コニカミノル（4902） – Integrated Report 2021

Integrated Report 2021RETHINK WHAT’S POSSIBLEContentsContents · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · 1Role of Integrated Report 2021Introduction · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · 2Value Creation Story · · · · · · · · · · · · · · · · · · · · · · ·3Konica Minolta Philosophy · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · 4Konica Minolta’s DNA · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · 5Value Creation Process · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · 6Material issues for value creation · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · 7Investor interestMedium- to Long-term Value Creation Strategy· · · · · · · · · · · · · · · · · ·11Importance for the company1Integrated ReportFinancial data• Annual securities reports• Financial reports• Convocation notices, shareholders’ correspondence, etc.Non-financial data•Sustainability site ・Corporate Governance Report•Intellectual Property Report ・Technology Reports•IT (DX) Performance Report, etc.Our Changing Medium-term Business Plan · · · · · · · · · · · · · · · · · · · · 12Message from the CEO · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · 13Medium-term Business Plan “DX2022” · · · · · · · · · · · · · · · · · · · · · · · 17Message from the CFO · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · 27Medium- to long-term growth drivers · · · · · · · · · · · · · · · · · · · · · · · · · 29Environment Strategy · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · 37Corporate Governance Overview · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · 42Message from the Chairman of the Board · · · · · · · · · · · · · · · · · · · · · · 43Message from the Chairpersons of the Nominating Committee, Audit Committee, and Compensation Committee · · · · · · · · · · · · · · 45Corporate Governance · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · 48Risk Management· · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · 55Management Members · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · 57Independent Valuation · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · 60Financial Highlights · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · 61Non-financial Data Highlights · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · 63Material Issues and KPIs (Medium-Term Sustainability Plan 2022)· · · · · · · · · · · · · · · · · · · · · · · 65Data highlights by business segment · · · · · · · · · · · · · · · · · · · · · · · · · · 67SASB INDEX · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · 69Company Overview/Stock Information · · · · · · · · · · · · · · · · · · · · · · · · 70Glossary · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · 71Notes on outlook for future resultsThe plans, strategies and statements related to the outlook for future results in this document are in accordance with assumptions and beliefs determined by management based on currently available information, and include elements of risk and uncertainty. However, it should be noted that there is a possibility that actual results could differ significantly due to such factors as social and economic conditions. In this report, unless otherwise indicated, “the Company” refers to Konica Minolta, Inc.About “RETHINK” (on the Front Cover)RETHINK is at the heart of everything we do. It means we are always creative in our approach, empowering people to shine and help improve the world around us. We strive to RETHINK today to make the future a better place for everyone.Platform Supporting Value Creation· · · · · · · · · · · · · · · · · · · · ·41Data SectionKONICA MINOLTA Integrated Report 2021Data SectionPlatform Supporting Value CreationMedium- to Long-term Value Creation StrategyValue Creation StoryTable of Contents & Editorial PolicyIntroduction2In FY2020, Konica Minolta formulated a long-term management vision that targets 2030 and a medium-term business plan “DX2022” that sets goals to be achieved by 2022. These efforts mark the start of a new management approach that takes a 10-year view. This report presents Konica Minolta’s strategies for transforming its business portfolio through digital transformation (DX) as well as efforts to strengthen the intangible assets that support these strategies with a focus on this management vision and DX2022. Also discussed here are our efforts to improve corporate value through good corporate governance. The report was a cross-organizational collaboration accomplished by taking cues from sources such as the Integrated Reporting Framework published by the Value Reporting Foundation (VRF) and the Guidance for Integrated Corporate Disclosure and Company-Investor Dialogues for Collaborative Value Creation formulated by the Ministry of Economy, Trade and Industry of Japan. I can attest to the soundness and accuracy of the report creation process and its content.Konica Minolta has prepared this integrated report to serve as a systematically-organized communication tool • RE100providing financial and non-financial information about Konica Minolta to the company’s shareholders, investors, and other stakeholders. Konica Minolta has issued annual reports of an integrated nature since FY2015 (referred to as “integrated reports” since 2017). This is the seventh such report. Going forward, we intend to continue using the integrated report as a tool for dialogue while working to sustainably enhance our corporate value.Frameworks referred to• Value Reporting Foundation (VRF), Integrated Reporting Framework• Ministry of Economy, Trade and Industry, Guidance for Integrated Corporate Disclosure and Company-Investor Dialogues for Collaborative Value Creation* Information provided on Konica Minolta’s Sustainability site is given based on the GRI and SASB standards. GRI Standards Comparison Table:https://www.konicaminolta.com/about/csr/csr/vision/gri.htmlSASB Standards Comparison Table:https://www.konicaminolta.com/about/csr/csr/vision/gri-sasb.htmlMajor international initiatives supported by Konica Minolta• UN Global Compact• Sustainable Development Goals (SDGs)• TCFD (Task Force on Climate-related Financial Disclosures)Shoei YamanaPresident & CEOKONICA MINOLTA Integrated Report 2021Data SectionPlatform Supporting Value CreationMedium- to Long-term Value Creation StrategyValue Creation StoryTable of Contents & Editorial Policy3Value Creation StoryCreating new value through the power of imagingKONICA MINOLTA Integrated Report 2021Data SectionPlatform Supporting Value CreationMedium- to Long-term Value Creation StrategyValue Creation StoryTable of Contents & Editorial Policy4Konica Minolta PhilosophyKonica Minolta has formulated “Imaging to the People,” a long-term management vision that looks forward to 2030. In concert with these initiatives, we redeveloped our philosophy. Now, Konica Minolta Philosophy comprises Our Philosophy, unchanged since its formulation in 2003, Our Vision, which defines our aspirations for 2030, the 6 Values that guide the development of Konica Minolta’s corporate culture as the wellspring of our value creation, and our “Brand Proposition.”KONICA MINOLTA Integrated Report 2021Data SectionPlatform Supporting Value CreationMedium- to Long-term Value Creation StrategyValue Creation StoryTable of Contents & Editorial PolicySatisfying hopes and desires to “see,” while creating new value5Konica Minolta’s DNALeveraging the “imaging” technologies that we have developed over the nearly 150 years since our founding and that comprise mainly image input, output, and processing technologies, we have fulfilled the desires of customers around the world to “see” and helped make