2016 R&D Strategy
To become “An Innovation Partner for the IoT Era”
28 June 2016

Norihiro Suzuki, Ph.D.
Vice President & Executive Officer
Chief Technology Officer
General Manager, Research & Development GroupHitachi, Ltd.
© Hitachi, Ltd. 2016. All rights reserved.

Contents
1. Basic directions for 2018 Mid-term Management Plan
2. Creating service business by accelerating
collaborative creation

3. Building-up technology platforms for business growth
4. Challenging future societal issues
5. Summary© Hitachi, Ltd. 2016. All rights reserved.

Contents
1. Basic directions for 2018 Mid-term Management Plan
2. Creating service business by accelerating
collaborative creation

3. Building-up technology platforms for business growth
4. Challenging future societal issues
5. Summary© Hitachi, Ltd. 2016. All rights reserved.

1-1 2015 Mid-term Management Plan summary2015 Mid-term Management Plan- Achieve growth & Hitachi’s transformation Innovation

GlobalTransformation

Hitachi Gr. business policy: increase business income
From “product-out” to “market-in”
Shift to “customer-driven”

Realign R&D organization, enhance innovation strength

1. Assign researchers close to customers to expand
collaborative creation
2. Create innovative technology that satisfy market needs© Hitachi, Ltd. 2016. All rights reserved.

3

1-2 Events worldwide•Hitachi Social Innovation Forum•Hitachi Social Innovation Forum

London ['15/6]
Munich ['15/10]

Las Vegas ['15/4]•CSI-North America New facility
Santa Clara ['16/1]

CSI-Europe

CSI-North America

CSI-Tokyo
CSI-China•Hitachi Technology Forum
Beijing ['15/12]•Hitachi Social Innovation Forum
Tokyo ['15/10]•Technology Community
Tokyo ['15/11]

Strengthening engagement with customers by holding events worldwide© Hitachi, Ltd. 2016. All rights reserved.

41-3 Collaborative creation with customers

FY 2014

Number of cases
discussed

FY 2015

81 17927 74

Number of co-created
PoC with prototype© Hitachi, Ltd. 2016. All rights reserved.

5

1-4 2018 Mid-Term Management Plan:
What Hitachi hopes to become

An Innovation Partner for the IoT Era
Accelerate collaborative creation with customers
through advanced Social Innovation Business
Collaborative creation (Open)

Driverbusiness

Basebusiness

Large-scale projects(EPC business)

Digitalized
Social Innovation Business= Digital solution
IoT platform “Lumada”

Products(Products/Materials business)〇10：0860.00HzOUTPUT FQ

60.00Hz◀

OUTPUT FQ

60.00Hz▶

OUTPUT FQ

60.00Hz◀

System integration(SI business)

General (Scalable)

Individual (Order made)Driver of overall growthLocal

Command source

RemoteBasebusiness

Basebusiness

Independent (Closed)
EPC: Engineering, Procurement, Construction

Source: 18 May 2016 Hitachi Mid-term Management Plan

© Hitachi, Ltd. 2016. All rights reserved.

6

1-5 Basic directions for the R&D Group2018 Mid-Term Management Plan: What Hitachi hopes to become

An Innovation Partner for the IoT Era
Accelerate collaborative creation with customers
through advanced Social Innovation Business

Basic directives for the R&D Group

Create business innovation amidst uncertainty• Create service business by accelerating collaborative creation• Build-up technology platforms for Service & Product businessgrowth• Challenge future society issues through open innovation

Section 2Section 3Section 4© Hitachi, Ltd. 2016. All rights reserved.

7

1-6 Research supporting the Front
Driving R&D close to customer sites
Business structurefrom FY2016

Customers
Front
Regional bases[R&D structure from FY2015]
Global Center for Social Innovation CSI
Developing services in keeping withthe needs of customers in each region
North America100

Europe 70

China 115

Asia 65

Japan 200

[Total: 550]

Customers’ segments (12 BUs)

Center for Technology Innovation
PlatformCore of Social Innovation

Products
Industrial products,
Automotive parts,Materials, etc.

CTI

Establishing Global No. 1 technologies(Platforms, Products)[Japan: 2,050]

Center for Exploratory Research

CER

Resolving future societal issues[Japan: 100]

[Total: 2,700] (+100 from FY2015)
Source: 18 May 2016 Hitachi Mid-term Management Plan

BU: Business Unit

© Hitachi, Ltd. 2016. All rights reserved.

