Promoting DX to Accelerate Five Transformations

Promoting DX to support business and management that leads to new value creation

Executive Vice President Chiaki Niwa

The NGK Group is proactively promoting digital transformation (DX) to achieve corporate reforms that will position us for the future. In April 2022, we outlined the NGK Group Digital Vision and a roadmap for promoting initiatives through 2030.

We will increase our market competitiveness, efficiency, and productivity to achieve growth as a corporation and the new value creation made possible through these initiatives.

Drafting the NGK Group Digital Vision

DX as the driving force of Five Transformations

In the past, NGK’s core strength was in the conventional manufacturing of products. From generation to generation, we inherited the skills and knowhow cultivated over the years to establish market differentiation and a competitive advantage not easily mimicked by other companies. Our shift towards the adoption of digital technology began some 10 years ago. We realized that, amid intensifying global competition, differentiating ourselves and securing a competitive advantage would require that we accumulate qualitative elements such as skills and knowhow as quantitative data that could be applied towards further improving our production efficiency.

Our current environment is known as the era of VUCA (volatility, uncertainty, complexity and ambiguity), an age in which technological advancements are creating environments of increasing complexity and making it difficult to forecast the future. As uncertainty increases during the winds of changes coming from all directions, achieving sustainable growth for the NGK Group will require that we shift away from conventional thinking about business and work processes. We must adopt thinking and concepts that fit with the changing times. The key to this will be to transform our corporate structure and business models by adopting data and digital technology. In other words, we must undergo in a digital transformation. The NGK Group must take unprecedented efforts to accelerate our DX and create new value.

In April 2022, we drafted the NGK Group Digital Vision, which we linked to our medium- and long-term vision. As our vision of what we want to be, we want to contribute to carbon neutrality and a digital society by using DX as the driving force of Five Transformations that will help us realize what we call our Third Foundation. We will seamlessly incorporate data and digital technology to identify the needs of our customers and society. We will reform our products, services, and business model to establish a sustainable competitive advantage. Through these initiatives, we will achieve the “Third Foundation” where we use DX to drive our Five Transformations will lead to new value creation and innovation that helps resolve social issues and promotes corporate growth.

Figure depicting the NGK Group Digital Vision   What we want to be –    Apply digital technologies as a key driving factor of '5 Transformations' to realize the 'Third Foundation' and lead to carbon neutrality and digital society. Transform NGK Group into a digital-oriented company by 2030.   What we must do –    Human Resources: DX enlightenment from top management to employees, Development of highly skilled data scientists (1,000 employees in 2030), Training of IT bridge talent in each division   Digital Technology: Construct data utilization platform, Develop next-generation technologies (MI, PI, CPS), Robust IT security   Organizational Culture: Top management commitment, Cooperate and promote with all NGK Group, Reform all NGK employees’ minds (Agile, Challenge)

*1 Bridge talents: Human resources that can adopt measures that strike a balance between management, operations and IT

*2 MI: Materials Informatics, PI: Process Informatics, CPS: Cyber Physical Systems

Three pillars of DX promotion

Human resources, digital technology, and organizational culture

Transforming into a company capable of the seamless adoption of technology will require more than simply using data and digital technology. This will require the company-wide digital transformation. Critical to this transformation will be the development of human resources, and the reform of our organization and corporate culture. With this in mind, we positioned human resources, digital, and organization and culture as the three core policies of the NGK Group Digital Vision.

In the area of human resources, we will hold in-person seminars and web meetings on the use of our internal portal and DX, as well as provide opportunities to interact with other companies as a part of enlightenment activities for all employees, including senior management. To foster the development of human resources capable of utilizing data, we will aim for the development of 1,000 staff members by 2030. For example, the DX Study Exchange we launched in 2021, in an internal program that provides staff the opportunity to leave their assigned department for one year. During this period, employees are allowed to focus on data analysis and digital technology without having to also perform their existing duties. This program is designed to develop the leaders who will play a core role in promoting DX. We chose three members for the program in FY2021 and expanded this to 13 members for FY2022. By 2030, we are planning to develop a total of 110 leaders. Aiming to increase overall IT literacy for the Group, we also are recommending employees take the Information Technology Passport Examination (a national examination for measuring basic IT knowledge) and are even planning to make this a required for employee promotions. We will also focus on the development of “bridge talents”, staff members capable of proposing policies that strike a balance between business management, operations, and IT. These bridge personnel will also serve as key personnel in our initiatives to promote DX.