society more fulfilling. This is where Konica Minolta’s roots lie, and is the DNA that we seek to pass on to the future. An evolving legacy of bringing vision to realityOriginsCamera andfilm technologyMaterialsOpticsCoretechnologiesImagingNanofab-ricationCareVisualizing care workVisualizing disease risksVisualizing social safety and securityVisualizing printing process issuesVisualizing virtual worldsVisualizing the office output environmentVisualizing work process issuesExamineVisualizing early signs of illnessObserveVisualizing manufactur-ing qualitySeeSeeVisualizing business documentsVisualizing vivid printed materialsViewVisualizing beautiful videoKONICA MINOLTA Integrated Report 2021Data SectionPlatform Supporting Value CreationMedium- to Long-term Value Creation StrategyValue Creation StoryTable of Contents & Editorial PolicyValue Creation ProcessFocusing on sustainable value creation with an eye to resolving future social issuesMaterial issuesP7Improving fulfillment in work and corporate dynamismFuture social issuesLeveraging intangible assets such as customer contacts, technologies, and human capital, Konica Minolta is advancing a digital transformation (DX) based on its own imaging-IoT platform in order to strengthen the competitiveness of its businesses. By providing solutions that satisfy our customers, hopes and desires to “see”, each business seeks to achieve the material issues as it works to help solve future social issues.6Business activitiesDigitalWorkplace P21ProfessionalPrintP21Imaging-IoTPlatformP20HealthcareP22IndustryP22Intangible assetsP23TechnologiesFinancial CapitalP27Corporate GovernanceP42Changing workflows and improving business productivityChanging printing workflows and boosting marketing ROISupporting healthy, high-quality livingEnsuring social safety and securitySolving social issuesAddressing climate changeUsing limited resources effectivelyDiagnosing and detecting disease early, and enhancing the quality of diagnosesEnhancing industrial product quality and improving production site productivityFinancial and non-financial capital reinvestments and allocations2030IMPACTGenerating cash flowsOUTCOMEOUTPUTINPUTProviding customer value to satisfy hopes and desires to “see” •Increasingly short business lifecycles •Labor shortages, aging, and depopulation in developed countries •Growing healthcare costs and social welfare spending •Shortages of doctors •Shortages of caregivers •Aging social infrastructure •Climate change •Rising information security risk •The threat of terrorism and natural disaster •Natural resource depletion • • •• Customers:About 2 million• Sales and service structureAbout 150 companies• Patents held:About 20,000• R&D expenditure:¥65.0 billion• Strategic investment: ¥300 billion(Total for the last 10 years)• Equity ratio: 45.3%(rating needed)Human capital•imaging-IoT talent:About 500• System engineers:About 2,000Customer engagementKONICA MINOLTA Integrated Report 2021Data SectionPlatform Supporting Value CreationMedium- to Long-term Value Creation StrategyValue Creation StoryTable of Contents & Editorial PolicyMaterial issues for value creationBackcasting from 2030 to identify five material issues Material issueVision for 2030Related SDGsToday, numerous social issues, such as demographic changes, rising social welfare spending, climate change, and resource depletion are becoming evident. With a view to 2030, Konica Minolta has made opportunity and risk assessments concerning how these issues will impact our Group and society and, through backcasting, has redefined five material issues that we seek to address. By focusing on these material issues and helping to solve social issues through our business activities, we will enhance medium- to long-term corporate value. 7Improving fulfillment in work and corporate dynamismIncrease labor productivity for corporate clients, society, and Konica Minolta. Make time for creativity, and promote workplaces where all individuals can thrive.Supporting healthy, high-quality livingPromote health and high quality of life at corporate clients, in society, and Konica Minolta. Help individuals lead fulfilling lives.Ensuring social safety and securityEnhance safety and security in the workplaces of corporate clients and in society. Minimize risks posed by Konica Minolta products and services.Addressing climate changeReduce CO2 emissions by Konica Minolta. Enhance CO2 emissions reduction at corporate clients and suppliers, and reduce the carbon footprint of society.Using limited resources effectivelyPromote the effective use of resources at Konica Minolta, while also helping corporate clients and suppliers to achieve effective use.KONICA MINOLTA Integrated Report 2021Data SectionPlatform Supporting Value CreationMedium- to Long-term Value Creation StrategyValue Creation StoryTable of Contents & Editorial Policy8Step 3.Results Confirmation and Issue IdentificationThe Konica Minolta Group Executive for Corporate Sustainability, who chairs the Group Sustainability Promotion Committee, confirmed the appropriateness of the material issue evaluation process and the prioritized issues. The selected material issues were then discussed by senior management and approved by the Board of Directors. The process used to identify material issues is reviewed annually, which guarantees the validity of the issues selected and the corresponding plan.Material issues for value creationMaterial Issue Evaluation and Identification ProcessStep 1. Issue AwarenessFirst, Konica Minolta made a list of diverse environmental, social, and economic issues by referencing international frameworks and guidelines such as the GRI Standards and SDGs, as well as macro trends in each specialized field.The list was prepared by referring to the Wedding Cake Model of the SDGs. This structural model was developed by the Stockholm Resilience Center* as a way to understand the SDGs, and it helps to clarify the relationships among the SDGs. With this model, the 17 goals are divided into three layered categories, like the tiers of a wedding cake. These tiers from bottom to top are biosphere, society and economy. The model illustrates that achieving the biosphere and society-related SDGs can help to build a sustainable economy and society, upon which companies can help build the foundation for a sustainable economy. With this relationship in mind, Konica Minolta identified the issues of greatest importance to its business.During this identification process, Konica Minolta also considered social and environmental changes, regulatory and policy trends, and stakeholder requirements, all in light of the company’s current and potential business areas as well as the corresponding supply and value chains.