It is a top of the page.

DUSKIN 60th Anniversary

A Dialogue between the President and the Outside Directors

Hiroyuki Okubo
Representative Director,
President and CEO
Nobuko Sekiguchi
Outside Director
Yukiko Tsujimoto
Outside Director
Fumi Musashi
Outside Director

We will strive to make our corporate governance even stronger and diligently address every issue that affects sustained medium- and long-term growth

President Okubo met with three Outside Directors for an exchange of opinions concerning corporate management issues. Among other topics, President and CEO Okubo heard the Outside Directors' honest evaluation of the effectiveness of the Board of Directors, their thoughts on issues concerning the Medium-Term Management Policy 2022 and their ideas about corporate management from a long-term perspective.

Duskin takes the valuable opinions of our Outside Directors very seriously, and we make every effort to find solutions to each and every issue that they bring to our attention. This helps us further strengthen our corporate governance and thereby enhance corporate value.

The Board of Directors welcomes discussion, but discussion from a company-wide perspective is an issue

Okubo:
I would be grateful to hear the candid opinions informed by the past experience and specialized knowledge of you, our Outside Directors. Today, I would like to hear your evaluations of the effectiveness of the Board of Directors, your thoughts on the progress of the Medium-Term Management Policy 2022 and sustainability management issues, and, looking ahead, your thoughts about what role and mission you wish to fulfill as an Outside Director. I would like to begin with Ms. Sekiguchi's thoughts from her position as chairman of the Outside Directors and Audit and Supervisory Board Members Council and as chairman of the Directors Evaluation Committee on the effectiveness of the Board of Directors.
Sekiguchi:
I have been an Outside Director on the Board of Directors for about four years, and one impression I have of the Board is that it has a very open atmosphere that welcomes discussion. For other meetings I have attended as well, such as Business Strategy Meetings, I feel that the substance of the discussions improves with each passing year. Looking ahead, besides engaging in more substantive discussion of proposals, I think it will be important to do thorough reviews and evaluations of business strategy and annual plans in order to have more substantive discussions for what comes after.
Okubo:
You observe that the Board of Directors welcomes discussion, but are there any issues that you think need attention?
Sekiguchi:
Given Duskin's wide and diverse range of business operations, I would like there to be a bit more time allotted for discussion from a comprehensive, company-wide perspective, with an emphasis on capital efficiency. Discussion on specific areas of business is important, of course, but since company directors each have their own areas of responsibility, they naturally tend to focus on those areas. Over the last few years, business portfolio selection and concentration has been a topic that has come up as part of the effort to make the Board of Directors more effective, and to take this discussion one step further I think we need to allot more time to take part as individual directors — regardless of whether one is an outside or company director — in discussions that cross organizational boundaries, and I think we should continue to have these discussions.
Okubo:
As you note, besides stimulating discussion concerning each business within the company, we might need more discussion concerning strategy and investment from a comprehensive, company-wide perspective. Ms. Tsujimoto, what do you think?
Tsujimoto:
Like Ms. Sekiguchi, I think the Board of Directors welcomes the opinions of the Outside Directors and has an environment in which one feels comfortable expressing their opinion. The Board of Directors has become a place for lively discussion, regardless of whether one is inside or outside the company. But as Ms. Sekiguchi noted, a lot of discussions right now are at the specific business operation level, and that means that at times discussions somewhat lack a company-wide perspective. Like a business division, the roles within corporate administrative divisions are carefully defined, but in this age in which new things constantly occur like never before, there will be an increasing need to avoid organizational barriers in favor of a broad perspective and flexible response. I hope that the Board of Directors will continue to have discussions from a company-wide perspective. At the same time, the company is making solid progress on overseas businesses, M&A and other efforts to enter new business domains. In all of these instances, we need more substantive discussions based on KPIs.
Okubo:
I see. You would like more substantial discussion from a company-wide perspective about the makeup of our business portfolio. Ms. Musashi, what do you think?
Musashi:
It has been a year since I was appointed to the Board of Directors. At first, there were a lot of things I didn't understand. But I receive explanations in advance of meetings, of course, and I also receive individual explanations from people in charge of things that I want to know about in greater detail, so my understanding of the situation at the company overall has improved. I am grateful for the courteous response. Given that it is easy to express one's opinion at Board of Directors meetings and that the opinions of Outside Directors are carefully considered, I think that the Board is open and very effective.
Before our meeting today, I reread the Corporate Reports for the previous two years, and they reminded me that the Board of Directors has evolved. Looking ahead, the Board will need to evolve in a manner that is more substantive. I hope we will deepen our dialogue with internal directors concerning such cross-organizational, company-wide topics as the company's capital investment policy and human resource policy.
The business environment changes at a dizzying pace, so there will be cases where business results do not meet targets and forecasts. Nonetheless, in such cases I think it is important that we remain committed to the initial targets and forecasts and move quickly to bring the business plan into sync with them.
Tsujimoto:
Yukiko Tsujimoto, Outside Director
Yukiko Tsujimoto
Outside Director
KPIs show that there has been a lot of progress. Right now, Duskin has several KGIs and sales- and profit-related KPIs, but looking ahead we can further improve on these by breaking down a bit more the elements that make up our KPIs and organizing them into a logic tree.