As initiatives related to digital, we will work to build, implement, and improve on a data utilization platform that will support the future activities of the NGK Group now that we have completed the transition from legacy systems. From materials informatics (MI)*3, which we introduce later in this report, and process informatics (PI)*4 to cyber-physical systems (CPS)*5, we will aggressively develop and integrate next-generation technology. Particularly with MI, which will become a core technology for NGK, we will aim to reduce our development lead time by 90 percent. Additionally, we will reevaluate and strengthen IT security measures for the entire NGK Group. Specifically, by the end of FY2024, for the entire NGK Group we will (1) build a targeted attack defense system, (2) establish and SOC+EDR*6 to strengthen detection capabilities, and (3) upgrade to a secure backup that is highly resistant to virus attacks. These measures are in line with the approach outlined by the US National Institute of Standards and Technology (NIST).

To address our organization and culture, we will ensure awareness and understanding of management’s strong commitment to promoting DX as a part of our management strategy. The entire NGK Group will unite towards building a framework for collaborating on these initiatives. We will also strengthen collaborations with our overseas locations and engage in activities that promote mutual success, including holding global conferences based on the adoption of common KPI. To ensure the success of our DX initiatives, we will work to cultivate a mentality centered on reform through which everyone from management to local site employees all embrace the importance of transforming how we think and taking a proactive role in operational reforms. Through these efforts, we will increase our annual project numbers from the current 100 per year to 300 per year.

We will engage in inter-departmental collaborations to promote DX activities based on these three core initiatives. By 2030, we are aiming to be a company capable of the seamless utilization of data and digital technology.

*3 Materials informatics (MI): Applying informatics (information science) such as machine learning and big data, the core technology of AI, towards new materials and new component development

*4 Process informatics (PI): Applying information sciences to new process development.

*5 Cyber-physical system (CPS): Creating value by using real-world data to recreate virtual spaces for analysis, and then provide feedback for real-world applications.

*6 Security Operation Center (SOC): An external dedicated organization that conducts 24-hour monitoring of device and service logs to quickly detect viruses on internal systems and other external threats.
Endpoint Detection and Response (EDR): Software that monitors for suspicious activity or communications on PCs and servers to detect and respond to infiltration by computer viruses and other external threats.

Tier-based education

Figure depicting tier-based training. Consists of DX Experts who are members of the Digital Transformation & Innovation Department at the top, DX Leaders who are leaders in the business unit for promoting DX, DX Supporters who support DX Leaders, and DX Beginners who apply data analysis methods in their work. Leader development includes: Common education and training for leaders and supporters, DX Study Exchange, and Report meetings.

Long-term plan

Table depicting long-term human resources development plan. Every year, we work to systematically develop human resources at each tier. What we want to be by 2030: Seeking to cultivate / bring on board 20 DX Experts, 110 DX Leaders, 300 DX Supporters, and 600 DX Beginners.

DX promotion roadmap

Figure depicting DX promotion roadmap. DX promotion roadmap: Build a foundation for digital utilization through 2023 in Stage 1; Establish a promotion system and accumulate results through 2025 in Stage 2; Expand DX activities in all directions through 2030 in Stage 3.

DX promotion roadmap

Gradual initiatives in 3 steps

The driving force behind DX promotion will be the Digital Transformation and Innovation Department, which we newly established in April 2021. Conducting activities across the entire company, this department will link digital technology such as AI and IoT with the expertise of each business division, Corporate R&D, and headquarters departments. The Digital Transformation and Innovation Department will also fulfill the role of supporting and promoting business reforms. Furthermore, the following is the DX promotion roadmap we formulated to transform into a company capable of utilizing data and digital technology.

STAGE1:Build a foundation for digital utilization

We will build a foundation for using digital technology by establishing a DX promotion organization and developing DX human resources. We will advance the digitization of analog data, the basis of our DX strategy, to improve operational efficiency and save labor while also working to improve the digital literacy of our employees.

STAGE2:Establish a promotion system and accumulate results

We will adopt our successes from STAGE2 throughout the company and promote the digitalization of each business and manufacturing process. We will make DX activities autonomous with business departments and local sites, change and reconstruct operational processes using digital technology, and link these efforts to the discovery of new needs.

STAGE3:Expand DX activities to all directions

We will leverage data and digital technology to transform our business model on a company-wide level. We will establish a competitive edge by reforming our corporate culture, organization, and operational processes while also improving the profitability of each business division. Furthermore, we will pursue continuous innovation to create unparalleled value.

The NGK Group is currently in STAGE1. Looking ahead to what we want to be in 2030, all employees in all divisions of the company will conduct backcasting and gradually implement initiatives with a sense of urgency as we work to increase our experience and maturity.