* Stockholm Resilience Centerhttps://www.stockholmresilience.org/research/research-news/2016-06-14-how-food-connects-all-the-sdgs.htmlStep 2.Issue Identification and PrioritizationFrom the initial list of issues, Konica Minolta identified fields that are particularly relevant to its business, and then conducted a prioritization process. Konica Minolta’s materiality analysis is unique in that it assesses both risks and opportunities. By evaluating both these aspects, the company aims to fulfill expectations for enterprises to tackle the SDGs. The expectation is that companies treat social and environmental issues as opportunities to grow their businesses, while helping to solve the issues through their business activities. Materiality analysis put 1 of 5 levels of importance for stakeholders (customers, suppliers, shareholders and investors, employees, etc.) and the business (amount of financial impact), and assigned priority to each issue.Opportunities for Each Material IssueRisks for Each Material Issue671241453108131617 189121511 lsredohekatsrof ecnatropmI lsredohekatsrof ecnatropmI4391178561012Importance for the business (DX business)Contribution to profitImportance for the businessContribution to profitImproving fulfillment in work and corporate dynamismSupporting healthy, high-quality livingEnsuring social safety and securityAddressing climate changeUsing limited resources effectivelyCross-cutting opportunities and risksCreate value through the businessCreate value through the Company’s activities1234567891011Mismatches between employee skills and their work due to rapid changes in systems and environmentsDeclines in employee diversity, independence, and ability to innovate due to stagnated efforts to create workplaces that promote diversityLoss of public confidence in the event of a product or service-related accident that results in death or injury to a userLoss of public confidence in the event of a serious information security accident related to a product or service, which results in a personal data leak or privacy infringementImpacts on operations and product shipments due to the use of substances that pollute ecosystems and pose human health hazardsSkyrocketing energy prices, increased material costs due to raw material shortages, and supply instabilityGreater use of paperless systems due to skyrocketing energy prices and raw material shortagesSupply chain disruptions due to abnormal weatherDecline in competitiveness due to delayed participation in the circular economyProduction or shipment delays due to water-related risks and water resource depletionDecline in public confidence due to lack of governance at business partners1234Improving productivity of customer organizations and increasing time for creativity by providing work-style solutions using digital technologyImproving productivity and enhancing workplace motivation in the supply chains of customer organizations by providing products and services that transform the workflows of frontline workersRealizing the full potential of human resources, who are the source of new value, and creating workplaces organizations where individuals thriveEliminating labor shortages and strengthening cyber security by eliminating the gap in IT access faced by small and medium enterprises5 Transforming caregiver workflow with imaging IoT-based systems and onsite consulting services, and creating a labor pool in the caregiving industry6 Promoting disease prevention and early detection by providing high value-added medical services, and reducing medical expenses7 Streamlining drug development by promoting innovation in pharmaceutical development processes utilizing genetic testing technology8 Improving healthcare accessibility in developing countries9Improving safety and security at client sites and for society by providing products and services such as gas leak monitoring servicesSupporting the quality produced by corporate clients by offering products and services that facilitate high-tech measurement and inspectionReducing energy consumption and CO2 emissions of customers and society by providing manufacturing process solutionsPromoting a paperless and ubiquitous computing society by providing solutions for work style reformContributing to drastic CO2 emissions and cost reductions by helping business partners to reduce their environmental impact using DX technologyConstructing efficient supply chains for client companies using on-demand productionReducing workflow and supply chain loss for client companiesFostering a corporate culture that encourages role models for the generation of SDG innovationImproving ESG relations with investorsEnhancing customer relations by making the most of ESG initiatives101112131415161718KONICA MINOLTA Integrated Report 2021Data SectionPlatform Supporting Value CreationMedium- to Long-term Value Creation StrategyValue Creation StoryTable of Contents & Editorial Policy9Material issues for value creationOpportunities and risks for each material issue, and Medium-term Sustainability Plan 2022Material issuesImproving fulfillment in work and corporate dynamismSupporting healthy, high-quality livingEnsuring social safety and securityMany economies around the world, including Japan, are expected to see labor shortages. As industrial structures change, there will be imbalances in the type of labor force needed. There will be labor shortages in some areas and more mismatches between the skills people have and the skills jobs require. By 2030, a total labor shortage of about 100 million people is anticipated in the countries that make up the top 70% of global GDP.Many jobs will need to be performed using technologies such as robotics and automation. This will occur not just on the manufacturing floor, but in offices as well. While it is important to increase productivity with technology, human creativity must also be fostered to solve the global labor shortage.Environmental and social issues with a view to 2030Due to population aging, the number of people suffering from diseases in developed countries is expected to grow. With a corresponding increase in the demand for medical treatment and nursing care, social security costs will also climb. In sparsely populated areas and developing countries, there are concerns that healthcare access could become difficult. In addition, the gap between supply and demand for nursing care in Japan is expected to grow to approximately 500,000 patients by 2030.*1 Similar issues are also anticipated in other developed countries in the near future. As part of productivity and safety improvement at medical facilities and seniors care sites, the quality of and access to medical services need to be enhanced, and social security costs have to be reduced. This can be done through the prevention and early detection of disease. It can also be accomplished by shortening the development period for new drugs through improved candidate success rates and greater clinical trial efficiency.Due to the aging of factories and equipment, staff shortages and the retirement of veteran employees with a wealth of experience, among other factors, the risk of disasters at manufacturing sites has increased and the risk of workplace accidents is also considered to rise. In order to attract personnel, however, companies must provide safer workplace environments. In addition, cyber-attacks have become increasingly frequent and sophisticated. The unprecedented damage they have caused is estimated at as much as 90 trillion dollars*2 worldwide. Societies also need to respond to risks such as urban crime, natural disasters, pandemics and food insecurity, which all threaten people’s work and livelihoods.To make society safer and more security, it is vital to visualize dangers to social infrastructure and workplaces, as well as information security risks, and to improve the inspection of products and services that contribute to people’s work and livelihoods.Opportunities• Improving productivity of customer organizations and increasing time for creativity by providing work-style solutions using digital technologyThrough Konica Minolta businesses• Improving productivity and employee engagement in the supply chains of customer organizations by providing products and services that transform the workflows of frontline workersThrough Konica Minolta businesses• Eliminating labor shortages and strengthening cyber security by eliminating the gap in IT access faced by small and medium enterprises• Promoting disease prevention and early detection by providing high value-added medical services, and reducing medical