Panasonic Spin-Off Camera Manufacturer’s Growth Strategy
Glory, Struggle, and New departure
On April 1, 2022, we changed our company name, from Panasonic i-PRO Sensing Solutions Co., Ltd. to i-PRO Co., Ltd., thus erasing the name of our original parent company.
But this name change is not just a transit point—it is a turning point that we should engrave in our hearts. I wish to take this opportunity to reflect on the path we have taken from our establishment until now and to outline our concept for the future.
Panasonic i-PRO Sensing Solutions was established as an independent entity from Panasonic on October 1, 2019. Of course, this change was not limited to a change of vessel, it represented a shift in purpose and strategy, the re-definition of our business field, re-connection of relationships, and reform of our organization. But it was just the first step in our long journey, and we continue to tackle these challenges today.
The origins of i-PRO can be traced back to 1957, when Matsushita Electric Industrial Co., Ltd. Central Research Laboratory developed a professional surveillance camera. Later, the company underwent mergers with Matsushita Communication Industrial, Kyushu Matsushita Electric, and SANYO Electric to become a world leader in the image sensing industry by the 1990s. (See Figure 1: i-PRO Corporate History.) But, in the global picture, we were slow in adapting to market changes. Although we still held a large share in the Japanese domestic market, we were falling behind newly emerged competitors in the global market. While global rivals were enjoying double-digit growth, our sales had remained at the same level for many years. (See Graph 2: Global Competitors’ Growth.)
We also saw a decline in our product development capabilities, which had been a source of pride since the Panasonic days. In fact, a survey conducted by an independent industry research institution in 2019 showed that we had also lost ground to our rivals in evaluations of camera performance. The key factor behind this was that they had redrawn the battle lines with new technologies and business models. Once a market leader, we failed to notice that our way of doing business was behind the times. People may say it was the success trap, and we must admit that this was why we could not break free from our conventional methods.
What was the problem? Here, I wish to reflect from the perspective of 3C: customer, competitor, and company.
The first point is the customer. Who exactly are i-PRO’s customers? Security systems are comprised of surveillance cameras and other hardware, along with software that performs tasks such as image analysis and system management. People known as system integrators design the systems, selecting the ideal hardware and software based on the client’s requests. Essentially, our customers are system integrators, and as a manufacturer, we should aim to improve our products and services in order to increase the likelihood that they will choose us.
But Panasonic as a whole was proclaiming a shift from products to services, changing course to become a solutions business. Its Security Systems Business Division, the predecessor to i-PRO, followed suit. We switched business models from simply supplying hardware to offering clients whole systems that included software. This put us into competition with some system integrators who should have been our customers.
Soon after i-PRO was established, our development division proposed a project to me to develop an advanced LPR (License Number Recognition) system. The aim was to compete with Japanese system integrators that supplied car park systems. Of course, these system integrators were not manufacturing cameras. In other words, they were potential customers. But we were not striving to encourage such companies to adopt our products, instead, we were trying to steal their business. There were countless such examples, resulting in many lost opportunities and utterly wasting our resources.
What were our global competitors doing? The late 1990s witnessed the global expansion of a digital revolution of IT and the Internet that spurred rapid acceleration of technological advancements. Based on this new business environment, our rivals opted to pursue horizontal specialization. Hardware manufacturers developed hardware, software developers focused on software, and system integrators concentrated on realizing client demands, each specializing in their own business field. Then, through collaboration, they were able to shrewdly target market opportunities. As a consequence, a new industry landscape emerged where a number of major players in video software management (VMS), the basis of security system platforms, and a few major camera manufacturers, had carved the market up between them. Unfortunately, we were not among them. From their perspective, it was difficult to collaborate with Panasonic, which offered clients a vertically integrated business of hardware and software.
In addition to the inconvenient reality that this business model created, we also had operations issues. Panasonic has a good reputation for manufacturing, with top quality products and production efficiency. But the price it paid to secure these merits was time. Global rivals had a new product development cycle of two to three years, in comparison with a four to five year cycle at Panasonic. Why so slow? The company would repeatedly refine designs in an effort to create the best product possible. But no matter how optimum a design is, in the world of digital, it takes just two years to fall out-of-date, making it impossible to maintain high appraisal for performance.
In addition, the company aimed to optimize production plans with the prerequisite of minimizing inventory. This frustrated customers by forcing them to accept long lead times. Rival companies, however, had sufficient inventory to be able to respond to customer demands for immediate delivery. The difference was clear in the eyes of customers. Soon after I joined the company, during a visit to a client in the U.S., I was shown the transaction screen for doing business with us, using electronic data interchange (EDI). I was shocked to see that the delivery time frame automatically displayed “90 days.”
In the past, the company won significant market share thanks to Matsushita Electric Industrial’s Panasonic brands, which guaranteed sufficient revenue. It had established sales channels, particularly in Japan, and had few rivals, allowing it to successfully operate the same business for almost 50 years. But the world viewed things more harshly. I think this is shown in the difference in speed seen in Graph 2, and in the third party’s product review. The company let its guard down—new rivals took advantage of this, and seized territory. The company had fallen into the success trap.
Becoming independent from Panasonic and changing our company name in preparation to re-launch is more than merely a change of name plaque. For a start, I want the new i-PRO to recapture the global lead that was carved out by our predecessors. Over the last few decades, our rivals have changed the principles of competition with business models that differ to ours, and have created new markets. This is why i-PRO will start at a disadvantage. We cannot beat our rivals with our current way of doing business, no matter how hard we try. We need to take up a new business model, as our rivals did previously, reform our principles of competition, and pioneer new markets. Our entire organization needs to deeply comprehend this, and each individual needs to personally reform their behavior.
In 2019, we immediately began to redefine our strategy. The new strategy we conceived is comprised of two main concepts. The first is an “open policy” and the second is “time-based competition.”