Toshiba Tec positions itself as a solutions provider.
Our Access Japan 2022 series continued with a virtual visit with Toshiba Tec on August 1. Ten Toshiba Tec executives joined us for the meeting. (See sidebar for a list of participants.) In addition to answering questions about research and development (R&D) initiatives, new product introductions, financial performance, and supply chain issues, our hosts provided comprehensive insights regarding Toshiba Tec’s strategic initiatives.
Toshiba executives reported that demand for equipment has picked up globally, and even though the backorder situation is getting better, it remains a challenge. The typical backorder for hardware is two to three months. The company is trying to produce as much equipment as possible to fill the gap, as well as use air shipments to reduce backorder times, although that option is costly.
Financials & Strategic Initiatives
For the fiscal year (FY) 2021, Toshiba Tec posted an operating profit of 6.5%, despite the negative impact of external environmental changes (COVID-19 pandemic, supply chain issues, chip shortages, etc.). Helping the company’s financial performance was a structural transformation implemented in 2020. Net sales increased by 39.6 billion yen from FY 2020 to 445.3 billion yen in FY 2021, the equivalent of nearly $4.2 billion U.S. Operating profit grew by 3.3% to 11.6 billion yen. Those figures primarily reflect the performance of Toshiba’s Retail Solutions (RS) and Workplace Solutions (WS) businesses. Current net profit is 4.4 billion yen, cash flow from operating activities is 10 billion yen, and return on investment capital is 5.7%.
Toshiba executives attributed these results to proactive and aggressive management in its RS and WS businesses. In the retail business where Toshiba is a global leader in point-of-sale (POS) systems, the company is looking to accelerate its business model transformation with the goal of becoming a top global solutions partner. Highlights from the previous fiscal year included:
- Expanding the data solutions business through the expansion of strategic partnerships and co-creation.
- Enhancing wall-to-wall/predictive analytics maintenance services overseas.
- Implementing management reform in the overseas (U.S. and Europe) retail business with new management.
For the WS business, the focus is on returning to profitability and strengthening its existing business initiatives and solutions offerings to drive growth. To accomplish this, the company reallocated resources and enhanced local solutions capabilities. A key strategic initiative is creating new value through what executives called “co-creation” with partners, not just within Toshiba Tec.
Sustainability and focusing on resolving social issues is another important element of Toshiba Tec’s strategic initiatives, including:
- Reduction of waste loss
- Reduction of CO2
- Reduction of paper consumption
- Response to labor shortage
- Optimization of stores and offices
- Reduction of sales opportunity losses
By FY 2024, Toshiba plans to grow net sales to 500 billion yen from its FY 2022 forecast of 450 billion yen, increase operating profit from 18 billion yen to 31 billion yen, and achieve a current net profit of 15 billion yen from its FY22 forecast of 8 billion yen.
Growth Strategy for Workplace Solutions Business
Toshiba is on a mission to shift its focus from hardware and MFPs, extending the value proposition to what executives described as the higher-growth segments of software and solutions. Part of this strategy is shifting its revenue structure to a recurring subscription base while leveraging existing machines in field (MIF) and channels as core assets.
The strategy for growing the WS business, an integral part of its solution strategy and global solution direction, includes shifting human resources to these higher-growth segments. The plan also focuses on enhancing local solutions geared to specific markets or regions to meet small- and medium-sized business (SMB) requirements and improve business development programs and sales.
An important element of this strategy is the cloud. That includes connecting and integrating MFPs to an external cloud and providing Toshiba-developed cloud solutions in core areas such as cloud MPS, document management/electronic content management (ECM), and device management/service portal. Among the related initiatives underway to establish readiness for business cloud solutions are creating a business solution build package and delivery platform, developing management and monitoring solutions, and monetizing the platform through licensing and subscriptions.