expenses• Streamlining drug development by fostering innovation in pharmaceutical development processes utilizing genetic testing technology• Improving healthcare accessibility in developing countries• Transforming care staff workflow with imaging IoT-based systems and onsite consulting services, and creating a labor pool in the nursing care industryInternal action to create value• Realizing the full potential of human resources, who are the source of new value, and creating organizations where individuals thriveInternal action to create valuefeel motivated• Building safe and comfortable workplaces where employees RisksAffecting Konica Minolta• Mismatches between employee skills and their work due to rapid changes in systems and environments• Declines in employee diversity, independence, and ability to innovate due to stagnated efforts to create workplaces that promote diversity—• Increasing customer productivity and making time for creativity• Improving employee engagement and making the most of human • IPromote health and high quality of life at corporate clients• Building safe and comfortable workplaces where employees feel motivated• Provide safety and security in the work and daily lives of corporate clients• Minimize safety and security risks posed by Konica Minolta products and Medium-term Sustainability Plan 2022resources globallyKPIStrategic assignment of managerial candidates/Number of DX leaders trained/Employees engagement score/Percentage of management positions held by womenKPIRate of reduction of Level 4 workplaces/Percentage moving to higher level of organizational/healthPercentage moving to higher level of organizational health/Number of employees who are at high risk physically/Number of vacation days due to mental health problems*1 From a report released by Japan’s Ministry of Economy, Trade and Industry on April 9, 2018: Report compiled by the Study Group for Future Supply and Demand of Elderly Nursing Care Systems*2 Source: Zurich Insurance Group and the Atlantic Council, 2015Through Konica Minolta businesses• Supporting the quality produced by corporate clients by offering products and services that facilitate high-tech measurement and inspection• Improving safety and security at client sites and for society by providing products and services such as those that make gas leaks visibleAffecting Konica MinoltaservicesKPI• Loss of public confidence in the event of a product or service-related accident that results in death or injury to a user• Public disapproval in the event of a serious information security accident related to a product or service, which results in a personal data leak or privacy infringement• Impacts on operations and product shipments due to the use of substances that pollute ecosystems and pose human health hazardsNumber of serious accidents caused by chemical substances/Serious business losses due to chemical substance management/Number of serious accidents with products.Serious business losses due to product safety/Number of serious incidents due to information security/Serious business losses due to information securityKPIPlease see pp. 65-66 for the KPI targetsKONICA MINOLTA Integrated Report 2021Data SectionPlatform Supporting Value CreationMedium- to Long-term Value Creation StrategyValue Creation StoryTable of Contents & Editorial PolicyMaterial issues for value creation10Material issuesEnvironmental and social issues with a view to 2030Addressing climate changeUsing limited resources effectively The Paris Agreement provides a framework for the world to move more quickly and ambitiously to build a low-carbon global society. At the same time, there are concerns that the needed changes will not happen fast enough and climate change will have a harsh impact on the world. If and when the low-carbon society is achieved, the energy structure of entire industries will have changed significantly, including the widespread use of renewable energy and dramatic energy savings. On the other hand, if dire climate change predictions materialize, rising sea levels will submerge coastlines and damage biodiversity. There will likely also be frequent severe weather events, such as typhoons and hurricanes, which could have a significant impact on both industry and people’s lives. In order to transition to a low-carbon global society, there needs to be a fundamental change in how energy is used, which means conventional workflows must be dramatically reformed. In addition, it is vital to build an industrial structure that can withstand severe weather events in case dire climate change predictions materialize.Given the world’s growing population and the growing rate of resource consumption, it is estimated that the equivalent of two earths will be needed by 2030. In order to make more effective use of limited resources, companies need not only to recover and recycle waste, but also to reduce the volume of resources wasted. This means that drastic workflow innovations are required, such as using on-demand production and IoT technology, to reduce resource waste in the supply chain. Circular economies also need to be created by developing material technologies that facilitate recycling, while building better networks for recovering used resources.OpportunitiesThrough Konica Minolta businessesInternal action to create value• Reducing energy consumption and CO2 emissions of customers and society by providing manufacturing process solutions• Promoting a paperless and ubiquitous computing society by providing solutions for work style reformThrough Konica Minolta businesses• Constructing efficient supply chains for client companies using on-demand production• Reducing workflow and supply chain loss for corporate clients• Contributing to dramatic CO2 emissions and cost reductions by helping business partners to reduce their environmental impact using DX technologyRisksAffecting Konica Minolta• Soaring energy prices, increased material costs due to raw material shortages, and supply instability• Greater use of paperless systems due to rising energy prices and raw material shortages• Supply chain disruptions due to abnormal weatherAffecting Konica Minolta• Decline in competitiveness due to delayed participation in the circular economy• Production or shipment delays due to water-related risks and water resource depletionMedium-term Sustainability Plan 2022• Reduce energy use and CO2 by transforming customers’ operational processes• Promote effective use of resources by transforming customers’ operating processesKPIAmount of “Carbon Minus” contributions/Solution salesKPIReduction of waste discharge of customers/Solution sales• Reduce energy use and CO2 from Konica Minolta sites, Konica Minolta products and services and business partners • Promote effective use of resources by Konica Minolta sites and for Konica Minolta products and servicesKPIReduction of CO2 emissions/Monetary equivalent of energy reduction/Amount of CO2 reduced through procurement of renewable energy/Sales from sustainable solutions/Monetary equivalent of energy reduction KPIReduction of waste discharge of customers/Reduction of waste discharge/Amount of resources saved and recycled (thousand tons) Sustainable solution sales (billion yen)KPIPlease see pp. 65-66 for the KPI targetsKONICA MINOLTA Integrated Report 2021Data SectionPlatform Supporting Value CreationMedium- to Long-term Value Creation StrategyValue Creation StoryTable of Contents & Editorial Policy11Medium- to Long-term Value Creation StrategyTransforming our business portfolio through DXKONICA MINOLTA Integrated Report 2021Data SectionPlatform Supporting Value CreationMedium- to Long-term Value Creation