Jan. 04, 2019
2019 New Year Message
I wish to send New Year’s greetings from the new Otemachi Head Office, Tokyo, to everybody in the Sumitomo Corporation Group around the world.
How did you enjoy the holiday season? I spent the holidays relaxing at home. The morning of New Year's Day was rather chilly, due to a cold front which came down from the continent. The view of the great Mt. Fuji was breathtaking---glowing red in the first sunrise of the year before shining pure white as the sun climbed higher. The weather was fine, making it a refreshing day. While enjoying delicious Japanese sake and New Year’s specialties, I reflected on the past and considered our upcoming centennial year. I also recalled the words of Dr. Surin Pitsuwan, then-ASEAN Secretary-General, whom I met 10 years ago in Jakarta.
This is what he said to me: “Globalization will progress. It will continue to reveal disparity in various areas and create new challenges for society---concentration of the population in big cities, a growing gap between rich and poor, immigration problems, environmental destruction... That is why cooperation among the ASEAN countries as well as the ASEAN Economic Community, starting from 2015, is very important. We are earnestly looking forward to mutual cooperation with Japan to help resolve social problems." In his excellent English, he appealed to me enthusiastically.
Ten years have passed, but even now, his message carries considerable weight. The significance becomes apparent when you substitute “the world” for “ASEAN” and “Japan.” However, the globalization which he described 10 years ago differs considerably from that of today. In the future, it will change further in terms of speed and content.
Before sharing my prospects, I would like to go back in time a little to reflect on our journey.
Japan experienced a period of fast economic growth from the mid-1950s to the 1970s, followed by the collapse of its “bubble economy” in the early 1990s. The period since then is called the “Lost 20 years” in Japan. We have also seen the Asian currency crisis in 1997, and the subsequent IT bubble, and global financial crisis in 2008, followed by sustained monetary easing and economic growth. Through the changes of these times, our company, founded 100 years ago and the company’s name was changed to Sumitomo Shoji Kaishya,Ltd in 1952, had as its slogan the words of Shunya Toji, the president at the time: "enthusiastic amateurs outperform professionals.” In recent years, we have had slogans like: "Big Three & The Best” in the 1970s, and the vision of being an “Integrated Business Enterprise” in the 1980s. Since then, we have worked together as one to overcome the crises of the times, including the unlawful copper trading episode and substantial impairment losses, succeeding in expanding the scope of our business. During this time, we have moved our head office from Yodoyabashi, Osaka, to Tokyo: Takebashi, then Harumi, and most recently Otemachi. We have also worked to strengthen our organizational systems to suit the times, and expanded the functions of the head office. The road had ups and downs, and was dynamic.
After the second world war, our company launched into trading business, though it was considered taboo according to Sumitomo tradition until that time. During the following seventy-odd years, up to the present, the company has continued to tackle challenges unceasingly. Over that period, the relationships that we have built with all of our stakeholders---the executives and employees who have worked for the Group, our business partners, regional communities and shareholders, and the various businesses which were supported by them---form the largest and greatest asset of our Group, and will be the driving force sustaining our future growth. It remains a foundation of our business that has not been eroded by the recent supremacy of digital data, but we must not become complacent.
Now we are in the midst of the fourth industrial revolution, sparked by revolutionary technology such as IoT, Big Data, AI, and robots. The impact of this ongoing revolution will be faster and bigger, changing our daily lives and society itself. The framework of the G7 and G20 that has led the international community has transformed into a so-called “G-Zero World,” while social inequality is growing, and our societies face emerging challenges such as population growth and aging demographics. Our globalized world and innovative technologies will change society from the core. Data hegemony, that divides society into those who own data and dominate the economy, and the remaining majority, will accelerate fragmentation of social structures. Since the start of the 21st century, I have been surprised by the speed of change in our business environment.
Against this backdrop, I would like to reflect on 2018 and look at the year ahead.
In the political sphere, we saw trade friction between US and China, the Brexit conundrum, US sanctions against Iran, and various issues arising out of immigration. In consideration of the international political turmoil, the latter half of the year saw unrest in markets overall, reflecting uncertainty about world economic trends, and the IMF revised its global economic growth forecast downwards for 2019 and 2020. Furthermore, unprecedented natural disasters have occurred around the world. While we pray for the speedy recovery of those affected areas, it was also a year that we strongly felt the importance for the Sumitomo Corporation Group to be prepared for natural calamities and for any change.