The importance of creating an even richer physical customer experience

Okubo:
Now let's move on to your thoughts about the progress of the Medium-Term Business Plan 2022. In particular, what are the issues that we need to address in order to make even more concrete progress on reforming our business portfolio?
Tsujimoto:
When thinking about its business portfolio, it is very important that Duskin consider the end-user. Who are the people who pay money for the products and services that Duskin offers? In addition, the most effective way to think about the nature of Duskin's business is to ask what are the products and services that Duskin should offer in order to contribute to a better and happier life for the end-user. And though I use the catch-all term "end-user," they differ in age, location, lifestyle, disposable income and so on, so it's a good idea to approach the business with a focus on the target customer, the "who." The more accurate the product targeting and to whom it is targeted the more effective the "what" — the product or service — will be, and this will lead to better business results. Looking ahead, I hope that we will explore this topic a bit more deeply.
Okubo:
It is important that we have a more clearly defined strategy for our target customers. Whether it is the residential market or the commercial market, customers are divided into segments, so for a given segment there is the question of whether to develop a single business or to approach it with multiple businesses that include affiliated companies. I think our future marketing and business evaluations will need to consider this. Ms. Musashi, what do you think?
Musashi:
It is important that business portfolio reform also look at collaboration with our franchisees. President Okubo has said that the relationship between Duskin and its franchisees is utterly unique, and it is certainly the case that the intangible assets that Duskin and its franchisees have built are a core competence of the company. I hope we will work on portfolio reform from the perspective of how we can further leverage this strength.
While the Direct Selling Group and Food Group are two different business domains, among their customers there are certainly those who enjoy donuts and use mops as well. We would like these customers to use our products and services as one package and feel that Duskin is convenient. To this end, I hope we can take a boundary-crossing approach to our customers.
Okubo:
One of the key terms for our business portfolio reform is digital transformation or DX strategy. I think that we can use this technology to enhance the value of the customer experience or CX. While I think that our business model up to now for both the Direct Selling Group and Food Group enables ample face-to-face interaction with the customer at the time of purchase, in the future we will also be concerned with enhancing the customer experience before and after purchase. What do you think?
Tsujimoto:
As you say, providing a positive face-to-face customer experience is a Duskin strength. That means Duskin should be able to leverage DX for creating an even richer physical experience. Whether direct sales or sales service at shops, I think we will need to transform the touchpoints with our customers.
Okubo:
Indeed. A "richer physical experience" is a good way to put it. In other words, we use digital technology to create a richer experience from the customer's perspective.
Sekiguchi:
Utilizing digital technology as part of Duskin's business concerns two points. First, how do we transform business processes using advanced tools? Very time-consuming tasks that had required human intervention can now be processed much faster by using data, and where there had been no more than one point of contact with the customer, thanks to the digitalization of information, it is now possible to reach an infinite number of potential customers. This means that first we need to think about business processes that contribute to a better customer experience.
The second point concerns how we use AI voice recognition, generative AI and other new technologies. These technologies have the potential to create new kinds of fun customer experiences. For instance, information recorded by voice input into a smartphone by a Direct Selling Group salesperson and customer information are all digitized and then matching and other functions make it possible for a customer in Hokkaido and salesperson in Okinawa to have a conversation. So, rather than simply selling a product, it might become possible to increase added value from an experience-based consumption perspective. This is where the power of new technology is indispensable.
Okubo:
Right now, when we think of DX, it is usually in terms of improving productivity and CX, but it is really about how integrating it into physical interactions with the customer changes the business model. Overseas development is also a topic of the Medium-Term Management Plan 2022, so I would like to hear the thoughts of Ms. Musashi, since you have a great deal of overseas experience.
Musashi:
Fumi Musashi, Outside Director
Fumi Musashi
Outside Director
In Japan, we have to seek investments in new growth opportunities amid a shrinking and aging population. In contrast, there are countries around the world with steady growth, and they offer an increasing number of business opportunities. I think our overseas business still has room to explore more dynamic growth than it has up to now.
But the franchise business model absolutely requires building solid relationships with local partners. Duskin has focused its business development on Asia, and the key is to utilize a variety of channels to search for reliable partners and form business relationships. I want to help Duskin grow its overseas business.
Okubo:
Mister Donut has opened a new shop in Singapore, and we are steadily expanding our comprehensive cleaning and hygiene services overseas, including the addition of a home cleaning service to the dust control business in Taiwan. As our businesses work together in the future to enhance these comprehensive services, I believe we will be able to show continued progress in the implementation of our ONE DUSKIN strategy.