StrategyValue Creation StoryTable of Contents & Editorial Policy12Our Changing Medium-term Business PlanG PLAN 2013TRANSFORM 2016SHINKA 2019DX2022Basic PolicyConduct M&A of IT companies to strengthen ability to provide IT servicesBegin a full-scale transformation into a solutions business from a manufacturer-oriented businessStarting a platform business centered around data utilization• Expansion of scale by achieving growth• Evolution into a “truly global company”• Boosting of Konica Minolta brand recognition• Achievement of continuous profit growth• Transformation into a company that works closely with customers• Establishment of a strong business structure• Become a digital company with insight into implicit challenges by FY2021• Greatly expand core and growth businesses while reliably launching new businesses• Leap to highly profitable businesses through DX• Evolve into a company clearly committed to solving social issuesAchieve-ments and Issues• M&A of IT service companies in the Business Technologies Business (a core business), and building of a hybrid-type sales system that integrates IT services with MFP products• Transition from being a pure holding company to an operating company, and building of a system for providing customer value as One Konica Minolta• Recovery from the effects of the 2008 financial crisis and Great East Japan Earthquake, and getting on track for growth• Withdrawal from the glass substrates for HDDs business based on genre-top strategy• Continued M&A of IT service companies led to success with hybrid-type sales in the Business Technologies Business (a core business) and improved per-customer profitability• Strategic M&A for each business led to acquisitions of technologies, knowledge, expertise, and talent for providing greater added value to businesses and for creating new businesses• Launching of Business Innovation Centers (BIC) to build systems for creating new businesses through open innovation• Acquired high market share for color MFPs in China, Asia, and other growth countries in the Office Printing Business which account for the majority of sales, but delays in implementing cost reduction measures led to decreased profitability• Greater added value is being created in business units such as production print, Performance materials, IJ (inkjet) components, and Measuring instruments• Began rolling out new businesses that fulfilled social needs, including the Workplace Hub and precision medicine medicine businesses. While continued upfront investment has not contributed to earnings, sales have increased2030 Long-termManagement Vision• A global company that is vital to society, bringing vision to reality• A robust and innovative company, continually evolving and contributing to the sustainable growth of society and individualsSales over timeRevenue(Billions of yen)1,2009006003000PhotoimagingAnnouncement of withdrawal from the camera and photo businessesEffects of financialturmoil followingthe 2008 financial crisisGreat East JapanEarthquakeG PLAN 2013 TRANSFORM 2016 SHINKA 2019DX2022Spreading COVID-19 pandemic863.3940(projected)20032004200520062007200820092010201120122013201420152016201720182019202020212030(FY)J-GAAP (Japan standards)IFRS (international accounting standards)KONICA MINOLTA Integrated Report 2021Data SectionPlatform Supporting Value CreationMedium- to Long-term Value Creation StrategyValue Creation StoryTable of Contents & Editorial PolicyMessage from the CEO13As I promote management based on the conviction that we have no future without the completion of our business portfolio transformations, we will achieve profit diversification and a business structure that enables sustainable growth via bold shifting and reinforcement of management resources. Shoei YamanaPresident and CEO, Representative Executive OfficerRedefining the risks and opportunities facing our company as society is dramatically changed by COVID-19COVID-19 has had a major impact on societies and economies around the world, greatly accelerating changes to our values and the way we work and live, and has had a great impact on the business of the Konica Minolta Group. This year has seen the Group face many new risks and opportunities due to such changes to society and human behavior.Such risks include an acceleration in the decline of print volumes due to the reduced numbers of employees commuting to an office caused by the expansion and normalization of working from home. This is a structural change that we were expecting to happen gradually, but COVID-19 has certainly accelerated such KONICA MINOLTA Integrated Report 2021Data SectionPlatform Supporting Value CreationMedium- to Long-term Value Creation StrategyValue Creation StoryTable of Contents & Editorial PolicyMessage from the CEO14change. In anticipation of the shift to reduced print volumes, we have been seeking to transform our Office Printing Business to solutions and IT services for a long while now. Although the cancelation of events and closing of stores has led to a drastic decline in demand for commercial printing, this is a temporary phenomenon caused by COVID-19, and after the pandemic subsides, I expect demand to recover, particularly for the digital printing provided by the Company.On the other hand, COVID-19 has accelerated behavioral changes in the way we live and work, which can be expressed by keywords such as individualization/decentralization and remote/non-contact services, and has led to demand for safety, security, and health. I believe that such changes to society provide us with a new business opportunity. For example, the popularization of working from home has increased the importance of information security. This has led to various customers asking us for proposals on workflow reforms that utilize the advanced security technologies and digitalization of the Company, and our solutions have been well received. Various workplaces have also been investigating methods for avoiding infection and ensuring social distancing, and this has led to many inquiries about projects such as temperature screening services via image diagnosis, remote medical care at hospitals, and services for automating the inspection process at factories. With COVID-19 also increasing consumer interest in health, I feel that demand for services that support personalized medical care and early diagnosis will certainly grow.Completing the two portfolio transformations essential to achieving long-term growthIn order for the Company to achieve sustainable growth and enhanced corporate value, we must make sure to implement business structure reforms from the perspective of these risks and opportunities. That is the most important challenge that I face as CEO. We have been promoting the three-year DX2022 medium-term business plan since fiscal 2020, and the fundamental objectives of DX2022 are to “leap to highly profitable businesses through DX” and to “evolve into a company clearly committeed to solving social issues.” In order to achieve these objectives, I have resolved to complete two portfolio transformations.The first such transformation is to shift our Office Printing Business, which focused on MFPs, to the Digital Workplace Business. COVID-19 has led to a change from employees concentrated at an office to decentralized work via working from home. Companies now have a pressing need to maintain information security and ensure efficient workflows. Workplace Hub is a solution that links cloud computing with edge commuting to provide new information security measures, and has the ability to respond to such requirements in detail. There is also a shift toward digitalizing the workflows for