Hicham Abdessamad, President & CEO, Hitachi Consulting
Hicham Abdessamad describes some of the cases where Hitachi is addressing sustainability issues such as climate change, pollution, inequality and a lack of diversity through its use of technology.
Read the transcript of Hicham Abdessamad’s interview on the examples of how Hitachi uses Social Innovation in practice..Show transcript
Anna Delaney (interviewer)
I want to know more about what Hitachi is doing in this area. Can you give me some examples?
I can give you more of a local example: a water and a transport example here in the UK. As you know, we actually manufacture trains here. And this, where we are, there’s a train station. Our trains are running.
We won a large contract through the UK government to basically supply the next generation fast speed trains. And you can approach it two ways. You can say, all right, we’re going to build you a great train. It’s going to have all the specifications, and here you are.
Or you can say, we can come in and provide you transportation as a service for the next 27 years, which includes all the trains, all the ticketing, all the maintenance. And Hitachi is going to provide you the complete solution. And you’re going to pay us by the outcome, so you’re not actually paying for the trains. You’re paying for the service that we’re delivering.
And you can measure us on up time, and on time, and all those things. And by the way, we’re creating jobs, which we’re contributing. So we’re manufacturing a lot of the trains here. We’re creating jobs. We’re much more embedded in the community. We take a lot of pride in that. And we are actually mutually integrated and invested in making this work.
So that’s an example of social innovation in transport. There’s a lot of things behind the scenes, things like, we’re using so much analytics– run data to predict maintenance, to predict failures before they happen. So security, safety is very important. And Hitachi has taken a lead in doing that for us that we, obviously, would deliver back as a service.
We also worked with Southwest Water here in the UK. It’s a public utility for water, and they had a lot of different problems. They had regulatory compliance issues. They had leaks issues. They had all kinds of different problems.
And they’ve talked to us about, how do you use digital technologies and internet of things to address some of these challenges? And these are industries that have been around for a very long time. So obviously they understand their water business well. They understand what’s happening. So we said, yeah. We have a water business in Japan, and we have similar challenges. Here’s how we would do that. So we’ve had great success with Southwest Water. They’re very referenceable. And basically we digitised their operation.
So you bring in digital technologies to and the old sort of school industry. That’s what we feel like. You can sort of ignite and revive some of these industries.
And how smooth is the transition?
It’s a great question. So typically, if you come in with sort of a big bang and say, OK, I’m going to go and transform your entire enterprise, it doesn’t work that way, right? Because you have to come in and pick a use case that’s very near and dear where they’ve had a lot of pain.
They’ve probably tried to solve it and were unsuccessful, or partially successful. And you go back at it and say, OK, we’re going to pick that up and we’re going to deliver an outcome very quickly. So you’re talking 90 days, you want to do something that’s going to show value and it’s going to demonstrate that, oh wow, they have solved my problem.
So you can internally champion it within their own stakeholders, and then they’ll give you the next thing and the next thing. So I think it is a gradual process, and it’s wins along the way when it comes to digital transformation– with an overall broader vision. You have to have a vision of what you want to be. But certainly one step at a time. That’s been our learning and our experience.
I’m interested to know about the ways you approach this innovation. What resources are you using? What technology?
Hitachi spends about $2.5 billion in R&D per year. That’s across a variety of different industries. But we’re also cross-pollinate. So we take capabilities that we built for, let’s say, nuclear power, and we could leverage it in rail, or leverage it in other industries that we have.
We’ve been through a transformation to say, there’s so much innovation in Japan that we do for Japanese clients and the government. How do you bring that innovation outside of Japan? That’s been a struggle, because it doesn’t necessarily all translate.
You can’t just take it and bring it here, and it’s not usually commercially ready there’s cultural, there’s language barriers, and things like that. So what we’ve done is Hitachi has said, OK, let’s build a consulting and solutions organisation that would basically be the front line to our customers across multiple industries around the world. And that’s organic, and also through many acquisitions.
So we’re building sort of the technical and consulting talent, and then we can pull capabilities from Japan, because now you have you have sort of an interface. And the other thing is, the market is changing quite a bit where clients don’t care about technology as much. They care about outcomes.
So working with a solutions company that’s sort of representing what Hitachi has to offer helps us really ease that consumption of that technology. The other thing we’ve done is, we decided to open up R&D labs around the world outside of Japan to bring innovation closer to our customers and our partners, like the Centre for Social Innovation that we have.
It’s a journey. And what we’re trying to do is, we have so much capability in Japan and not all of it works here. However, we’re starting to bring it more. So when we look at trains that we’re doing in the UK, we’re actually building the trains here, so it’s local. But the control systems, the software is from Japan, obviously, because we’ve been doing that for 40-plus years with a lot of success.
It’s a combination of being a truly global company. And we have engineers in Japan, we have engineers in China, we have engineers in India, in the US. So we’re starting to do global R&D and a global strategy versus more of a Japan-based model.
That’s really interesting about what you say: there’s different cultures that you are dealing with, and how do you replicate this model in those different cultures?
