$4.24 Billion ($10.3B total)
Yasuyuki Kimoto, Chairman
Hiroyuki Sasa, President & Representative Director
Akihiro Taguchi, President, Medical Group
Karl Watanabe, President & Chief Financial Officer, Olympus America Inc.
Rick Harbuck, Group VP, Olympus America Inc.
Hidenao Tsuchiya, President, Olympus Corporation of the Americas
Luke Calcraft, President, Olympus Medical Systems Corp.
Charlie Goodwin, President, Olympus Surgical
NO. OF EMPLOYEES: 39,121(total)
GLOBAL HEADQUARTERS: Tokyo, Japan
All cultures have words or phrases whose meanings often are lost in translation. For Russians, it’s “toska” (great spiritual anguish or “dull ache of the soul,” according to some interpretations); the Czechs have “litost” (vaguely defined as a state of agony or torment from the realization of one’s own misery) and Germans are blessed with “torschlusspanik” (the literal translation is “gate-closing panic” but its contextual meaning refers to the “fear of diminishing opportunities” with age). In Japan, there’s Wabi Sabi and monozukuri, the latter of which is used to describe technology and processes integrating development, production and procurement, but also includes intangible qualities like craftsmanship and dedication to continuous improvement.
Such ambiguity in denotation have spawned a multitude of meanings for monozukuri, depending on the interpreter. Some scholars believe only those fluent in the Japanese language can truly understand all its nuances.
Yasuyuki Kimoto and Hiroyuki Sasa are well-acquainted with the term, having spent several decades in Japanese business and manufacturing (where the word originated). Perhaps it’s no coincidence, then, that Olympus Corporation’s newest leaders referenced monozukuri on the first page of the company’s FY12 annual report.
“Our mission is to contribute to society and its development through products and solutions,” the leadoff page reads. “Recognizing our technological prowess and getting back to the original spirit of monozukuri (excellence in manufacturing), the entire Olympus Group will work in unison on the genesis of a new Olympus.”
Rediscovering the spirit of monozukuri is just part of Olympus’ multi-faceted plan to reclaim the profits and shareholder trust lost in one of Japan’s largest accounting frauds. The scandal came to light during the third fiscal quarter after CEO Michael Woodford learned of an elaborate cover-up scheme involving offshore money, inflated acquisition payouts and a network of obscure brokers. His source was a magazine exposé that accused Tokyo-based Olympus of spending $773 million between 2006 and 2008 for three companies worth a fraction of their purchased value and had no ties to global firm’s core businesses of cameras and diagnostic endoscopes (one entity manufactures face cream, another made microwave plates and the third was a garbage recycler). “…they were Mickey Mouse companies—comical, farcical,” Woodford said in a December 2012 interview with The Atlantic. “[They] certainly were not worth the incredible amounts paid for them.”
As he dug deeper, Woodford uncovered a massive accounting fraud of nearly $2 billion. When he demanded that management resign and take responsibility for their imprudence, he was fired. A subsequent investigation conducted by Olympus found the massive overpayments for assets and lavish fees—totaling at least $1.7 billion—were a fraudulent attempt by company executives to hide previous bad investments by past Olympus presidents dating to the bubble economy of the 1980s. Within weeks of Woodford’s retaliatory firing, several company leaders had resigned and Olympus stock value plummeted 80 percent.
In their message to shareholders, Kimoto and Sasa apologize for their predecessors’ past sins and outline the company’s redemption plan. The pair, appointed at a heated shareholders’ meeting on April 20, 2012, vow to rigorously focus on Olympus’ core businesses—Medical, Life Science & Industrial, and Imaging—as well as overhaul its corporate governance policy.
“As expressed by the slogan ‘Back to Basics’ under the medium-term vision, Olympus will focus on our core businesses…and implement fundamental reforms that extend to the cost structure and production structure,” Sasa told investors in a joint letter with Kimoto. “These reforms differ essentially from short-term profit improvement measures. We are set to reach the objectives of the medium-term vision, create a new Olympus, and achieve the transformation necessary to become a stronger business with a stronger financial structure.”
Financial fortification certainly will be key to any long-term growth strategy, though Olympus proved its might in FY12 by weathering the scandal and a litany of other challenges (aftereffects of the March 11, 2011, Great East Japan earthquake and Thailand flooding) surprisingly well: Overall sales and gross profit remained flat at $10.3 billion (848 billion yen) and $4.6 billion (383 billion yen), respectively. Medical division sales—which comprise 41 percent of the company’s total revenue—slipped 1.7 percent to $4.24 billion (349.2 billion yen) and operating income tumbled 4.2 percent to $828.8 million (68.2 billion yen) according to the FY12 annual report.
Medical Group President Akihiro Taguchi attributed the relatively solid results in medical division revenue to physician empathy regarding the scandal and robust demand for its products, though both endoscope and surgical/endotherapy revenue remained flat. Endoscope sales totaled $2.3 billion (191.7 billion yen) and surgical/endotherapy proceeds reached $1.9 billion (157.4 billion yen).