paper-based application and approval at companies, government, and local municipalities, and we will proactively approach such document digitalization needs with security technologies. We have already been deploying managed IT services to markets in Europe and North America in order provide centralized management of IT infrastructure at small and medium-sized companies, and we will further strengthen this business. In short, we will robustly promote our goal of creating advantages for the Company via security.The second transformation is a company-wide business portfolio transformation to reduce our dependence on the Office Printing Business, which currently accounts for about half of our revenue, and accelerate growth in our Industry Business and Healthcare Business. In regard to sensing in the Industry Business, we have established the top position in the world in the field of measuring instruments for displays. By utilizing this strength, we will further expand our business in the area of displays, and expand our business into new areas other than displays, such as visual inspections for automobiles and component inspection for food and pharmaceuticals. In the field of imaging IoT, we have established technologies for detecting and analyzing behavior based on the intelligent edge processing cameras of German company MOBOTIX. We will combine these AI (artificial intelligence) network cameras, sensing devices, and analysis software to provide a new platform called FORXAI. By linking with the technologies and products of various business partners, we will meet the needs for safety/security and non-contact services/labor saving at various worksites, including monitoring at plants, warehouses, and logistics areas, as well as thermal cameras for the automatic measurement of body temperature combined with KONICA MINOLTA Integrated Report 2021Data SectionPlatform Supporting Value CreationMedium- to Long-term Value Creation StrategyValue Creation StoryTable of Contents & Editorial PolicyMessage from the CEOfacial recognition and services for watching the elderly at nursing facilities.In the Healthcare Business, we will aim for further growth in the field of early diagnosis, which we excel in. Our digital X-ray diagnostic imaging systems have evolved from still images to the real-time capturing of video, and that video can now be combined with AI dynamic analysis to support more accurate interpretation and diagnosis by doctors. These cutting-edge Konica Minolta technologies are well-received at medical sites, and contribute to achieving early diagnosis and reducing workloads. In the field of precision medicine, our United States subsidiary Ambry Genetics has advanced technology in the area of genetic testing, and Invicro in the field of image diagnosis. We will utilize these strengths to provide genetic testing services for healthy people, as well as pharmaceutical development support services. We will also start providing the LATTICE multi-omics platform that integrates the gene and diagnosis image data that we have accumulated. These efforts will enable us to contribute to quality of life (QOL) improvement with early diagnosis and early treatment via various approaches.15Starting to rebuild our management system in order to accelerate the speed of executing transformationsWe have set the ultimate goal of these two transformations for fiscal year 2025, but to ensure that a certain level of results have been achieved by 2022, the final fiscal year of our DX2022 medium-term business plan, we will dramatically shift our management resources such as our R&D and human resources to these growth areas. On the other hand, we recognize that our failure to increase the speed of these transformations during the previous medium-term management plan is a major issue, and will also promote drastic reforms of our management system. Therefore, over the past few months, I myself have identified issues via a thorough examination of our management system, and am currently working on restructuring the Company in a manner that can solve those issues.One key point of management reforms is speeding up decision-making and actions via the adoption of the OODA (Observe-Orient-Decide-Act) loop. Rather than carefully planning before executing initiatives in an unpredictable business environment subject to drastic change, the OODA loop should enable us to get closer to achieving our goals by clarifying what we want to achieve, determining the best course of action based on the information at the time, and immediately taking action. In order to effectively operate this new decision-making framework, we are currently investigating a method for collecting and analyzing reports from various business sites and reviewing our framework for conducting meetings and making decisions. At the same time, we recognize that department autonomy is extremely important for speedy decision-making, and have adopted a policy of proactively delegating authority closer to business sites in the future.Of course, efforts to further strengthen digital transformation (DX) are also essential for accelerating the two transformations. We are promoting DX from two perspectives: “Business DX”, which maximizes the value provided to customers by digitally evolving businesses, and “Operational DX”, which aims to improve all of our operations across the entire company. Business DX overlooks customer business processes to visualize issues that the customer themselves may not have realized, in order to derive optimal solutions together with the customer and assist business process and business model reforms. In addition to combining AI and IoT KONICA MINOLTA Integrated Report 2021Data SectionPlatform Supporting Value CreationMedium- to Long-term Value Creation StrategyValue Creation StoryTable of Contents & Editorial PolicyMessage from the CEOwith the imaging technologies that form the basis of our strength, we plan to build a platform that will enable us to link with the technologies and services of various partners, and provide solutions to a wide range of customers. On the other hand, operational DX will involve efforts such as expanding the digital manufacturing built at our Malaysia factory to other factories, achieving high-precision forecasting by utilizing AI at SCM, and optimizing the maintenance services provided to our customers in the field.Placing sustainability at the foundation of management strategy to improve our medium to long-term corporate valueTo formulate DX2022, we held deep discussions on what we want society to be like a decade from now in the year 2030, and what environmental/social issues we will need to solve in order to achieve that vision. As the world moves toward an autonomous distributed society that develops sustainably, we have redefined our purpose as contributing to “Support people to achieve their own purpose” and “Realize a sustainable society.”This is the stance that has been at the foundation of our management strategy since the merger between Konica and Minolta in 2003, and since being appointed President, I have focused management based on my belief that contributing to the realization of a sustainable society where everyone can live with a purpose is the only way to achieve the sustainable growth of the Company. This idea has carried over to our employees and we are seeing more and more voluntary initiatives, such as projects for solving social issues that were proposed and started by young employees. I find it extremely encouraging that we have such human resources that truly want to improve the world.In fiscal 2020, we clarified our five material issues for contributing to