We moved our Hitachi Rail headquarters from Tokyo to London, because this was an anchor sort of. You know, this 27-year relationship we have. We decided we need to be more European-based and run our rail business from here to the rest of the world. And our leadership that runs rail is actually– his name is Alistair Dormer. He’s from the UK.
So there is diversification of leadership, and there’s also sort of moving things a little bit out of Tokyo outside. It does take time, because it’s a 170-year-old company who’s been built on great innovation. And then, try to export it outside of Japan at a high quality, but also at a high price.
So that, you know, with competition from China and other countries, the focus becomes more around, OK, how do we localise innovation, and then how do we deliver it in a way that our clients can consume it? And to do that, it takes R&D, it takes local capabilities, it takes consulting, and many different parts working well together to make that a reality.
So how do you measure its impact?
Well, the impact is measured in two ways:
Client satisfaction. They’re happy, they want to reduce their downtime by x and we’ve made or exceeded that.
And then they can take that metric and put a business value on it. Because of predictive maintenance, that your downtime was reduced from 1% to 0.5%, for example. What does that mean? So you can measure that.
For us, it’s, can we take that solution and replicate it, and can we deliver it somewhere else with maybe a shorter cycle? Because in the digital world, what you see instead of the product and the software world– everybody knows what to do. Like when you’re doing SAP, Oracle, everybody knows what the expectation is.
In a digital world, the process is long. It takes 9, 12, to 18 months. So you have to be very patient as a company. And that’s why only the large companies are going to survive as far as providers, because if you’re a startup you’re not going to be able to sort of sustain a long sales process, and a lot POV.
Customers are not just throwing money at you and saying, here’s money. Go solve this problem. It doesn’t quite work that way, because they want you to prove it to them, and you have to kind of earn it through the journey.
So it’s fun, but you have to be very disciplined. And I think our approach is usually well received, because we drive the value creation. We only get paid if we create the value. So a lot of the responsibility is on us.
But sometimes that value can’t come till years down the line.
Well, then we don’t pick those projects. So the qualification is important. So for example, I had an interview earlier today. We were talking about smart cities. And I said, honestly, that’s kind of a waste of time.
What I’m saying is, to do a smart city, that’s a huge undertaking. And it takes a consortium of companies and government working together to figure out, what does a smart city even mean. What is that going to do? Like, what’s the benefit of that? But I would prefer to do a smart airport, or a smart hospital, or a smart campus, or maybe a new retail or new development.
So focusing on less?
Focusing on less, smaller footprints where you can make the bigger impact. The big projects that are– anytime someone says this is $100 million whatever, typically it’s multi years, and we have to show results to the customer, but also to our shareholders and our employees so we can continue investing. So we have to be very selective about which projects we want to get engaged in, and what industries we want to focus on. And that’s been something that we’ve been intentional about.
So you’ve got your perfect plan in place. How do you deal with events beyond your control? Unforeseen events, you know, rapidly changing technology– how do you cope with that?
Well, that’s part of business, right? I think the technology industry is just fast moving. You have to be ahead. Sometimes we get caught. You’re a first mover and you have great technology, and then you stopped innovating and then someone else came with something better. And all of the sudden, your customers will tell you, don’t do anything. We’re going to keep buying this, or we want this. And then the next morning they want that.
That happened a lot, right? I mean, look at cloud. A lot of these enterprises, we would never use cloud. And guess what, right? And so sometimes you should not listen to your customer 100%.
So you have to be aware of what’s happening around you. Yeah, so it’s not perfect. We try to do our best. We’re not the most aggressive company, either. So we don’t tend to throw billions of dollars at a great idea that we think is going to change the world.
So our approach is, do something, get some wins, get the next one, show business plan, show value, and then we can get behind it. And it’s a very entrepreneurial mindset in that way, because especially for areas are not proven or there is lot of hype, you can get burned pretty quick. And we have. We put money in many projects that didn’t drive any value or return.
We learned a lot from them, so there’s definitely learnings that we’ve learned that now we take it to the next one. But now we know where to go, and we know where we can make an impact. And we know what we can’t, and we try to qualify it that way.
And how about the smaller companies or say developing countries?
Well, you know what? In the developing countries we don’t have a footprint in every country in the world. Or we may have a footprint, but we don’t have all the capabilities. So we love those small professional services firms, small systems integrators, small companies who have unique technology that they haven’t really been able to commercialise around the world, but it works there. We absolutely work with those companies, as well.
It’s kind of that last mile, we call it. So if you’re in a developing country in Africa, we may not have full presence in Africa, or certain countries in Africa, rather. But if we have a partner that has capability, we partner and we work together. Because in fact they make a huge difference, because there’s a language issue, cultural, and all those things that they can help bridge, and also some capabilities.
And then for them, we bring capacity, we bring innovation, and a solution that they can indeed replicate. So partnering with smaller firms, especially the small players, is also very important for us because it gives us the coverage that we need and it gives us that last mile challenge that most big companies have.
Our world faces a number of challenges, from climate change and pollution to population growth and urbanisation. Hitachi believes that it must help to find innovative and commercially viable solutions for these challenges.
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