KEYENCE Co., Ltd., a comprehensive manufacturer of factory automation (FA). It has maintained an operating profit margin of 40-50% for more than 10 years, and has an average annual income of 18 million (2020), making it a well-known and extremely profitable company. Its high performance is often described as “because it is fabless”, but there are many manufacturers that are not fabless. What is the difference between KEYENCE and KEYENCE?
This article was written by Ono with reference to various books and magazine articles. I myself have no contact with KEYENCE. So, I wonder if this is the point of high performance, not “articles written by people who know Keyence well”, but “as far as the information that appears outside” of Keyence. This is an article that analyzes what I think from my point of view. Some of the magazines I referred to are old, and I think the current information is different.
Keywords to understand KEYENCE
The following is a brief summary of the activities that KEYENCE is conducting. First of all, regarding the strategy part on the left side, we will make improvement proposals by looking at the customer’s production line as a “one system”. Even a small part of KEYENCE products is not “I don’t know anything else”.
I am also studying sensor-related products from other companies. Keyence’s sales are such that there are “technical study sessions” in-house three or four times a week, which requires a great deal of technical knowledge. That is because we regard the customer’s production line as one system.
When you think of improvement proposals that regard the production line as one system, you tend to think of it as “individual customization”, right? Each customer has different needs, so when it comes to meeting customer needs, it’s generally easy to think of customizing and making to order.
However, I think that the basis of KEYENCE’s strategy is ” solve by mass customization, not build-to-order manufacturing “.
Let’s look at the keywords one by one.
Mass customization is said to be “a concept that combines mass production (mass production) and customization (individual design)” in the automobile industry. In KEYENCE, “mass customization” is to collect individual needs and sublimate them into mass products (market them as products) to solve them.
For example, suppose company A’s production line is having trouble with issue X. Therefore, if you customize an existing product or manufacture an original device that can solve X for company A, it will be “custom-made”. The amount will be high. This is also a law of manufacturing, but the “number of products manufactured” has a greater effect on cost than the relationship between “high cost” and “high effect”.
Why are the production numbers so small? This is because only one company is needed in this case.
Now, what if you find out that “other B companies are also in trouble with X, and C company is not X itself, but is in trouble because it is close to X”.
If you can sell to three companies, the selling price will be much lower than if you develop it exclusively for one company . Well, that’s right, but I think this is an important point. In other words, I think that B2B manufacturing companies have little relation between “selling price” and “customer value”.
The number of products manufactured is more important than that.
Compared to BtoC, the number of “products” for BtoB is originally small, so the selling price tends to be high. But 90 %は、「中小企業」なのです。日本企業の99% are SMEs, “SME Target” is a good idea to sell quantity. However, custom-made products from each company are very expensive and the number of purchasers decreases, so we cannot get out of the trap that the number of products manufactured cannot be increased = the selling price is high.
In addition, if there are only three prospective customers for equipment that has a solution only for X, we will sell it by planning and manufacturing equipment that can solve “X + Z” so that we can sell it to other companies that are also in trouble with Z. You can increase the number of prospects.
It seems that this is exactly what KEYENCE is doing by utilizing data in product planning. There are two benefits here.
1. The number of demand can be predicted
2. The industry’s first function can be added and it can be put on the market as a one-of-a-kind product.
This enables product design that “customers who use it can enjoy more profit than the amount paid for the equipment” even if the product has a high profit margin. It’s a win-win.
70% of the products to be released are "first in the industry"
In this way, KEYENCE knows which customers are having trouble with what challenges. The reason I know it is because “sales ask”. Keyence’s sales are called consulting sales, and they are educated so that they can discover “problems that they are not aware of” at the customer’s site.
The issues are stored in a database, and you can predict “what issues will be solved and how many companies will be able to sell them”. Problem solving means that if you put it out too early, it won’t sell, and if it’s too late, it will be price competition. I think this release timing is also exquisite. In other words, you can see the degree of demand for solving each problem (whether you want to solve the problem even if you pay for it).
This means that “the potential needs of the customer are revealed by using the product.”
When you release a product, you are basically required to be “industry first”. If it is “the first in the industry”, it is easy to add value, but it is also the culture of KEYENCE that “do not make things that customers want” and “put them out before they are told they want them”.
Making the same thing as the one in the world does not solve the problem that the customer is not aware of, so the Product Planning Department is required to consider it until it is crowned as “the first in the industry”. At the product planning stage, you will be asked to brush up until the profit margin reaches 80%.
In this way, KEYENCE activities start with “understanding the potential needs of customers” and data collection is indispensable, but how can we collect so much data?
