Panasonic Spin-Off Camera Manufacturer’s Growth Strategy
Open Policy
Open policy refers to horizontal specialization. i-PRO is a hardware manufacturer, specializing in development of hardware including cameras, our field of expertise. At the same time, in areas where hardware alone is not enough, namely, software and system integration, we share the work with our leading global partners.
Security systems are generally composed of (1) cameras and other hardware, (2) image analysis software such facial recognition (analytics), and (3) VMS, which controls the system. It is (4) system integration that executes optimal design installation based on the client’s wishes. During the time of Panasonic, we combined all four to create “solutions,” and aimed to provide all these aspects as “solutions” ourselves. But now, i-PRO focuses on position (1) as the reason for our existence, while strategically rebuilding relationships with partners who are responsible for the work of (2) to (4).
Since the establishment of i-PRO, we have actively endeavored to rebuild relationships with VMS vendors, AI analytics vendors and others. Our total sales for projects in collaboration with vendors other than Panasonic in fiscal 2022 are expected to be around double the level in fiscal 2019.
In this way, our open policy has become a driving force for i-PRO’s growth. In April 2022, we removed “Panasonic” from our company name and that has also helped us in re-building relationships with partners. From the viewpoint of major system integrators in competition with Panasonic, they were no doubt wary of purchasing cameras from a company with Panasonic in its name, even if we proclaimed an open policy. Fortunately, i-PRO still enjoys a strong reputation for product quality as a legacy from the Panasonic days, therefore many partners welcome our decision to remove Panasonic from the company name and our conversion to an open policy. We must be thankful to our predecessors at Panasonic who built up this valuable asset of reliable quality.
In fact, when I first proclaimed this open policy, I received many questions from within and outside of the company. There were people who questioned our decision to abandon the solution business, or who wondered if it was right to specialize in camera hardware at a time when AI was gaining attention as new solutions business. Obviously AI is a growth field that gets everyone’s attention. Describing one’s company as an AI solutions vendor is more in keeping with current trends and has a better ring to it than being a mere security camera manufacturer. I believe such questions are completely normal.
But I would like to respond to these questions by introducing the following story. California experienced a gold rush in the mid-19th century, with prospectors flocking in the hope of striking it rich, but who really became rich at that time? Was it James Marshall, whose discovery of gold sparked the gold rush? Was it one of the 49ers, who converged on California in 1849? The answer is none other than Levi Strauss. Strauss neither developed ground-breaking technology, nor lent a hand in prospecting. He merely made and supplied jeans made of thick, strong canvas. But because he took out a patent, which lasted 20 years from 1870, when he invented jeans, until 1890, he was able to benefit from his monopoly.
If we compare vendors who offer analytics and system integration using AI with the gold prospectors, we will aim to be like Levi Strauss. We will not compete with them in searching for gold. Instead, we will supply “jeans” in the form of AI-compatible cameras. In the same way that many ambitious people traveled west hoping to find fortune, there are now many players, big and small, clamoring to provide AI-based solutions. There are probably thousands, or even tens of thousands, of them now around the world. But there are few camera manufacturers with established technologies suited to the needs of the AI sphere, in the same way that there was once a limited number of jeans manufacturers.
It is said that around 60% of data used with AI is images. Essentially, the majority of openings into AI are camera-related, and cameras are therefore an essential tool for those working in AI. But can this be a source of profit in the way that jeans were? Some people claim that cameras are a commodity that anybody can make. To respond to that doubt, we must gain a hint from the strategies of our predecessors. It is at this point that we set our sights upon economies of scale. Do economies of scale function in the AI solution business, or the AI-compatible camera business?
Despite the market’s expectation, AI and its spread is not causing a stir globally. The fact is that it remains expensive. Unlike fields such as finance solutions and ERP, where standardization is advanced, AI solutions must be customized for each project. In other words, there is little standardization, therefore there is no room to achieve mass production that would engage economies of scale. We believe this situation indicates how extremely fragmented the AI market is.
When we consider the situation faced by AI engineers, in many cases, they must work on-site at the client company, and develop solutions through trial and error. If a camera manufacturer is able to work closely with such an extremely busy work site, AI will no doubt see progress, but unfortunately no such camera manufacturer exists. This is an issue for the AI market, but also a business chance for us. But to gain such a business opportunity, we must increase the variety of our AI-compatible cameras and be able to immediately supply even just single units. If we can successfully employ economies of scale here, we can be like Levi Strauss.
Everyone admits that AI is a growing market, but the pursuit of AI solutions does not afford opportunities to benefit from economies of scale. Because there is no maker in the world able to manufacture cameras in high-mix, low volume, with prompt delivery, the market is not growing as quickly as people hope. If i-PRO can establish a system for high-mix, low volume, and prompt delivery of AI-compatible cameras, the market will grow, we can become the default vendor, and expect exponential growth. This is the reason that we abandoned the solutions business to focus on manufacturing the hardware.
It is our second strategic concept, “time-based competition” that holds the key for establishing systems for high-mix, low volume, and prompt delivery. This way of thinking seeks to build competitive superiority through operational excellence. Let us look closer at the specifics.