8

1-7 “Collaboration Forest” - New site
New research building @Kokubunji site to facilitate co-creation
Cutting-edge research equipment for rapid prototyping inaccordance with customer needs, will be installed
to promote collaborative research with customers worldwide

Construction
to be completed
in March 2019

Jinso-toRapid prototyping formaterializing ideas

Kyoso-toOdairaMemorial Building
Entrance towelcomevisitors

Environment to holddiscussions withcustomers worldwide(Convention center &Collaboration space)© Hitachi, Ltd. 2016. All rights reserved.

9

1-8 Global Research: Collaboration between sites
CSI-Europe[70]CSI-China[115]

Globally coordinatedIndustrie 4.0
Railway business
Made in China 2025
'16/4
New Guangzhou site

Society 5.0'19/3
New collaboration
space

CSI-NA[100]

Industrial Internet
IoT platform businessAsia
smart city
'16/1: Opened new office'16/4: Est. Financial Innovation Lab.

CSI-APAC[65]

CSI-Tokyo
[200]

CTI
[2,050][Approx. number] Researchers
APAC: Asia-Pacific,
CSI: Global Center for Social Innovation,
CTI: Technology Innovation Center, CER: Center for Exploratory Research

CER
[100]
© Hitachi, Ltd. 2016. All rights reserved.

101-8 Total R&D expenditure for Hitachi Group
Approx. 4% of revenues is invested in Hitachi Group R&D

700

6R&D expenditure (billion JPY)
R&D expenditure/revenues (%)

5600
4500
400

3300

2200

R&D expenditure/revenues (%)

R&D expenditure (billion JPY)

800

1100

00
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Fiscal year(Forecast)© Hitachi, Ltd. 2016. All rights reserved.

11

1-10 Allocation of R&D Group funds
Frontier & Platform Research: Strengthening digital solutions researchResearch target
Sponsored research<BU funding>Business roadmap [Led by BU]
Current businessAdv. sponsored research

Next gen. business<BU funding>Technology roadmap [Led by R&D Group]

Frontier & Platform<Corporate funding>

Co-creation/ Technology platform enhancement/ New business creation

Portfolio% Change in digital solutions related research
Frontier &Platform
ResearchSponsored
research

30%

R&D
expenditure*1 50%
FY2016

Advancedsponsored
research
BU: Business Unit

24%
FY201520%*1: Roughly 20% of total Hitachi Gr. R&D expenditure

FY201664%© Hitachi, Ltd. 2016. All rights reserved.

12Contents
1. Basic directions for 2018 Mid-term Management Plan
2. Creating service business by accelerating
collaborative creation

3. Building-up technology platforms for business growth
4. Challenging future societal issues
5. Summary© Hitachi, Ltd. 2016. All rights reserved.

2-1 Generating service business through co-creation
Co-creating digital solutions using IoT/Big Data/AI
Power/Energy•Microgrid•Wide-area grid stabilization•Decision support system•Wind turbine gen. system

Industry/Distribution/Water

JP NA EU CN AP

JP NA EU CN AP•Value chain optimization•Demand forecasting•Predictive diagnostics•Smart manufacturing/LogisticsUrbanFinance/Public/Healthcare
JP NA EU CN AP•Physical security•Human behavior/flow analysis•Train management system•Video surveillance
JP: Japan

NA: Americas

EU: Europe

CN: China

JP NA EU CN AP•Digital network payment•Hospital mgmt. reforms•Integrated community care
AP: Asia-Pacific© Hitachi, Ltd. 2016. All rights reserved.

14

2-2 Smart manufacturing
Derive business opportunities from Kizashi through joint workshops& validate with prototype

Vision design
Analyze
Discover businesscustomer issues
opportunities

Service prototyping
Createservice ideas

Monozukuri-related Kizashi

Work analysis/support by IoT[Flow analysis][Movement analysis]

Increased Monozukuri close to market (locally produced &consumed Monozukuri)
Increased quality from non-experts due to work support
Change in supply chain structure due to design data
circulation and 3D printer manufacturing
Increased automation of supporting tasks due to AI…

Increased security risks

PoC with several customers© Hitachi, Ltd. 2016. All rights reserved.