Establishing DX unique to NGK

“Materials Informatics”

One of the next-generation technologies that we are focusing on is a development method called Materials Informatics (MI). This involves creating a database of calculated data based on simulations and accumulated experimental data. This data is then analyzed by AI to efficiently search for new materials. The adoption of this technology is expected to speed up the development of advanced materials.

Thus far, there we have seen examples of practical applications for MI in the calculated data for organic materials. However, with inorganic materials such as ceramics, no progress has been made in the application of MI due to the fact that ceramics are complex structures comprised of multiple crystalline elements, making high-precision simulations more difficult than with organic materials.

The NGK Group has more than 10,000 sets of experimental data accumulated over the past 100 years, and we are developing MI that leverages this vast experimental data that other companies do not possess. Our goal is to use MI to shorten development lead-time by 90 percent and establish MI unique to NGK that will lead to future growth. The Corporate R&D Group, Digital Transformation and Innovation Department, and Corporate Manufacturing Engineering Group will engage in a company-wide project towards achieving this goal.

Materials informatics unique to NGK

Figure depicting materials informatics unique to NGK. This involves creating a database of calculated data based on simulations and past experimental data, which is then analyzed by AI to efficiently search for new materials. Adoption of this technology is expected to speed up development of innovative materials. Application to material development for all NGK products is targeted by the end of fiscal 2030.

Seamless connection of all processes along our engineering and supply chains

Based on the NGK Group Digital Vision, our vision of manufacturing in 2030 is one where all processes along the engineering and supply chains are seamlessly connected through digital technology. To achieve this vision, on the engineering chain, we will introduce next-generation technologies such as MI to speed up development and improve productivity by digitizing human experience and technology. On the supply chain, we will digitize data and create an environment that facilitates the utilization of data gathered by the Manufacturing, Sales, and Procurement Divisions. These activities are being promoted in close coordination with one of our company-wide initiatives, Manufacturing ∞ (Chain) Innovation. It will also be essential to reform the back-office functions (headquarters departments) that support manufacturing. Through DX, we will improve the efficiency of low-value-added work and improve the speed of management by becoming experts in strategy/decision-making tasks.

Figure depicting the seamless connection of all processes along our engineering and supply chains. Engineering chain: A series of operations centered on the development and design departments. Supply chain: A series of operations centered on procurement, production, and supplies.

Promoting DX is essential to expanding services

The NGK Group is expanding our business beyond product manufacturing to provide services, systems, and solutions. We are working towards the utilization of data and digital technology in these areas as well.

One example is the regional new electric power project (Ena Electric Power, Abashiri Electric Power) that utilizes large-scale storage batteries and NAS® batteries. Our product in this project is the NAS battery, but we have launched a business that sells not only NAS batteries, but also provides megawatt-class power storage systems that offer large capacity, high output, and long service life. Renewable energy sources such as solar power have issues with stable power supply because the amount of power generated varies depending on the weather. NGK applied digital technology to build a system that can forecast power generation and demand while finding the optimal balance between charging and discharging to provide stable power supply over the long term. The adoption of this system by society will enable the realization of local production and consumption of electricity, and promote the spread of renewable energy. This will create new value for NGK Group and contribute to resolving social issues at the same time. The importance of storage batteries for "adjustment flexibility", the ability to provide a stable supply of electricity, is increasing. In the future, we plan to combine NAS batteries with larger energy management systems to help expand the adoption of renewable energy throughout society.

We believe that promoting DX is essential to developing our own competitive products into service provision and new business expansion.

Achieving change toward what we want to be

Executive Vice President Chiaki Niwa

DX is a keyword of modern times, but human capabilities remain indispensable to achieving true DX that goes beyond mere digitization and operational efficiency. People are the main players in DX, and DX promotion initiatives will require that all employees to understand the essence of DX and work together as a group. The important thing is not to be satisfied with the status quo. Even small changes can make a difference in our operations. Each and every one of us must always embrace an attitude of “trying to change.” Through gradual advancements, we can make changes to departmental operations and manufacturing processes. We believe we can optimize the ensure NGK Group through a transformation resulting from a combination of multiple processes based on Group-wide collaborations between people and departments. An important management theme when promoting DX is the repetition of speedy planning, execution, evaluation, and improvement. The path to a successful DX strategy is the agile implementation of the PDCA cycle and to aim for improvement without fear of failure.

The connections between people, products, and services created by digital technology serve as a bridge to new value creation and innovation. The NGK Group will accelerate our DX promotion with a strong desire to transform into a corporation capable of utilizing data and digital technology.

Note: This interview was conducted in May 2022.