- Teruji Yamamura
- Chairman
- Yukiko Tsujimoto
- Outside Director
- Fumi Musashi
- Outside Director
Supporting sound business management and enhancing corporate value
As the ONE DUSKIN long-term strategy enters its final phase, Duskin Chairman Teruji Yamamura talked about its role in the company's success and exchanged opinions with Outside Directors Yukiko Tsujimoto and Fumi Musashi about how to further raise corporate value going forward.
ONE DUSKIN's achievements and the outlook ahead
- Yamamura:
- When Duskin celebrated its 50th year in fiscal 2015, we initiated ONE DUSKIN, a long-term strategy for the next 10 years. As company president at the time, I visited franchisees, factories and shops all over the country, and I came away with the impression that different business divisions and positions perceived things with quite different points of view.
For our customers, however, there is just one Duskin, and the ONE DUSKIN long-term strategy is therefore strongly guided by the idea that franchisees and the franchise headquarters must do business as one. Over the ensuing 10 years, this idea has become internalized by the entire Duskin Family. Our strength lies in the Only One franchise system, where we — the franchisor and franchisees — share the same business philosophy, and in our aspiration to become "Number One" or the most trusted franchise business in the community. As we move forward, we must continue to strengthen both of these. What's more, I think that one of our biggest accomplishments is how everyone in the Duskin Family strives to achieve the All For One idea of uniting every Duskin business as one and to be of value to our customers.
Starting in 2020, our ONE DUSKIN strategy fulfilled a vital mission during the COVID-19 pandemic. In an environment in which events were being postponed and canceled as infection spread, we developed Event Hygiene Services, which combines Rent-All's expertise in supporting the operation of all kinds of events with the respective specialties of Clean Service and Care Service. This package providing solutions for better hygiene management for facilities ranging from concert venues to vaccination sites was well-received by many customers. In this way, our business approach under the ONE DUSKIN strategy discovered new possibilities amid what can be considered very adverse circumstances.
The ONE DUSKIN strategy seeks to build a framework that enables different business divisions to work together as a single brand and to employ their strengths even in times of emergency. Looking back on the last 10 years, I feel that the Duskin Family has united as one and consistently provided value to our customers. Looking ahead, we intend to cherish the values embodied in ONE DUSKIN and achieve even more growth.
- Tsujimoto:
- I was appointed to the position of outside director in June 2020. So, I started out during the COVID-19 pandemic, a time when all of society was enveloped in confusion and uncertainty and the economy was likewise facing severe hardship. Among other problems, this challenging business environment made it hard for Clean Service to make sales visits to its customers' homes and reduced opportunities for eating out at Mister Donut. We therefore needed flexibility and drastic changes to avoid getting dragged down by the conditions around us. The effort by Duskin to take on hygiene management at vaccination sites that Mr. Yamamura mentioned is a prime example of this response.
Through Phase II, Duskin had deployed a strategy aimed at growing existing businesses, but Phase III initiated a major change in course to reforming existing businesses. I believe that responding to these drastic changes in the socioeconomic environment required reforms that go beyond conventional boundaries. During this challenging time, various efforts initiated under ONE DUSKIN also produced positive results. The COVID-19 pandemic was indeed a challenging event, but for Duskin it also presented a valuable opportunity to move in a new direction.
- Musashi:
- In 2022, the year I was appointed an outside director, ONE DUSKIN Phase III began following a one-year delay due to the COVID-19 pandemic. While the pandemic posed a number of challenges to businesses, there were also some positive developments, such as growing concern over hygiene and rising take-out demand.
Three strategic themes for ONE DUSKIN Phase III represented by the Medium-Term Management Policy 2022 were: business portfolio reform, building a solid business operation foundation and coexisting with local communities, and they all made decisive progress. I think that business portfolio reform, especially, made substantial progress. Besides reforming existing business domains, we applied M&A and business partnerships to take on a new challenge of supporting the generation currently raising children. I hope we can benefit from the synergy between these businesses in the future.
They are also proof that initiatives based on the ONE DUSKIN strategy are being solidly executed. To achieve even more growth, it is also important to work out how to handle the issues that Duskin faces. I want to continue working on solving these challenges and supporting Duskin's sustainable growth.
- Yamamura:
- In recent years, the percentage of people at home has decreased dramatically, and this has made it hard for us to reach the family segment, which has been a Duskin specialty. Besides developing new products, we periodically update existing products. A recent popular item is our mops for pets. But the shift of purchases from home visits to the Internet has made the declining number of direct points of customer contact an issue.
