada’s IoT
platform are intelligent, composable, secure and flexible.

appropriate digital solutions.
Features of Lumada’s digital solutions
Intelligent

Composable

IoT platform architecture

Analytics technology such as machine learning and artificial intelligence allow
for deep insight and awareness that leads to action.
Hitachi’s core technologies can be widely combined with OSS* and thirdparty technologies to maximize outcomes (results).
* Open Source Software

SecureFlexible

Users can ensure high levels of security by confirming the appropriatenessof connecting equipment, managing the security of stored data andcontrolling access.

StudioDisplay results

Analytics

Analyze data through AI andanalytics technology

Data management

Gather and process data

Edge

Core

Relay device data to
IoT systems

Prepare a data lake andaccumulate data

Foundry

We can provide flexible solutions that fit equipment, devices and IT
environments currently in operation both through the cloud and on-site*.

Provide infrastructure, such as servers andnetworks, for IoT systems* Involves installing equipment inside company facilities and implementing and operating systems from within.

(2) Lumada Solution Hub, a mechanism enabling the speedy composition of solutions

packages Lumada solutions and application development
environments in forms that are easy to implement and then registers
combine business solutions and application development
environments are registered and stored in the Lumada Solution Hub

sin
Bu

tion
s

catalog. This system enables smooth transitions from the speedy
verifications of solutions, which are conducted through collaboration
with customers, to production environments. Furthermore, it allows for
efficient rollout to multiple locations, including those that are situatedoverseas.

Consulting
services

Partnersolutions

LumadaSolution Hub

s
ion
m
he
rt

and provides them on cloud platforms. Easy-to-reuse packages that

customers’ dig
ed up
ital
tran
spe
o
t
new solutions
sfo
e
s
t
a
n
a
e
r
n
o
rm
c
i
o
S
l
d
u
tion Htadalyatub regiolu tive he Lum
s
a
t
te
r in
o
b
ess soluUs
Co e slla

Launched in 2019, the Lumada Solution Hub is a system that

Application
development
environments

Operationaltools

In the future, the Lumada Solution Hub will be opened up to partners
and register solutions that they have developed, in addition to the
Hitachi solutions that are already a part of the Hub’s catalog. With
these solutions, Hitachi will accelerate the creation, distribution andutilization of digital solutions while speeding up the construction of
Lumada ecosystems.

Partner cloudservices

Analysistools
Hitachi cloudservices

Center of
Excellence• Assemble human resources who aredigitally savvy in terms of OT and IT• Promote the use of solutions and facilitate
the registration cycle• Develop human resources
who employ these solutions

53