solving social issues via our business activities as “Improving fulfillment in work and corporate dynamism,” “Supporting healthy, high-quality living,” “Ensuring social safety and security,” “Addressing climate change,” and “Using limited resources effectively.” In regard to climate change in particular, we have worked toward 16long-term goals since establishing the Eco Vision 2050 long-term environment plan in 2009. In fiscal 2020, we pushed forward our timeline for achieving carbon minus status to the ambitious target of 2030. We aim to increase the amount that we can contribute to reducing CO2 emissions at client companies and business partners compared to our own CO2 emissions, by sharing our expertise and knowledge on environmental management in order to reduce the environmental impact of the entire value chain. As for material issues not related to the environment, we will continue to quantify the social and economic impact that our business activities have, and set specific KPIs to accelerate our initiatives.Guided by our philosophy—”The Creation of New Value,” we will continue to create environmental/social value and economic value via all kinds of business activities. We will also contribute to a sustainable society as a company clearly committed to solving social issues, while simultaneously improving our medium to long-term corporate value, and I hope for the continued support of all of our stakeholders.Shoei YamanaPresident and CEO, Representative Executive OfficerKONICA MINOLTA, INC.KONICA MINOLTA Integrated Report 2021Data SectionPlatform Supporting Value CreationMedium- to Long-term Value Creation StrategyValue Creation StoryTable of Contents & Editorial PolicyMedium-term Business Plan “DX2022″17Our Medium-term Business Plan DX2022, which began in FY2020, calls for quickly restoring the revenue of the Office Printing Business, which has been hit hard by COVID-19 since the outbreak of the virus at the start of 2020, to the level in FY2018 by FY2021. This will involve strengthening the business’ position as a cash cow following FY2020 structural reforms, and simultaneously building a business to serve as an earnings pillar that replaces the Office Printing Business by undertaking two portfolio transformations. We will achieve the major management targets of FY2021 and FY2022 while making the necessary investments to complete these business portfolio transformations.Make further advancesMain management indicatorsFY2021 (plan)FY2022 (plan)Operating profit¥36 billion¥55 billionOperating profit ratio3.8%+1pt or moreOperating cash flows¥190 billion2021(Plan)2022(Plan)2030(FY)ROIC2.8%+1pt or moreOperating profit plan(Billions of yen)62.41008060402008.2-2020182019-16.22020Achieve profitability55.036.0KONICA MINOLTA Integrated Report 2021Data SectionPlatform Supporting Value CreationMedium- to Long-term Value Creation StrategyValue Creation StoryTable of Contents & Editorial Policy18Toward establishing new businesses that follow on the Office Printing BusinessEarnings structure reform in the Office Printing Business• Sales process reform• After-sales service productivity improvement• Development expense reduction• Fixed production costs reductionGet FY2021 Office Printing Business operating profit back to the FY2018 levelStrategy trajectoryExternal environment awarenessThe COVID-19 pandemic has changed people’s values and how we work and live RiskDeclining demand in the office printing field, which accounts for more than 50% of Konica Minolta’s revenue• Accelerating decline in office print volume among customer companies• Accelerating decline in print volume among centralized reprographic department at customer companies• Declining hardware sales volume due to decreasing print volumeIncreasing business opportunities centered on imaging in areas where social needs are growing• Working styles continue to change due to DX • Growing demand for individualized and diversified solutions in various fields• Growing demand for contactless, distributed, and remote solutions• Growing demand in the safety, security, and sanitation fieldOpportunitiesBuild businesses to stand as new earnings pillarsDigital Workplace Workplace Hub and IT services business growthProfessional Print Healthcare Industry Establish business base in measurement, inspection, and diagnosisBusiness model evolution through DXMedium-term Business Plan “DX2022″KONICA MINOLTA Integrated Report 2021Data SectionPlatform Supporting Value CreationMedium- to Long-term Value Creation StrategyValue Creation StoryTable of Contents & Editorial Policy19The ideal business portfolioDeriving the majority of earnings from the Industry and Healthcare businesses With the goal of achieving a business portfolio that is not reliant on the Office Printing Business, we are working quickly to bring about two transformations. The first entails shifting business to the Digital Workplace Business by leveraging the customer base of our Office Printing Business and providing greater added value. This will involve visualizing our customers’ workflows, viewing customers that we have developed over the years in our Office Business as assets. We will then provide managed IT services for comprehensively managing IT infrastructure, which includes teleworking environments for our customers, as a service to support DX and a distributed working style. We will also provide solutions to diagnose and address information security, an area of increasing importance, as well as solutions specialized to our customers’ different lines of business and industries. The second transformation entails achieving a business portfolio transformation that speeds up business growth companywide in the measurement, inspection, and diagnosis fields. Three businesses will become pillars of our company going forward. One is the Professional Print Business, which will bring individualized, distributed, and laborsaving solutions in digital form. Another is the Healthcare Business, which will support early diagnosis functions that include gene testing to the next level digitally through safe, secure, remote, and individualized solutions. The last is the Industry Business, where we will provide imaging-IoT solutions as a platform to fulfill a demand for safe, secure, remote, and laborsaving solutions in measurement and inspection. To accomplish all this, we will allocate personnel, R&D expenditures, and investments and loans. By quickly carrying out measures to achieve these transformations during the period of DX2022, we will complete our business portfolio transformation by FY2025 and significantly improve each business’ operating profit composition. Two transformations aimed at achieving business portfolios that are not reliant on the Office Printing Business(1) Transformation into the Digital Workplace Business using the customer base of the Office Printing BusinessOffice Printing BusinessTwo transfor-mationsDigital Workplace Business(2) Business growth in the measurement, inspection, and diagnosis fieldsIndustry BusinessHealthcare BusinessProfessional Print BusinessOperating profit by segmentFY2021 (plan)FY2025 (tentative goal)Digital Workplace Business(including the Office Printing Business)Professional Print BusinessHealthcare BusinessIndustry Business37%Office Printing Businessis majority¥36billion 53%10%39%Reduce Office Printing Business proportion38%FY2022 (plan)5%¥55billion18%20%36%ExampleShed reliance on Office Printing Business24%19%Medium-term Business Plan “DX2022″KONICA MINOLTA Integrated Report 2021Data SectionPlatform Supporting Value CreationMedium- to Long-term Value Creation StrategyValue Creation StoryTable of Contents & Editorial