The majority of Direct Selling Group sales are mops and mats, but they also supply customers with such products as water purifiers and air purifiers. Looking ahead, we are aware that further product development and improving customer touchpoints are important issues. The Duskin Family is united on providing our customers with all kinds of value by always taking on new challenges.
- Tsujimoto:
- As Mr. Yamamura said, Duskin has developed businesses covering a very wide range. In addition to strengthening the unity of each Duskin business, I think it is also important that franchisees and the franchise headquarters move in the same direction as partners for the sake of our customers rather than facing each other. I believe this effort truly embodies the ONE DUSKIN strategy.
On this point, Mister Donut is an outstanding model case example. I believe that their business continues to grow precisely because everyone involved is keenly aware that the headquarters should take the lead in analyzing customer needs and meeting those needs in unison with the franchisees. This is the number one reason why their business continues to grow. The Direct Selling Group is concentrating on a similar effort, but in order to produce results that embody the ONE DUSKIN strategy in a novel way, it needs to upgrade its services by more accurately grasping customer needs and working in partnership with franchisees.
- Musashi:
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Duskin's wide range of businesses has once again impressed upon me the breadth and depth of the Duskin brand. No matter the business, customers see it as a Duskin business, and franchisees all over the country build their businesses carrying the weight of the Duskin brand.
ONE DUSKIN, the strategy that every Duskin business is united as one under the Duskin brand, is our guiding principle. Even as our business model evolves over the next 10, the next 20 years, we need to strive to keep this spirit alive.
Duskin is doing business not only in Japan but overseas, so creating opportunities to publicize Duskin among, for example, tourists visiting Japan seems worthy of attention. I hope Duskin will take this opportunity to spread name recognition of the Duskin brand overseas, raise its value, and open the way to expanding its business worldwide.
- Yamamura:
- As both of you have pointed out, it is important to have a viewpoint that accounts for both things that need to be preserved and the things that need to change. Duskin's founder often spoke of "unifying business and morals (pursuing both social and economic values)," and this idea especially resonates with me. While a person must not deviate from fundamental principles and should always maintain compassion and an ethical perspective, when it comes to the economy one has to flexibly respond to the times. A synthesis of these two elements is the core of our founding philosophy, and Duskin's mission is to give form to this philosophy.
Our goal is to consistently provide our customers with the best possible services by thoroughly understanding what values are permanent and what values need to change. We are convinced that carrying on the spirit of our founder while also creating new value is the key to further company growth.
The current state of and issues facing corporate governance
- Tsujimoto:
- Conducting business with a close eye on capital costs and share price is becoming more and more important, and therefore at Duskin the Board of Directors share an awareness of capital costs and deliberate on the company's capital strategy. Share price exceeded a 1.0x price-to-book ratio on September 30, 2024, and I think there has been progress on a dividend policy that considers share value and on actions taken to increase share price.
But capital cost-aware business management still has room for improvement. Further effort is needed to optimize the business portfolio so that it reflects capital costs. Capital allocation needs to be in step with a market's degree of maturity and growth. Also, it is important that deliberations on M&A and creating new businesses consider capital costs.
Each Duskin business needs to build a value chain that integrates the franchisee and the headquarters, but they all have a different business model. At the same time, Duskin needs to evaluate its businesses from a cross-sectional perspective and further bolster the organizational resources needed to do this.
All Evaluation Committees of the Board of Directors contribute to strengthening governance by reporting regularly to the Board. Moreover, in order to enhance the company's mid- and long-term shareholder value, the Board of Directors will closely monitor the progress of the business in such non-financial domains as human capital, as well as whether each business has both profitability and growth potential.
- Musashi:
- Our evaluation of the performance of the Board of Directors takes into account a questionnaire completed by Board Directors and Audit and Supervisory Board members. Inside and outside board members evaluate from different perspectives, and this enables us to identify areas that need improvement and determine the issues that need attention in the coming fiscal year. Moreover, we are also making progress on improving systems and operations that we need to achieve our objectives, and I feel that the PDCA cycle is firmly in place.
While M&A are executed after thorough debate, most important is monitoring set goals, degree of progress toward achieving them, and results. It is also important that our monitoring take into account the time frame, including more frequent monitoring to ensure that needed measures are executed promptly.