Developing human resources capable of transforming our business portfolio is a key challenge

Okubo:
Now, I would like to hear your thoughts about achieving sustainable growth from a long-term growth perspective. Since sustainability management covers a wide range of issues, here I would like us to focus on the issue of building a solid business foundation.
Sekiguchi:
Nobuko Sekiguchi, Outside Director
Nobuko Sekiguchi
Outside Director
Sustainability management is a very important issue and also one with a full agenda of topics in need of thorough discussion, and I think corporations need to take action in a variety of areas to address the issue. From the perspective of building a solid business foundation, I think it is very important to build a framework that balances social value and economic value. In particular, regarding the active participation of women and other effective use of human resources, they should not be based on simply meeting numerical targets. I hope we can build an evaluation system that effectively allocates human resources to where they are needed most while also enabling people with a diverse range of values and abilities to fully maximize their potential.
Currently, Duskin is reviewing its human resource portfolio. As part of this ongoing effort, and in order to make the company more competitive, Duskin needs to focus on developing a diversity and inclusion policy appropriate for the company.
Tsujimoto:
Whether environmental issues or human resource management, we should approach sustainability management not as something we must do because it is a social obligation but as a business opportunity.
Duskin has developed an environmentally friendly business that reuses mops and mats rather than discarding them. When we think about how to meet our commitment to sustainability in this new era, we should assume that making the most of and further refining Duskin's strengths will be a source of new business opportunities.
Investing in the environment is a corporate responsibility. I think it can bring about a cycle that grows business and further benefits the environment. Making progress on sustainability management requires sharply separating differentiation marketing's points of parity (or POP, the basic functions and features of a product or service) and points of difference (or POD, the points that differentiate a product or service from its competitors), and then thinking about how to approach POP that Duskin needs to pursue at a minimum, and POD that highlight Duskin's strengths. In regard to human capital management, given the importance of adapting to the DX and the importance of learning that focuses on creating new value, it might be necessary to reskill middle-age and older employees. But more importantly, how do we train young employees? It is vitally important that we invest in how to instill a management mindset in young employees.
Musashi:
A Duskin policy is to encourage young employees to take on challenges and grow, but there might be some who are reluctant to take on new challenges out of fear of failure. It is important to reward success and it is important for employees take responsibility for setbacks. A healthy organization doesn't give up on an employee because of a single failure, however, but instead provides further opportunities for that employee to succeed and make a comeback. It is also essential to instill an attitude of sharing examples of failure with the whole company so that the same thing is not repeated. I think it is important to set up a platform that makes it easy for young people to take the first step.
Okubo:
Hiroyuki Okubo, Representative Director, President and CEO
Hiroyuki Okubo
Representative Director, President and CEO
Business portfolio reform must secure the diverse human resources needed to ensure future growth. For example, at Mister Donut young employees are active in product development as well as SNS, web marketing and the like. In contrast, many veteran employees are Area Managers who provide guidance to our franchisees. So, I think Duskin skillfully allocates personnel to where they are the most effective. Looking ahead, we want to promote human resource diversity throughout the entire Group and make progress on human resource training that is in step with business portfolio reform.

Duskin's Outside Directors reaffirm their commitment to contributing ideas that raise corporate value

Okubo:
Lastly, please tell us how you see your role and mission as an Outside Director as we move forward.
Musashi:
As an Outside Director, I want to provide as much support as I can so that we make solid progress on the medium-term business plan and achieve — even by a little — our targets ahead of schedule. In particular, given that I have spent many years in business overseas, I intend to make every effort to provide advice and contribute to substantive discussion concerning Duskin's business development overseas.
Tsujimoto:
Since I am taking part in discussions about Duskin's medium-term business policy and long-term strategy, I hope to contribute to setting the future course for Duskin from a long-term perspective. Moreover, I hope to use my involvement in human resource recruitment and development in Kobe City as well as my experience in marketing prior to that to contribute to enhancing Duskin's corporate value.
Sekiguchi:
I am in my fifth year as an Outside Director, and I really feel that the weight of the role expected of me has grown. I am keenly aware that understanding what our stakeholders want and increasing corporate value is one of the most important roles for a director.
In closing, I believe that Duskin's business still has untapped potential. For instance, right now the Direct Selling Group focuses on the residential and commercial markets, but there are other growing markets besides these, the school and education market being one example. I want us to by all means boldly take on the challenge of untapped business domains. Instead of simply providing cleaning services, I believe that sowing seeds of joy that spread the culture of cleanliness in Japan and overseas can increase Duskin's corporate value.
Okubo:
At this gathering, we have heard the opinions of our Outside Directors on a variety of topics. I want us to steadily increase corporate value by incorporating your ideas into our business operations. Thank you, and we look forward to hearing your candid opinions again.