15

2-3 Smart logistics
Improve warehouse efficiency by automated guided vehicle& AI-based demand prediction
Automated guided vehicleＯＴ

Challenge: Decreasing availability of workers
Automated guidedvehicle (AGV)
Ｒａｃｒｅｗ
AGV conveys
shelfＩＴ

AI-based demand prediction

Challenge: Dynamic demand-based work orders
Warehouse cart
allocation system

Picking order

AI*（Ｌｕｍａｄａ）

AI predicts demand,
optimizes the order ofcarts & issues workorders

Workers only
pick items
Picking station
3x more efficient than only manual labor
OT: Operational Technology* Hitachi AI Technology/H

Item picking based on the issued orders

8% efficiency increase due to AI© Hitachi, Ltd. 2016. All rights reserved.

162-4 Next evolution in Industry & Distribution
Optimization across the total value chain

Supply chain management

Warehouse cart allocation
simulation“Connecting” to create new value

Work flow-line monitoring

Cross-industry
cooperative delivery© Hitachi, Ltd. 2016. All rights reserved.

17

Contents
1. Basic directions for 2018 Mid-term Management Plan
2. Creating service business by accelerating
collaborative creation

3. Building-up technology platforms for business growth
4. Challenging future societal issues
5. Summary© Hitachi, Ltd. 2016. All rights reserved.

3-1 Challenges in the 4 Social Innovation Business areasContribute to Social Innovation Business by resolving challenges
Collaborative creation(Open)

Driverbusiness

Basebusiness

Large-scale projects(EPC business)

Digitalized
Social Innovation Business= Digital solution

Raise total value

Scalability by platforming

System integration(SI business)

Products

General (Scalable)

Individual (Order made)Driver of overall growth(Products/Materials business)〇10：0860.00HzOUTPUT FQ

60.00Hz◀

OUTPUT FQ

60.00Hz▶

OUTPUT FQ◀

60.00Hz
Local

Raise profitability by rapid delivery ofhigh quality systems
Base

Command source

RemoteExpand share & profitabilityby IoT
Basebusinessbusiness

Independent(Closed)
EPC: Engineering, Procurement, Construction

Source: 18 May 2016 Hitachi Mid-term Management Plan© Hitachi, Ltd. 2016. All rights reserved.

193-2 Technology platforms for business growth(2) Large-scale projects

Collaborative
creation(Open)(EPC business)(1) Digitalized Social
Innovation Business= Digital solution

Lumada-based solutions
3-4

Proton beam therapy equip.

Sensing

Security

Hitachi AI Technology/H

Robotics

3-3-2

Symbiotic-ADS

System modernization

3-5

IoT industrial products

3-6-1

ADAS

3-6-2

General (Scalable)

Individual (Order made)Train/Maintenance/ TrafficManagement

3-3-1

Wind turbine generation systems

High efficiency converters(3) System integration(4) Products(SI business)
Independent (Products/Materials business)(Closed)
EPC: Engineering, Procurement, Construction

ADAS: Advanced Driver Assistance System© Hitachi, Ltd. 2016. All rights reserved.

20

3-3-1 (1) Digital solutions: Examples
Build-up multiple digital solutions on Lumada

Air-conditioning

MiningPowerHealthcare

Predictive maintenance

Event-based failure prediction

Smart grid controls

Efficient hospital operation

IoT platform “Lumada”
Customer OT system

Data analysis Security

AI*…

Data lakeCore technology
OSScommunity*Hitachi AI Technology/H

Customer IT system

Solution core (Solution blue print)

OSS: Open source software

Partner’s
IoT platforms

IT/OTpartners

OT: Operational Technology

Showcase @ IoT World 2016
© Hitachi, Ltd. 2016. All rights reserved.

21

3-3-2 (1) Digital solutions: Core technology
Strengthen technology forming the revenue stream in IoT
Sensing

Security

Environmentally-powered sensing system

Control ramification of threats from the open market

Efficiently collecting and storingenergy from the environment

Sensor node (36cm2)

Field test @ internal factory ['16/6]

Joint research with Keio University ['16/4]

AI

Robotics

Making current systems intelligent by connecting to AI

New human-symbiotic service robot EMIEW3ControlMonitoring

IT/FacilityHitachi AI Technology/H

Data
Mgmt./Tasks/
Human
Generate hypothesis
behavior

Select indices

Hitachi AI Technology/Business Improvement Service ['15/10]

Robotics Co-Creation Room

Press conference, Collaborative creation activity ['16/4]© Hitachi, Ltd. 2016. All rights reserved.