I should also note that the role of the secretariat is becoming more and more important for raising Board of Directors effectiveness. I hope they will deepen the content of the discussion agenda. I want my outside perspective to contribute to improving the effectiveness and functioning of the Board of Directors.
- Yamamura:
- Duskin works hard to conform to the principles of the corporate governance code, but discussion is important for understanding these principles and how they contribute to raising corporate value. For stronger corporate governance, it is important to balance all stakeholders — not just institutional investors — including employees, franchisees, vendors and customers. Duskin spreads profits equally among all stakeholders and aims for a sustainable business operation. This is because, based on our founder's philosophy, we have a history that values our partnership with our employees and franchisees. This is why our franchises emphasize a joint partnership approach.
Moreover, we believe that M&A should be carried out not just because they enlarge our business but because they also create value for franchisees and vendors. For this reason, we will rapidly carry out management decisions and business expansions and properly execute the PDCA cycle.
The importance of sustainable management
- Yamamura:
- Sustainable development goals (SDGs) are important indicators that corporations should follow in order to deal with the various issues that society faces today. SDGs addressing such topics as poverty, respect for human rights and protecting the environment are extremely important, and it is important to understand that there are numerous such issues that modern society has yet to solve.
As natural disasters continue to occur around the world, environmental problems, especially, make us keenly aware of the importance of reducing environmental burden. Despite the cost, for the sake of the next generation, we have a responsibility to make progress on such efforts as reducing CO2 emissions. When we imagine the world when the present young generation become adults, we understand that our generation must do everything that we can to leave behind a better environment.
Like the diseases that occur among adults because of years of unhealthy living, environmental problems cannot be solved quickly and require restraining our behavior day after day. We therefore bear a solemn responsibility, both as individuals and as a corporation, for making progress on these initiatives so that we leave behind a brighter future for our children and grandchildren. As a corporation we bear a social responsibility to address these issues, needless to say, and Duskin will therefore work toward achieving its SDGs and contribute to achieving a sustainable society.
- Tsujimoto:
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As Mr. Yamamura says, for corporations, sustainability isn't something that's nice to do; it is something that they must do. Corporations need to think of sustainability as part of their corporate management strategy, and also as part of their business strategy because, if they don't, the business will not survive. In recent years, especially, global warming has accelerated and temperature continues to rise. Given that their affects are more severe than expected from now on, it is vital that corporations work out management strategies that anticipate the worst-case scenario.
Moreover, if a corporation does not address sustainability, it will have a poor reputation in society, and it will not earn the support or be the choice of the younger generation. Our generation as well needs to pursue sustainable business with a greater sense of urgency.
- Musashi:
- In 2021, Duskin established Duskin Green Target 2030, an initiative to reduce Duskin's environmental burden. Moreover, Duskin established Duskin Green Vision 2050, with the idea of accelerating this effort. The most notable feature of Duskin Green Vision 2050 is that young employees in their 30s took the lead in formulating its policy. They imagined the environment they desired for both Japan and the planet in 2050 and then used a backcasting approach to work out what we need to do now to realize that future.
Especially worthy of note is Developing Green Communities, one of The Four Green Challenges. One specific initiative has been to partner with local governments by using Duskin locations around Japan as sites for collecting unneeded goods and other discarded items. I think using resource recycling to create a framework for people to participate in the community is a very Duskin-like approach. Formulating an environmental vision with a long-term outlook led by young employees also shows that sustainability management has taken root within the company.
We cannot ignore environmental problems, and we live in an age in which sustainability management is vital to corporations. Solutions to these problems are needed on a global scale, and Duskin will focus on how it can contribute as a corporation and continue to energetically pursue sustainability.
The background of the Vision and Purpose formulation
- Yamamura:
- As part of its vigorous efforts to apply corporate governance and practice sustainability management, Duskin has established a new Purpose and new Vision. In a major departure from the past, we had young employees, those in their 30s especially, take the lead in discussing what we need to do in the next 10 years and then formulate a Vision for the future. This Vision shows Duskin's new direction.
Looking ahead, we have to put in place opportunities for young employees to directly tell all employees about their ideas behind this Vision. Spreading the message about a new Vision on their own is the key to success over the next 10 years. It is important that we in the older generation provide an environment where they can freely take on challenges and one where we provide support while bearing ultimate responsibility. We, the management team, will pass the torch to the next generation in a way that respects the leadership of younger employees so that they can make progress without fear of failure.
