CXO Interview

We aim to drive new growth unique to ITOCHU by accelerating business transformation through the advancement of digital transformation and by strengthening horizontal collaboration and business integration

Member of the Board, Executive Officer, CXO;
General Manager, Group CEO Office

Hiroyuki Naka

What is the role of the newly established CXO position?

My role as Chief Transformation Officer is to forcefully promote the transformation of the ITOCHU Group as a whole, without being bound by existing frameworks.

CXO stands for Chief Transformation Officer. My role is to control business transformation in the Group as a whole, and also encompasses the responsibilities of the previous CDO∙CIO* position. I also serve as the head the Group CEO Office, which was established in 2023 to strengthen Group management. We often encounter the terms digital transformation (DX) and green transformation (GX), but the scope of transformation overseen by the CXO is not limited to any specific field. I am responsible for transforming not only the way we work but also redefining the core mechanisms of all our businesses, as well as the way they are created in the first place. Digital capabilities are undoubtedly the most important tool to transform the way we work. In 2018, ITOCHU launched the Business Intelligence Competency Center (BICC), which specializes in supporting data analysis and utilization. In 2023, we established the Generative AI Research Lab to support the development of new businesses and transform businesses using generative AI, such as ChatGPT. Centered on these organizations, we have continuously focused on operational efficiency and advanced data utilization. We reduced the time spent on general administrative tasks, mainly in the back office, by the equivalent of around 200,000 hours annually, achieving a dramatic enhancement in productivity. However, I believe that the possibility of utilizing digital capabilities, which had significantly contributed to the “cut” principle of the “earn, cut, prevent” principles, is now expanding to the “earn” principle moving forward, especially to sales activities and business investments, which are closer to the front lines of business creation. I have held various positions in the field of corporate planning, such as CSO and General Manager of Corporate Planning & Administration Division, so I have an advantage in terms of insight on how ITOCHU creates businesses, as well as their mechanisms. By combining these insights with evolved digital capabilities, or, in other words, connecting digital capabilities to the “earn” principle, I intend to drive a transformation unlike any other in our growth trajectory to date.


* CDO·CIO: Chief Digital & Information Officer

You were recently appointed Chair of the Investment Consultative Committee. What is important when accelerating growth investments?

We will shape promising investment opportunities by complementing our functions with partners and bringing together the knowledge and insights of our business and administrative divisions.

We have no intention of loosening our investment discipline. We will continue to thoroughly practice the Four Lessons for Investments learned from past investment failures. These lessons are designed to prevent, 1. Overpaying for investments; 2. Investments aimed at seizing profit from investees; 3. Overdependence on and overconfidence in partners; and 4. Fields with limited insight. However, just as we state “No growth without investments” in the Management Policy, growth investments are indispensable if we are to continuously grow earnings at a high growth rate. The Company has taken on many investments deeply rooted in fields where we have expertise, for example by increasing our stakes in existing investments. Recently, however, there has been an increase in the number of projects where we work with optimal partners to complement each other’s functions, such as investing in Hitachi Construction Machinery Co., Ltd. with Japan Industrial Partners, Inc. and rebuilding of WECARS Co., Ltd. with J-Will Partners Co., Ltd. Regarding projects that are challenging for us to undertake alone despite expectations of large profit contributions, we will work with a wide range of partners, including suppliers, customers, and investment funds, with the aim of achieving profitability over the medium to long term, and expanding the scope of our investments. In addition, we will take a more proactive approach to projects expected to not only enhance the business results of investees but also expand synergies across the entire Group, including other Group companies. To achieve this, it is necessary for the business divisions and administrative divisions to further unite and drive the projects forward together. In particular, it is important for the administrative divisions to not only perform negative checks to leverage business control function but also enhance their sensitivity to positive checks to further improve and refine projects. We will evolve into a structure in which both divisions work together to brainstorm ideas, such as changing schemes to alter cash flow and increase profit opportunities, thereby shaping promising investment opportunities. Our Management Policy, “The Brand-new Deal—Profit opportunities are shifting downstream,” builds on the foundation of the five consecutive medium-term management plans that started in FYE 2012. The basic policy of Brand-new Deal 2012, which served as the starting point for a series of management plans, advocated to “expand our scale of operations.” We will steadily conduct growth investments to maintain and accelerate our long-term growth trajectory.

What is the intention behind the concepts of “maximizing synergies by horizontal collaboration among Division Companies” and “business transformation and creation through business integration” in the Management Policy?

Horizontal collaboration and business integration form the genuine growth strategy of general trading companies. We will continue realizing limitless possibilities.

While general trading companies operate businesses in a wide range of fields, breaking down silos has been a long-standing issue. Conducting business solely within the conventional vertically segmented industries limits the data that can be acquired and prevents us from adopting the true market-oriented perspective that our Company strives for. For example, railway companies are not solely engaged in train operations. They have also expanded into real estate, logistics, and retail sectors such as department stores and supermarkets. When engaging with these kinds of customers, proposals from a single Division Company are usually limited to that particular industry. This is the weakness of siloed businesses, but it also means that for general trading companies where vertical silos are deeply ingrained, there are undiscovered business opportunities. The CXO is responsible for connecting multiple Division Companies while involving The 8th Company, which aims to create new businesses through market-oriented perspective. In each Division Company, these on the front lines are deeply engaged in their daily tasks, and it is not easy to change their way of working or thinking overnight. My intention is to promote new innovative initiatives by supporting Merchants who have cultivated know-how on the front lines to advance toward a transformation from a broader perspective. Digital technologies will be key to this. Even in fields where we have yet to acquire expertise, we can use digital capabilities and gain a foothold to become familiar with these fields faster. In particular, the consumer sector where we have strong expertise is a treasure trove of data, and there is infinite room for transformation. Together with approximately 260 Group companies, we will drive transformation across the entire Group, to achieve a higher level of growth.