22

3-4 (2) EPC business: Railway
Raise total value of railways by transforming rolling stock, maintenance & operations
Rolling stock / MaintenanceNew orders received for
U.K. Rolling stock/Maintenance for Abellio
U.K. Rolling stock/Maintenance for First Great Western
U.K. Rolling stock/Maintenance for TransPennine Express

Traffic Management
New order received for
UK ThamesLink TMS

TMS for ThamesLink
Trains for First Great Western

Trains for Abellio

Reliability-centeredmaintenance (RCM)

Trains for TransPennine Express

Scalable carriage design
RCM: Reliability centered maintenanceUsing IoT
Monitoring
Optimizing
standard
maintenancecondition

Raising efficiency by RCM
TMS: Traffic management system

On-board
signaling equip.
Depot

Energyefficientdriving
Efficientcars & crew
operationsCoordinated cooperation
with the field through TMS© Hitachi, Ltd. 2016. All rights reserved.

23

3-5 (3) SI business: System modernization
Recover business spec from legacy system, enabling rapid delivery of new systems

Currentsystem

New system

Transfer current system
to new platform

Legacy platform

New platform

BeforeConventionalsystemtransferAfterSystemtransferwith thistechnology

Spec survey / Interview
Specification
document

Spec changes over time
→ Difficult to grasp actual spec

Operation data

Automatic spec recovery

Operationlog• Log structure analysis• Program analysis• Data expression clustering

DatabaseProgram→ 60% reduction in
spec survey hours

Development
Incorrect
spec•Missing necessary functions•Remaining unusedfunctions

Rework (many hours)
Development
Correct
spec

Reduceddevelopment time© Hitachi, Ltd. 2016. All rights reserved.

24

3-6-1 (4) Product business:
IoT compatible industrial products
Visualization of operation status & optimization of maintenanceby IoT of facility equipment■System configuration

Customer
Operation
status alarmInternet

Operation
data

Dedicated line
Mobile VPN

Wireless carrier terminal

Exterior

Hitachiprivate cloudComm.
terminalComm. terminal

Ubicube-GW

3G

CPTransseries

LTEController integrated
permanent magnet
motor
Use case inHitachi HE pump*

Air compressor

VPN: Virtual private network

Comm.

Product example

MotorSensor embedded IoT compatible products

ProductIn field-trial [‘15/11~ ]*Fresh water on the ground construction pump (Hitachi Industrial Equipment Systems Co., Ltd.)© Hitachi, Ltd. 2016. All rights reserved.

25

3-6-2 (4) Product business: ADAS
Automated driving by
integration with infrastructure, environmental sensing and vehicular control
360 degrees sensing technology

ADAS

4 monocular cameras
Stereo camera

Vehicle control

Automated driving on highways/urban roadsBegin public road tests ['16/2]

Decision

Operation

Signs

Vehicles Lanes

Integrate information

Safe driving

LightsBicycles Pedestrians

Prediction

Safe + Practical driving

ADAS: Advanced Driver Assistance System

Complexity ofobstacle behavior pattern

Recognition

Infrastructure

Securecommunication

CenterEnvironment sensing

Highway

Cloud

Integration with
infrastructure

4 radarsRoad

Cloud/Security technology© Hitachi, Ltd. 2016. All rights reserved.

26

Contents
1. Basic directions for 2018 Mid-term Management Plan
2. Creating service business by accelerating
collaborative creation

3. Building-up technology platforms for business growth
4. Challenging future societal issues
5. Summary© Hitachi, Ltd. 2016. All rights reserved.

4-1 Challenging future societal issues

Advanced road traffic
Energysystems
value chains

New manufacturingsystems

Smart foodchain systems

Cabinet Office of Japan
5th Science and Technology Basic Plan

Smart production
systems

Super Smart Society
Society 5.0

Integrated materials
development system Global environment
information platform

Hospitality
systems

Integrated
community care system
Infrastructure
maintenance & renewal
Resilience against
natural disasters

Incubating for a Super Smart Society
Information sciences Physical sciences

Life sciences

Frontier© Hitachi, Ltd. 2016. All rights reserved.