- Tsujimoto:
- The effort to formulate a new Vision and Purpose was led by employees in their 30s and took a great deal of time to prepare. As a generation that will be with the company 10 years from now, their vision of the future is very meaningful. I am especially impressed that this effort started around October 2022 acknowledges and carefully refines the opinions of many employees, including outside directors. As a result, the new Vision and Purpose reflects many voices and is a very forward-looking document.
The new Vision includes the theme "connecting people and society and people and tomorrow." Not only does it strengthen the bonds of the Duskin Family like ONE DUSKIN, its scope also extends into the future and includes all of society. Unlike the past, this Vision looks to a broader and more sustainable future and expresses a deep commitment to moving forward in partnership with all of society.
Going forward, this Vision and Purpose will be the foundation for business operations and choosing investments and will serve as the guidelines for making decisions. My sense is that it is capable of broadening the overall business operation both horizontally and vertically and embodying sustainable management. Also noteworthy is that the Vision and Purpose carries on the founding spirit. I was impressed by how the philosophy of the founders has taken root even in new initiatives. I hope that this Vision and Purpose will guide the company over the coming decade.
- Musashi:
- In fall 2022, the members of the Purpose and Vision Formulation Project presented a summary of the project to the outside directors. The enormous enthusiasm of project members left a very deep impression. It was very encouraging that they saw the Purpose and Vision as their very own and to hear them explain it so passionately. After that, the same members have worked to instill the concept of the new Purpose and Vision inside the company. I am convinced that this diligent effort to internalize the new Purpose and Vision in every employee is very worthwhile.
The mission of the Chairman and the outside directors
- Yamamura:
- Since my appointment as Chairman, I always try to make sure that franchise headquarters and frontline staff are working closely together, and that the strategies of the headquarters have penetrated to the frontlines and are functioning properly. I go into the field and attend franchise owner meetings and business manager meetings, listen to Area Managers, and observe questions and answer sessions. This process, however, sometimes fails to adequately grasp the opinions coming from the frontline. When this happens, I try to correct it by explaining the situation, and also sometimes by conveying my own opinions, to Division and General Managers at the Head Office. I consider this an important role of the Chairman.
Moreover, so that the Prayerful Management philosophy does not fade as franchisees move to the next generation, I make time to talk with franchisees and on some occasions also recommend a change in business direction. Since my time as President, I have made an effort to have honest exchanges of opinion with franchisees, as it is important for building trust with our frontline staff. By visiting franchisees, I will focus on strengthening the partnership between them and the headquarters and transmitting the Duskin philosophy to the next generation.
- Tsujimoto:
- When a company has a clear philosophy and builds a strong culture it can guide all of its employees on the same path. This is important, but it can also foster an internally focused point of view and habits. This in itself is not necessarily a negative thing, but it is also important to take in viewpoints from outside.
Just as Chairman Yamamura strengthens the partnership between the headquarters and franchisees and fulfills the role of handing down the business philosophy to the next generation, as an outside director I have the indispensable role of providing information that shows how the company is viewed from the outside. Taking in outside points of view adds diverse viewpoints to business decisions and actions and makes it possible to make decisions based on a broader perspective. In this way, I hope I can help Duskin establish the direction of its business management.
- Musashi:
- There will always be an information asymmetry between inside and outside directors. But based on this information environment, I believe outside directors have an important role to state frank opinions from an outside perspective and ask, "Is this really the best approach?" when they have doubts.
I think that Duskin's Board of Directors is very open to hearing opinions from outside. I want my candid opinions to contribute to the deliberations of the Board of Directors. Moreover, thinking about the long-term profits of shareholders is one of the missions of an outside director, so I intend to continue providing the perspectives and ideas that help enhance shareholder value.
- Yamamura:
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Inside directors are deeply involved in all of our businesses, and we use their expertise to improve our business management, but their focus is vertically oriented and therefore they can have difficulty in seeing things from a broader and more horizontal perspective. In contrast, outside directors have the role of observing the company from a different perspective and understanding its lateral relationships. By compensating for one another in this way, outside directors and inside directors both support a sound business operation. Like a fabric of interwoven vertical and horizontal threads, this combination of vertical (that is, deep) and horizontal (that is, broad) perspectives endows management with both solidity and flexibility. We want the horizontal perspective of our outside directors to continue contributing to Duskin's sustained growth. I want to close by thanking you both for the wide range of opinions you have shared today.