A Company In Transition

With the oil & gas sector taking a hit because of global economic conditions those companies that invest heavily in this sector are seeing the greatest impact to their core business. However, many companies are finding new opportunities across the region and still finding growth. By Mark Johnston

IAA interviewed John Hewitt, president and MD of Yokogawa Engineering Asia on the company’s direction and its approach to a rapidly changing market. Mr Hewitt joined the company in March 2005. Mr Hewitt ran the Australian operation from 2005 to 2015.

Q: What do you see as the major challenges going forward for Yokogawa?

 

John Hewitt (JH): The biggest challenge in our space at the moment is the depressed market situation, especially in oil & gas. As a company we have invested a lot in the Oil & Gas sector. In Asia we have specialised in the downstream, which we have been very successful at over the years. Over the past several years we have also been focusing on the upstream and been quite successful at it. This has given us a wider portfolio. When the oil prices started to deteriorate it was a big warning for the company.

 

Having said that, some of the companies that I have talked to in Singapore and in the region have said they are having their best years, so it is not the same for everyone. One thing that does seem to be fairly consistent is that the first thing to go is CAPEX and then people are scared to spend money on OPEX, as a result. That makes the situation very difficult.

This cutting back on expenditure is not totally across the region. There are some major projects that are moving forward, which we will benefit from. While these projects may not be new business, they are definitely good business for us going forward.

The biggest challenge is to be the right size for the market and in order to do that we have got to be as efficient as we can be and we have got to be as cost efficient as we can be.

We have to reduce our business costs, because if we cannot reduce our business costs, we cannot sell at the price the market is willing to pay. Those that are not prepared to accept this change or embrace this change probably will not survive.

Q: You mentioned Oil & Gas, which is obviously a major business for you, but it is not going to last forever, more people are moving towards renewable. What is Yokogawa going to be like in a post Oil & Gas period?

JH: Certainly in my lifetime it will not be a post Oil & Gas period but there is perhaps a post Oil & Gas boom. We have to be continually reinventing ourselves and looking for other opportunities. I relate the experience to my experience in Australia. During my first five years, from 2005 to 2010, we were very successful in the power market in terms of migration of all the control systems in coal fired power generation in Australia.

That market, like all markets started to come to an end and the challenge was there for us that we really had to reinvent ourselves. We actively sought Oil & Gas and we were very successful at it. We won most of the Oil & Gas work on offer in Australia over that period. But again we are now faced with the same sort of dilemma, and yes, we are not only looking in new industries but we are looking on how we can leverage on our existing customer base and move up and down the existing value chain within Oil & Gas, both for upstream and downstream.

The chemical industry is one that is important to us. Across Asia there is still an enormous need for power and we do have a particular expertise in regards to power. We are prepared to move into new industries and seek out new opportunities.

As a corporation, Yokogawa recently has been very aggressive in the M&A space. The company is still actively pursuing other opportunities, because the pace of change in the market in regards to technology is such that we are always developing new products. What we are looking to do is move up the value chain.

Q: What are some of the major targets and business objectives for 2016/2017?

JH: Every three years we have a mid term business plan, the current plan covers 2015/2016/2017 for our financial years. The current plan is targeted on being in a certain position by FY2017 and it is called ‘Transformation 2017’. It is really strongly focused on driving the company in a new direction, at a much quicker pace.

‘Transformation 2017’is really looking at three themes, which are:

1.         Moving the company from being product centric to being customer centric

2.         Value creation

3.         Maximising efficiency

In regards to maximising efficiency, what we are referring to relates not only to our clients but also to ourselves. If we cannot be an efficient, lean organisation ourselves, it is going to be hard to convince clients that we can help them become an efficient lean organisation.

Change is happening very quickly. I believe in a short two to three years time we will be engineering solutions we have not even thought about yet. These are exciting times to be living in because there are so many things changing and the speed of change is increasing.

The big issue here is that we are looking to transform the organisation to really become a totally customer centric organisation. We are doing a number of things to achieve that aim.

One example of this is the launch of the co-innovation centre, which we have developed here in Singapore. When we talk to our customers about their plant, it is important to realise no one knows their plant better than they do. It would be quite arrogant of us to think otherwise. Having said that, we are experts in automation. Individually we can come up with many value propositions and concepts, but by joining forces and by working together we can do better and achieve greater results. Together we can come up with some exceptional solutions. We are working with some major companies around the globe.

Q: You mentioned things are changing very quickly. The question would be in regards to major trends, such as IoT, mobility, cloud, etc, so how are these impacting your business and how are you leveraging them?

 

JH: They are impacting our business in so many ways. It is correct to say there is rapid change, with new solutions, and joint development. As little as five years ago, this would have seemed a strange way to do things. Times have changed, however. I believe that Yokogawa has been at the forefront of driving a lot of change.

 For instance, Industry 4.0, or the fourth industrial revolution, is a term often discussed nowadays in industry, but what does it mean? If we look back just five years and see how technology has developed, it is staggering. I was talking to a robot in Tokyo recently. Technology has advanced very rapidly in such a short period of time.

Another recent experience is I was talking to a client in Taiwan recently, and he said whilst the human machine interface is very important, what he wanted was a robot that would tag behind the operator and challenge him on his decisions. He remarked that he would like that within five to 10 years. My reply to him was why wait five to 10 years. We should aim for two years. Technology is moving so quickly that realistically that is what the timeframe would be. The willingness and the interest is there that we will chase after it.

IoT is likely to bring the 4th industrial revolution. Production systems in which things and information are closely integrated will result in more efficient business processes, with improved collaboration with business systems used in functions such as development, sales, management, and supply chain management. We are expanding the coverage of our solution services from control systems to Manufacturing Execution Systems (MES) and other types of higher-level information systems.

In regards to cloud technology. What we are doing is Data as a Service (DaaS), which is an interesting term. I have always said knowledge is power, and knowledge is data. We are in a position where we can give access to an enormous amounts of data. If you do not do anything with it then it is a waste of time. It is now a matter of making it a service and making it viable whereby we allow our clients and we allow our people to make more informed, better, and cost effective decisions.

People these days do not want to spend money unless they can see a return. Unfortunately they are looking for returns within a year. With the way technology is advancing this is possible. Buying companies that are a good fit for Yokogawa and complement our expertise very well help us with this goal. Such acquisitions allow us to move with the times, and to take advantage of these mobility issues, cloud technology, IoT, and all of these things that allow our existing and new clients to realise the greater potential of their plant and really drive down their costs.

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