28

4-2 Research topics
Build-up collaboration networks for rapid incubation
Life sciences

Regenerative medicine

Low-cost cell production for proliferation ofregenerative medicine(*1)

Info. sciences New-paradigm computing
Optimization of complex society systems
Solving combinatorial
optimization problems inreal-time with lower power（1/1000）

iPS cellAutomated cell
culturing

Ising chip
Optimization of(20kbit, 34mm)
society systems
Partner: Kyoto University, Sumitomo Dainippon Pharma Partner: Hokkaido University

Life sciences

Quality check

Breath-alcohol detection

Portable prototype for vehicle smart key•Reacts only to human breath;tamper resistant•Ignition interlock to prevent drinkdriving

Eradication of drink-driving
Partner: Honda R&D Co.

Info. sciences

Logical dialogue AI

AI to support management decisions
Decision-supporting AI
Logical dialogue
Text big data
World affairs/ Industry
news…

Partner: Nat. Inst. of Adv. Industrial Science and Technology*1: This research is partially supported by the Japan Agency for Medical Research and Development, AMED.

© Hitachi, Ltd. 2016. All rights reserved.

29

4-3 Promoting Open Innovation
An comprehensive approach beyond the confines of industryacademia-govt., country or region will become indispensableIntelligence

Govt.

Academia
Systemization of knowledge

Realization Fostering of human resources
Fusion of Arts & Scienceof Society5.0
FinanceCutting-edge technology development
Regulatory reform

Citizens

Forums for discussion

IndustryAcademia-Govt.
collaboration toshare a vision or
ideal for society

TechnologyNeeds© Hitachi, Ltd. 2016. All rights reserved.

30

4-4-1 Open Innovation: in Japan
Joint research sites @ 3 universities in Japanto realize a Super Smart Society (Society 5.0)
Hitachi The University ofTokyo Lab ['16/6]
Drafting national visionHitachi Kyoto University
Lab ['16/6]
Explore future society issues
Explore future society issues up
to 2050 on the basis of regional
tradition and culture amassed
through a history over 1,000years

Create a vision for government
policy based on accumulated
knowledge from government &society, propose policy/conduct
joint research

Hitachi Hokkaido
University Lab ['16/6]
Solution for emerging regional
challenges
Leverage regional attribute ofscale representation of Japan
to explore society issues andlead solution PoCs
13th Commendations for persons of distinguishedachievement in Industry-Academia-Governmentcollaborations - Connecting Innovation Grand Prize –Prize of the Minister of Education, Culture, Sports,
Science and Technology
For the development and proliferation of “4D tumor
tracking proton beam therapy system”(Joint research with Hokkaido University)© Hitachi, Ltd. 2016. All rights reserved.

31

4-4-2 Open Innovation: Outside Japan
Basic research

Railway

Healthcare

Industry

Automotive

Resources

andUniversity of University of Bispebjerg
Frederiksberg
Cambridge Birmingham Univ. Hospital
(UK)
(UK)
(Denmark)acatechStanford
University(USA)

EERC(Germany)

Telecomm.

EnergyMaterials

IndianInstitute ofTechnology(India)Universiti
TeknologiPetronas(Malaysia)

ShanghaiJiao Tong
University(China)

EERC: Energy and Environment Research Center

IT

Automotive New markets

TsinghuaUniversity(China)

Network

Environment

VehicleMTC: Mobility Transformation Center(USA)

EnergyUniversity of University ofMichigan
Campinas
MTC (USA)(Brazil)© Hitachi, Ltd. 2016. All rights reserved.

32

Contents
1. Basic directions for 2018 Mid-term Management Plan
2. Creating service business by accelerating
collaborative creation

3. Building-up technology platforms for business growth
4. Challenging future societal issues
5. Summary© Hitachi, Ltd. 2016. All rights reserved.

5. Summary

To become“An Innovation Partner for the IoT Era”
Create service business by accelerating collaborative creation
Build-up technology platforms for Service & Product businessgrowthChallenge future social issues through open innovation© Hitachi, Ltd. 2016. All rights reserved.

34

Delivering new value to society throughcollaborative creation with our customers and partners© Hitachi, Ltd. 2016. All rights reserved.

35

END
2016 R&D Strategy
To become “An Innovation Partner for the IoT Era”
2016/6/28

Norihiro Suzuki, Ph.D.
Vice President & Executive Officer
Chief Technology Officer
General Manager, R&D Group, Hitachi, Ltd.

© Hitachi, Ltd. 2016. All rights reserved.