There is a device as an organization there. The feature is that the sales promotion team is a mixed team of sales and technology, customer interviews are conducted, the technical staff in the sales promotion makes proposals to the product planning department, the development department commercializes it, and sales make proposals. It will be a flow to do.
KPIs have been set to enable this business process. Consideration for the organization will continue next time.
Don't make what customers want
There is the word solution sales. This is a sales style that aims to win orders by making proposals to solve the “problems” that customers have. “Issues” include issues that customers are aware of and issues that customers are not aware of.
When we talk about solution sales, it depends on the person who uses this word, whether we aim only to solve the “problem” that the customer puts into words, or try to solve the “true problem” behind it.
KEYENCE has a culture of “not making things that customers want.” It means not making the product exactly what the customer wants, and trying to discover the real challenge. At KEYENCE, KEYENCE calls “consulting sales” a style of discovering true issues and making customers “aware” of those issues.
Now let’s see how we are discovering the “real challenge”.
Sales and technology mix team, sales promotion department
The Sales Promotion Department is a mixed team of sales and technology. With regard to the issues caught by sales, we will visit existing customers together with technology and “observe the site” to find the true issues. How are customers doing their jobs, where is the waste, and what can’t be done because of the equipment, “I really want to do this”? Observe and so on. KEYENCE sales are receiving training to train this observing ability.
We plan products based on the discovery of true issues. At this time, not everything is a product plan. “True issues” are registered in the database, and from the “issue collection” collected so far, what kind of product planning should be planned to solve more issues, and the priority should be examined . It is done.
After you make a product, you have to sell it. KEYENCE is excellent because it has a database of customer issues, so it is possible to predict how much it will sell when it is commercialized at the product planning stage.
Product planning that realizes the industry's first
The plan created by the sales promotion department is brought to the product planning department and considered as a product plan. Here, it is required to consider the functions that make the product “first in the industry”. Products are harder to sell than to manufacture. “Industry first” is the most impactful promotion effect. If there are no other competing products, you have to buy Keyence products, even if they are a little expensive.
(5) Development of elemental technology / Product development (6) Manufacturing
The product development process is not very detailed and information is not available in the table, but it seems that the elemental technology is developed in-house (or a subsidiary) and the manufacturing is outsourced.
Being fabless means having a relationship with an external factory. One of the things that is being done to build this relationship is to “shorten the payment cycle.” Looking at KEYENCE’s financial statements, the payable payment cycle is about 30 days. (On the contrary, the collection cycle of accounts receivable is about 3 months.) It is thought that the aim is to maintain good relationships by speeding up payment.
Technology supports sales
Once you have a product, you need promotional tools to sell it. In addition, knowledge is required for the sales staff who sell. It is supported by the technical staff in the sales promotion department. We hold in-house study sessions to provide the knowledge necessary to sell products, and we are also involved in the production of promotional tools.
If there is a case where a customer uses Keyence’s products to improve productivity, the case is also stored in the database and expanded horizontally to customers with similar issues.
Sales staff contribute to solving customers’ real problems through consulting sales. For consulting sales, knowledge of our own products is not enough. Study sessions are held in-house to acquire the latest knowledge of competing products and sensor parts.
In this way, KEYENCE connects “true customer needs” to commercialization.
・ Perform on-site observations to solve customer issues
・ Use the database to improve sales efficiency, secure time to study, and enhance sales capabilities.
・ We will implement problem-solving cases of one customer to other customers by horizontal deployment.
Etc. seems to be a hint.
The impression is that the sales staff are studying hard.
Looking at the weekly timetable, in-house study sessions were held three times a week.
One of our strengths is the efficient sales process that allows us to spend that time.
How to walk the company “KEYENCE” Diamond
Hitotsubashi Business Review 2009 SPR “KEYENCE Management Philosophy Aiming to Contribute to Society through Value Creation”
Hitotsubashi Business Review 2010 SPR “Creating Semantic Value in Production Goods” Kentaro Nobeoka Yasunari Takasugi
Bulletin of Fuji University Vol. 51, No. 1 (2018) “Examination of organizational capabilities that enable value creation” Suzunosuke Aizawa
Financial forum (2015) “Special Interview Innovation Saves Japan: Interview with Professor Kentaro Nobeoka, Director, Innovation Research Center, Hitotsubashi University”
NIKKEI BUSINESS March 3, 1997 “Mr. Takemitsu Takizaki [President of KEYENCE] Learn from the bad side of a large company.
NIKKEI BUSINESS June 22, 1998 issue “Development / Production and Scrum Cooperative Play Polishing Mitsubishi Electric, KEYENCE”
NIKKEI BUSINESS October 27, 2003 “The Secret of Amazing Management Keyence with a Rate of Return of 40%”