Toshiba plans to complement its portfolio with strategic solution partners focusing on cloud infrastructure, document management, and workflow automation. This includes enhancing connections to the cloud through e-BRIDGE Plus for Google Drive, Microsoft OneDrive for Business, Office365, Dropbox, Box, and WebDAV, as well as Zone OCR and ID Card. The company plans to extend the value proposition to document management programs such as DocuWare and M-Files. Shifting MPS solutions to the cloud is another element of this initiative, focusing on multistation printing, e-BRIDGE Print & Capture, printer driver plug-ins, e-BRIDGE Paper Reuse Report, e-BRIDGE Plus for Green Information, and e-BRIDGE Global Print. Also expect to see feature enhancements around cloud device management through e-BRIDGE Cloud Connect and e-BRIDGE SKY Suite services.
Toshiba’s goal is to be a one-stop services business partner built around the e-BRIDGE SKY Suite offered in three phases, including:
- Cloud Services that facilitate remote service and print services (Global Print, MPS), and is offered as a software-as-a-service (SaaS).
- Document Solutions, which encompass remote solutions, document solutions, workflow solutions, and data and business analytics about the customer.
- Data Services, which encompasses device/solution managed service, content managed service, community support, and business and industry insights through business consulting are also among these phased introductions.
e-BRIDGE Global Print has already been introduced in the U.S. and will soon be launched worldwide. This will allow customers to leverage additional cloud offerings from Toshiba. E-BRIDGE Global Print is described as a simple, secure, and low-cost printing solution for SMBs.
Although the company is emphasizing solutions, Toshiba remains committed to MFPs along with managed print and document service models built around its MFPs. Barcode printers, digital signage, and inkjet print heads are also key to growth.
A3 & A4
For FY 2022, Toshiba plans to introduce A3 and A4 solutions with smarter and more comfortable operations to enhance workflow efficiency, improve productivity, and provide greater information security. The plan is to renew the entire lineup of mid- and high-volume color and black & white A3 MFPs. A total of five series, encompassing 19 models, will be introduced in the U.S. in FY 2022. Three different models with expanded color printing speeds of 55 to 65 pages per minute (ppm) are on the agenda. Also scheduled is a 90-ppm black & white A3 device for office users, an increase of 5-ppm over the previous model.
Highlights of the new A3s include:
- Increased performance – The company has increased the speed of its mid-range products to 65 ppm.
- Enhanced environmental standards – This includes a shorter recovery time from sleep mode, reduced power consumption, a new fusing system, a new image exposing system, and Energy Star V 3.1.
- Enhanced serviceability – This facilitates remote maintenance through the cloud. A new service initiative is DFS (Design for Serviceability), which allows problems to be resolved faster to enhance customer productivity and satisfaction. It offers easy-to-understand guidance, allowing certain technical issues to be corrected remotely or by the customer, reducing a dealer’s service costs. For example, an image recovery icon allows users to view a video that shows them how to remove image streaks such as small paper dust, as well as correct calibration, color registration, and density unevenness issues, problems typically fixed by a service tech. In addition, users will also be able to adjust print positioning, mode density, transfer bias, and reduce scanner streaks.
- Smart operation and improved usability – The new models have an updated external design and home user interface (UI), voice guidance, support for two IP addresses, remote UI, and e-BRIDGE SKY Suite support, as well as the option to change from an HDD to SSD. The new models will also be equipped with a motion sensor that turns the device on when a user approaches, reducing warmup time.
- Security enhancements – This includes HCD-PP, biometrics authentication, TPM 2.0, and anti-malware. Only a few vendors can support TPM 2.0, according to Toshiba. The anti-malware checks against white-listed programs and prevents the malware from executing when detected.
- Option detachment feature – If the finisher or document feeder are not working properly, these can be deactivated so that the MFP can function until a service tech arrives.
Toshiba also plans to introduce the successor to its internally developed A4 device within the next two years. The company is also looking at strengthening its cooperation with strategic partners to release new A4 models in other speed ranges. No specific launch dates were revealed, but these “co-created” mid- to high-end MFPs will likely be available before Toshiba’s next-generation internally developed A4.
