Working Backwards to Lead Digital Transformation at a 100-Year-Old Organization

Richard Taylor:
We are very fortunate as AWS to have been doing some work with you recently. How did that start? How did we get involved? What was the problem, or the opportunity that you were looking to tackle?

Nobuo Asahi:
Before we started the Digital Transformation Innovation Center, I have been working for the Living Environment Appliance business group, and started to do some kind of IoT-type products, and trying to collect the data. At that time we selected the AWS platform, and we an IoT platform onto AWS, as well as a smartphone application platform. And gradually we can collect the actual working product data on top of that, where we built a data analysis platform.

So those three platforms were so powerful because we adopted that serverless architecture. At that time still it was new, even in AWS. Applying that, the platform will continue, not collapse, and also collecting the data within the BI and AI tools of AWS simplified analysis. I tried to bring that kind of activity to corporate wide.

Richard Taylor:
Well thank you very much. And also, building those products and those solutions to gather data has been a fantastic collaboration. How did you start? How did you get to those solutions? Because you have mentioned a lot focusing on the customer, and finding synergies amongst the businesses for the customer. How did you approach that with your AWS team?

Nobuo Asahi:
Since we are manufacturers, we didn't have any internal methodology for data analysis to figure out new solutions. So AWS Japan staff suggested we try Working Backwards. That is Amazon’s internal process for business planning. So jointly with Kaneko-san of AWS Japan, we planned the Working Backwards program, and made several two-pizza teams inside Mitsubishi. Finally, we came up with one new idea, which is focused on using our product to help monitor older citizens, who may be living apart from relatives and their children.

This is a new trial, having launched that software as a paid service. Usually we just sell the product, but we now combine the product sales and recurring service revenue, and are using it to understand the customers, and catch up at the solutions.

Richard Taylor:
And for you, what was one of the biggest takeaways from Working Backwards? How did it differ to maybe other processes or methodologies that you'd used in the business before?

Nobuo Asahi:
Now we have the direct connection to end customer behavior—when they use the heater, or when they use the cooler, and when they use the timer, that kind of data. We now have the building blocks to understanding the customer insights.

Richard Taylor:
As we think about the future, it's important for leaders to cast their eyes ahead and try and understand two or three years where the business may be, and horizons, and how it may evolve, and clearly now with your remit to look across these nine business units. What is your approach to how you think you will look to instill some of this thinking into the culture across the organization?

Shoji Tanaka:
Based upon the experience of developing this new product, we learned two things. One is the importance of having a broader perspective of what the customer needs. Also, the thing is we have to come up with is the actual true value based on the facts. When we do customer interviews, we get a lot of requests from the customers, and we can’t just focus on the very tiny needs of the customers. Those are opinions. So we may not be responding directly to the need. We have to recognize, or analyze, to understand what exactly the customer needs in the broadest sense. If we don't have objective data that is a fact, we have to rely on our imaginations to figure out solutions.

Second, when we discuss the solution ideas, most likely the loudest speakers will take over everything. When we have a meeting and there's some hierarchy of more senior people there, even though there may be junior employees saying that, "I would think this one is good," but the other guy who is maybe a manager, "No, this is not good." So then that is taken over by his opinion. But nobody knows if that opinion is right or not. But if we look at the actual data and then see what's going on, everybody can share the same understanding of what exactly happened.

Richard Taylor:
We have a phrase for that. It's called the HIPPO Problem—the highest paid person's opinion—and typically that individual is the one that makes the decisions across the organization. But the Working Backwards process that you went through is a great way of leveling that conversation, because the data is all in the one document, and everybody gets to voice their opinion about the value, or the opportunities, or the obstacles, of going forward with that idea.  

Richard Taylor:
We believe at AWS that a customer's journey to the Cloud is fundamentally a cultural transformation that is enabled by technology. So two questions on that. The first one is, how are you going to evolve the culture? Aside from getting everyone's voice, what will be some of your tips and tricks to instill this innovative thinking across the whole organization?

Shoji Tanaka:
I think that the biggest obstacle is outdated “rules.” Because we are a 100-year manufacturing company, and we have accumulated internal rules that don't make sense. Many of them have become very outdated. And even though many people don't know why a rule even existed, very conservative peoples just follow the rules anyway. That's the huge obstacle to accommodate new things, like new technologies, new methodologies etc.

Nobuo Asahi:
The rules exists mainly in the factory. We are manufacturers, so procurement department people using the procurement rules, design people use the designing rules, and production department people using the production rules. So we brought in some younger people from the factories and made some small teams, like a two-pizza team, in our office located in Yokohama, and prepare for some kind of scrum style discussion group. By getting them out of the factory setting and looking objectively at actual user data, they gradually changed their mindset. That was so successful because in only two weeks we could come up with some new ideas. But before that, in tens of years in the factory looking at the same data, they didn't come up with any of the new solutions.

Richard Taylor:
And typically, in an organization like yours that has 100 years of great success, and huge amounts of knowledge, there can become some complexity in that organization, so to your point, finding ways to be able to build agility throughout the company is very important. That comes to my second half of that question is, how do you think technology might play a role in that? What technologies, or how might you embrace that technology in the future?

Shoji Tanaka:
We have to catch up with the technology, and we have to accommodate new technology into our product and our services very rapidly. So in order to do that, having the very traditional waterfall developmental style, we have to be transformed to the agile style. Also, the architecture, the product architecture, is quite monolithic, so we have to change that architecture to the microservice-based architectures, in order to quickly mash up the functionalities and deploy to the customers. If it doesn't work, then quickly update it, that kind of things. But in a monolithic system architecture, we can't do these things at such a speed.

Richard Taylor:
I'm really excited to see what you both do with your team of 30. I'm sure it will become bigger as you look at taking on this challenge across the whole of Mitsubishi Electric. There are many other large established organizations that are about to embark on, or go on exactly the same transformation that you are about to lead across your organization. So as a final takeaway from each of you, what would be a mindset suggestion, or something to think about for other leaders who are about to embark on a similar transformation?

Nobuo Asahi:
In my 35-year career in Mitsubishi Electric, I have worked on 11 new projects. From that experience, patience is very important, because any new trial, new project, there will always be some resistance. But it's kind of healthy. Pros and cons exist in the one organization, and it is healthy. But if that new project is very important, maybe we have to persuade the resistance group. But the best way to persuade the resistance group is to show the results. But then showing the results takes some time. From my experience, three years is the magic number. After three years, strangely, resistance group disappeared.

Richard Taylor:
We have a phrase for that in our business called being stubborn on the vision, but flexible on the details. So it sounds like your long-term thinking is what’s important to get into the organization.

Shoji Tanaka:
I was involved in the automotive equipment divisions, and we responded to the customer demand, exactly. Customers said specifically what they want and need. But recently, automotive industries become, so to say VUCA (Volatile, Uncertain, Complex, Ambiguous) things.

Customers also don't know what they want, so then we cannot get the exact request or demand from the customers. So as with Working Backwards, we have to think beyond our direct customer to the actual car owners. I think the stories we have to follow are the ones that lead to the actual value for the end customers.

This is pretty challenging, because our organizational style is doing things that way. We must gradually change the mindset, and embrace the culture to allow many, many challenges without fear of failures, like a two-way doors concept.

Richard Taylor:
And you have now gathered so much data that you will work backwards from that data on behalf of those customers. You'll be data-led in your decision making, and stubborn on that long-term vision.