Policy20Business model change through DXEstablishing a data-driven platform business To achieve our business portfolio transformation, we are shifting toward a business model that centers on high-value-added services through DX (DX as a Service) from a product-oriented goods-sales business model. We will accomplish this by establishing a proprietary platform business that brings together imaging technologies developed over our long history with state-of-the-art IoT and AI technologies. We will be able to “visualize” problems encountered by professionals in a variety of fields by reading and converting data images and other information from our customers’ workplaces gathered via sensor devices, an area in which we excel, and analyzing them with AI. We will then hold on to this information for different types of businesses and provide it as a solutions service. After establishing a platform to provide the services, we will build an ecosystem linking business partners with customers and create a business that will ensure continued, stable earnings. We will consolidate intangible assets such as the imaging technologies we have developed over the years, human capital of more than 40,000 employees in our Group worldwide, and customer engagement with close to two million customers, and we will transform our business model.High value-added servicesIoT PlatformImaging AISensor DeviceCreate customer value and secure continuous revenuePrint automation support solutionsLocal government DX solutionsPharmaceutial development support services Genetic testing servicesDisaster readiness support servicesAccident prevention servicesCaregiving support servicesPrintingLocal governmentHealthcareManufacturingNursingStore information for different customer business types and create servicesHuman behaviorAdvanced healthcareInspectionsImage recognition and analysisInput various kinds of informationImaging-IoT PlatformLATTICEIntangible assetsCustomer engagementTechnologiesHuman capitalMedium-term Business Plan “DX2022″KONICA MINOLTA Integrated Report 2021Data SectionPlatform Supporting Value CreationMedium- to Long-term Value Creation StrategyValue Creation StoryTable of Contents & Editorial Policy21DX strategies for each business with a view to FY2022Digital Workplace BusinessProfessional Print BusinessStrategy — Transformation into the Digital Workplace Business on the Strategy — Expand competitive advantages in the growing commercial and assumption of a decline in office printingindustrial digital printing markets• While maintaining and expanding the customer base we have developed in the Office Printing Business, we will provide additional value-added services in the form of digital workflow services tailored to different business types, as well as managed IT services and cyber security services targeting all business types. We will also transform into the Digital Workplace Business by offering further lifetime value to customers. • We will improve the gross profit ratio by obtaining major accounts through an array of new MFP products launched in FY2020, reducing service costs by replacing previous models owned by existing customers (replacing consumable parts less frequently and expanding remote service maintenance), and offering a flat rate system. We will also grow our customer base in growth markets (China, India, APAC) in which we are a market share leader. • We will establish a stable revenue base by expanding sales of proprietary development software that has a high gross profit ratio and broadening our offerings for monthly recurring revenue models. We will also expand sales of services to achieve business process DX in different sectors (including education, healthcare, law, finance, and local government). • We will reduce cost of goods sold by improving sales productivity through the use of AI in customer targeting and proposal making, by continuing to expand inside sales and remote sales, which have seen success during the COVID-19 pandemic, and by outsourcing back office operations for services. We will also reduce R&D costs by narrowing development projects.• As we become a leader in the digital printing market, which is expected to undergo continued growth, we are looking to gain more large printing companies as customers. To do this, we will expand our customers’ and our business by pairing heavy production printers (HPP) with industrial printing machines and supporting print workflow DX. We will also support customers in transitioning from analog to digital printing. • We will improve production efficiency among small and medium-sized printing companies by providing new models of light production printers (LPPs) and mid production printers (MPPs) equipped with the same functions as with HPPs, and will maintain market share leadership in this market. We will also expand sales in growth markets (China, India) in which we have very high market share. • We will increase print volume by adding automatic inspection functions to the intelligent quality optimizer function (IQ-501), which makes use of technologies from the sensing business, to greatly improve work efficiency. We will also reduce service costs by broadening our remote service maintenance with the rollout of new LPP and MPP models. • We will launch and grow sales of new high-speed label printer models in the industrial print domain, which is primed for considerable digital print volume growth. We will also grow sales by providing total solutions that bring together high-speed inkjet printers with digital embellishment printing to satisfy package printing demand. These efforts will see us greatly increase our non-hardware sales. CAGR by market (2020 2022)Strategic KPICAGR by market (2020 2022)Strategic KPIHardwareNon-hardwareMFPIT services* Konica Minolta estimates+2%+3%+8%MRR* growth rate20212022+15% or more/yr+15% or more/yrCustomer retention+1pt/yr+2pt/yrSales growth by industry+15% or more/yr+20% or more/yrService factory countries1025Sales growth rate of products/services developed by Konica Minolta+15% or more/yr+15% or more/yr* MRR: Monthly Recurring RevenueCommercial printingLabel printingPackage printing* Konica Minolta estimates+7%+6%+15%20212022HPP market share35%40% YoY sales Non-hardwareProduction Print+22% +5%Industrial Print+24% +28%Medium-term Business Plan “DX2022″KONICA MINOLTA Integrated Report 2021Data SectionPlatform Supporting Value CreationMedium- to Long-term Value Creation StrategyValue Creation StoryTable of Contents & Editorial Policy22DX strategies for each business with a view to FY2022Healthcare BusinessIndustry BusinessStrategy — Solving problems using AI and data, with support from our existing Strategy — Expanding growth industries through sensors, imaging IoT and AI technologies and customer basetechnologies, and key devices• Challenges remain with regard to enhancing diagnoses, providing preventive medicine, conducting online diagnoses, and achieving efficiencies in medical resource usage through inter-hospital coordination in developed countries, as well as improving healthcare access, boosting pharmaceutical development process efficiency, and providing precision medicine in developing countries. We will speed up efforts to resolve these issues by using AI and data with support from our existing technologies and customer base. • In the diagnostic equipment domain, we will expand sales of X-ray systems whose dynamic analysis functions provide high added value in Japan, the U.S., and China. • In the medical IT domain, we will focus on “infomity,” with which we are building a customer base in Japan, and provide online diagnosis services and promote inter-hospit