Major events are scheduled in Japan for 2019, such as transition from Heisei to the next Imperial era in May with the enthronement of the new Emperor, Rugby World Cup, and the G20, for which Japan will be the host country. The Tokyo Olympics are scheduled for the following year, 2020. We also expect to see various policies implemented for further structural reform.
Sumitomo Corporation Global Research (SCGR) has described the year's economic prospects in terms of "growing tension" in world affairs and the economy. While we hope for the US and China to ease trade tensions, we need to assume that the situation will remain unpredictable for a while. The intentions of many other countries are also involved in complicated ways, and the rules which have governed the international community until now are under reconsideration, as the search for a new international order and framework continues.
US economy, which has continued its strong performance, is seeing short-term and long-term interest rates reverse, resulting in potential negative yield. This phenomenon generally implies a recession in the near future, and caution about the future of the economy is growing. Unstable market movements, affecting shares, bonds, exchange rates and commodities also reflect growing tension in the political and economic fields.
However, there is also a development that is totally independent of these events. That is the advancement of the fourth industrial revolution, which I described earlier. Emerging technologies will have a significant impact on the structure of all business and create new markets and needs. The similar impacts and irreversible flow are also found in the environmental concerns. As Paris Accord is implemented, efforts to prevent global warming will force businesses to change. In these tides of change, the selection of winners and losers will accelerate. This flow will not change.
There are three things that I would like to share with you to begin the year.
These are three key ideas to bear in mind: the first is “back to basics,” the second is “transformation,” and the third is “leadership.”
Firstly, back to basics. Let us stay true to this.
There are many challenges awaiting us in the coming 100 years. These will be accompanied by difficulties. But by always keeping the basics in mind, we can keep growing as we have been over the past 100 years.
For us, the basics are Sumitomo’s Business Philosophy, our Group’s Management Principles, and the Six Material Issues.
In order to implement them, we need to promote diversity and inclusion as well as communication. We also need collaboration across organizations, Joint & Several concept, and integrated group strength. Let us also value group governance and compliance.
The second is transformation. We should strive forward.
Let us develop our response to the various changes, including ever-advancing digitalization. There is still much white space for innovation around us, and through cross-organizational collaboration, there are limitless opportunities for creating new ideas and value. We should not be constrained by conventional wisdom, but instead, we should imagine our future with large-scale ideas in a wide range of fields, re-defining the relationships between ourselves and our customers, tackling challenges for the achievement of our dreams without fear of failure. We should consider the re-definition of business brought about by ever-advancing digitalization as an opportunity, bringing transformation to our business with various ideas, continuing our efforts to maximize value through digital transformation (DX).
What is considered conventional today will be abnormal or obsolete tomorrow. Through our business, we should aim to realize the dream of making our changing society more exciting. We must not loosen the reins of the unceasing challenge.
The third is leadership. Let us all exercise this.
Each individual executive and employee of our Group should reassess the role and responsibilities expected of them. Leadership is required in order to fulfill the responsibilities which each of us bears. This is true for me. It is also true for you. We must all consider the leadership which we must individually implement. Let us all put it into practice.
With over 60,000 members in our Group, we are promoting the strategies and policies put forward by each organization. We will understand and accept partners inside and outside the company and will transcend conventional boundaries to collaborate across organizations. Each person within our Group should take a sincere interest in the various businesses and their strategies, and strive to understand through communication, thereby learning and making every effort to transform our organization and its strategies, to improve them and to create new value. Sumitomo Corporation and the Group are truly powerful ecosystems for the promotion of open innovation.
What we should practice now is incorporated in the Medium-Term Management Plan 2020 (“Unceasing Challenge for New Value Creation”) announced last year. This year is the important second year of the three-year plan, where we must make sure to materialize the various initiatives we have launched last year. As we start the new year, please reaffirm the specific plans for your organization and put them into action. I believe this year will be the first step towards the next 100 years. Let us all continue with the steady progress.
I sincerely hope that 2019 will be a good start of the next 100 years for our Sumitomo Corporation Group and that it will be a fulfilling and happy year for all of you and your family.
Today is truly the start. Aim high, act on our principles.