Business Expansion Plan
Toshiba Tec’s business expansion plan is focused on expanding the business into new markets through upselling, as well as new product introductions. Starting with its existing desktop and portable barcode printers, the company is adding connectivity to the cloud for remote support such as device settings, as well as providing remote control of the device. From here, Toshiba is looking to provide cloud support for labeling software, expand the print function of its barcode printers, and diversify into radio-frequency identification (RFID)-related products.
Toshiba executives also highlighted the company’s sustainability initiatives, as well as how it plans to address social and customer issues. Toshiba is bullish on mitigating the effects of climate change, creating a circular economy, and responding to ecosystem conservation. From a societal perspective, the company wants to expand employment and education, ensure employees’ health and safety, respect human rights, promote sustainable procurement activity, and reinforce R&D to generate innovation.
To address social issues, Toshiba is looking to create new value through co-creation and data utilization, and to protect privacy and personal information. Work-style reform and measures to protect against labor shortages are also part of this initiative. Initiatives that focus on customer issues include the integration of e-commerce and brick-and-mortar stores; strengthening marketing, improving efficiency and productivity at stores, offices, logistics, and manufacturing facilities; providing customers with a variety of checkout and payment methods; driving the movement toward a paperless society; and reducing food waste.
Committed to Innovation and Growth
Despite supply chain issues and financial challenges, nowhere in our conversation with Toshiba executives was there any indication that the company was anything but firmly committed to innovating and growing its business. This is a difficult time for all OEMs, and some like Toshiba have had tougher times than others, but after learning of their strategic initiatives we will be watching closely to see how the company performs in the upcoming quarters and beyond.
Toshiba Tec/Business Workplace Solutions Business Group Executives Who Participated in Our Virtual Meeting
- Takeshi “Ecoh” Eguchi, managing director
- Sachio Koyama, vice president and chief mechanical engineer (CME)
- Koki Tanaka, vice president and general manager of auto ID division & business innovation division
- Toshimitsu Suzuki, technology executive
- Kenichiro Shishikura, general manager of engineering & design division
- Hiroyuki “Zak” Yamazaki, senior manager of MFP product planning department, MFP solutions division
- Kazuaki “Kaz” Kidokoro, senior manager of business innovations department, business innovation division
- Yuko Komamiya, senior manager of marketing & design department
- Noritaka “Taka” Seo, senior manager of MFP solutions overseas sales department, MFP solutions division
- Shiro Shimokawa, general manager of MFP solutions division
We’ve been hearing a lot in the U.S. about Toshiba’s e-BRIDGE platform, and dealers can expect to hear even more going forward about Toshiba’s e-BRIDGE Cloud Service and its e-BRIDGE Cloud Suite, which are centered on data management and data services. e-BRIDGE SKY Suite is positioned as an affordable subscription model that facilitates data management and data services. The company’s plan is to achieve differentiation and growth by offering one-stop integrated solutions that encompass the e-BRIDGE Cloud Service, MFPs, and Auto-ID (barcode systems, POS printers, SCM solutions, RFID). The e-BRIDGE Cloud Service will also reportedly enhance document management, output management, workflow automation, and device management on the MFP.
Integrated device management is an important element of this strategy through the connection of MFPs and barcode systems. For example, an MFP prints a document or multiple documents, and the barcode printer prints the label that is applied to the box that the documents are shipped in.
MFP-RFID is another element of the cloud service strategy, providing the ability to write to an RFID tag while printing. This is particularly applicable to printing on special paper. The goal, according to Toshiba executives, is to streamline document authenticity and document management.
Current Toshiba TEC Financials
The following data was provided to The Cannata Report by Stramaglio Consulting’s Domo Services group and provides additional insights into the company’s most recent quarterly performance.