Customer Orientation and Technological Innovation:
The Journey to TOPCON 2.0 in an Era of Change

Takashi Eto
President and Chief Executive Officer

Why We Continue to Focus on Construction, Agriculture, and Healthcare

The business segments at Topcon are construction, agriculture, and healthcare. Investors have asked us why we operate in these seemingly unrelated fields. Here, I would like to explain how Topcon expanded the business segments into construction, agriculture, and healthcare and why we remain committed to these businesses, while also touching on our technical strengths.

Topcon’s core technology is precision optical technology, which we have continued to refine since the Company was founded. While producing surveying instruments, we released Japan’s first mydriatic fundus camera in 1965, which became the foundation for our Eye Care Business. We then reached a major turning point in the 1990s. Through corporate acquisitions and partnerships focused on international technology ventures, we acquired cutting-edge GNSS1 receivers as well as sensing and control technologies. Then, through a unique fusion of the measurement technologies we have had since our foundation and new technologies acquired through M&A, we successfully commercialized automation systems for construction and agricultural machinery, helping to boost productivity at work sites and resolve labor shortages. In the field of eye care, Topcon has developed proprietary fully-automated screening equipment through the application of accurate eye position measurement and tracking technologies in addition to fundus camera and OCT (optical coherence tomography) technologies, helping with early detection and early treatment of eye diseases.

Whether measuring the earth or measuring the eyeball, measurement technologies are the absolute greatest strength at Topcon, no matter the size. By combining these measurement technologies with new technologies suited to the era, we have expanded our business segments in the positioning field from surveying to construction and then to agriculture, while in the eye care field, we are working to create new business models that use eye health checkups as a solution to the rise of eye diseases due to aging.

1. GNSS (Global Navigation Satellite System): A system for measuring current position on the ground using artificial satellites

The Power of Innovation, Created Through Customer Orientation

We believe another major strength at Topcon is that the concept of “customer orientation” is deeply rooted in the Company. I have told employees that I want them to always focus on customers in their work. The customers who patronize Topcon’s products and services include civil engineering and construction companies, agricultural businesses, and ophthalmologists and opticians. What all of these customers have in common is that they use Topcon products to conduct their work as professionals. No matter how hard we try, we will never be professionals in their fields. However, when we ask customers about their processes during conversations, they sometimes have a moment of realization, that perhaps they could change something for better efficiency. Using these realizations by customers as hints, we have leveraged our core technologies to create groundbreaking solutions.

Innovation originally means “to renew” or “to change.” However, industry in Japan tends to associate it with “technological innovation” only. Technological innovation does not come easy, no matter how hard engineers struggle in research labs.Conveyor belt sushi was an innovation conceived of not by engineers, but by a sushi chef who saw a conveyor belt and thought, “If I put sushi on this, it might solve labor shortages.”

Topcon has a hit product in surveying instruments called the LN series. I was involved starting from the initial planning stage, and some in management at the time questioned the sales prospects. However, based on my experience as a site supervisor at a construction company in my previous job, I felt there was a reasonable chance of success. We secured a budget to make prototypes and put the first 30 units onto the market. We focused on making it possible for anyone to use by themselves, linking with 3D design data to make it easy to perform pile driving¹ and layout² work. Eventually, concerns about sales prospects were dispelled and the LN series became a major hit. This is just one example in which we combined our core technologies with peripheraltechnologies such as laser technology and communication technology to create a product with diverse field applications, dramatically boosting convenience at construction sites.

The reason behind all the innovation at Topcon is that we have worked closely with customers who are early adopters. The ideas this creates are combined with cutting-edge technologies in a unique way then tested, leading to products with an edge. We take pride in having helped create greater prosperity for people around the world by working with customers to devise the ultimate in efficiency.

1. The accurate installation of position points on the ground to serve as reference points for buildings at construction sites.
2. The marking of construction blueprint information at sites during architectural or civil engineering projects.

Think Globally, Act Locally

Japan accounts for 16% of Topcon’s consolidated net sales by region, meaning international markets account for over 80% of net sales. I spoke earlier of the importance of listening to feedback from professional customers and believe that the key to growth in global markets is to “Think Globally, Act Locally.”

In agriculture, for example, wheat and grains are grown all over the world. In Japan, Japanese farmers grow Japanese rice, and in Italy, Italian farmers grow Italian wheat. This may seem obvious, but closer examination reveals that the types of grains, cultivation methods, harvest times, and the challenges faced differ vastly by region.

Manufacturers tend to standardize products so they can work in any region. However, we always listen to what customers want and pursue localization to the best of our ability.

The Future of Topcon with TOPCON 2.0

I would now like to discuss the future envisioned by Topcon. As the next step to achieving our Long-Term vision, we have launched TOPCON 2.0, leveraging Topcon’s Manufacturing Excellence as we aim for further global success.

For Topcon to achieve greater success than ever, a Long-Term strategy is vital. The Positioning Business has achieved performance growth despite the impact of economic fluctuations, but market conditions have changed over the past two years, meaning it is now urgent to boost profitability through structural reforms.

In the Eye Care Business, it is vital that we transition from a traditional hardware-centered business to a solutions business, which requires ongoing investment. Given the accelerated evolution and proliferation of AI, we also recognize efforts toward digital transformation to be an urgent issue. We view these with a healthy sense of crisis and have determined that a fundamental changeover that goes beyond conventional business reform is essential.

Furthermore, promoting bold investment and strategic initiatives required us to rebuild the organizational structure to allow for agile decision-making. Through dialogue with investors in particular, we reaffirmed the importance of changing our perspective. As we considered the best course of action for the future, we decided on an MBO1 for growth. I believe MBOs present a major challenge, but by gaining strong partners in KKR and JICC, who resonate deeply with our corporate vision, we will build a rock-solid foundation and boost our capacity for executing strategy from a medium- to Long-Term perspective, accelerating bold growth investment and fundamental structural reforms.

Our evolution into TOPCON 2.0 requires a much flatter organization. While Topcon delivers products and services that make essential work sites more convenient and comfortable through automation, taking the next bold step forward is of the utmost importance. This is because we will never be able to differentiate ourselves by doing the same things as other companies. While many businesses have shifted toward solution-based models in recent years, we have been committed to providing technology-backed solutions since before this trend started. In other words, we believe true competitiveness lies in technology-driven transformation that leverages our core technologies.

A flat system is essential for ensuring that valuable insights from customers—regarding what they find inconvenient and how to make things more efficient based on an understanding of their lifestyles, culture and other aspects of their background—reach every corner of our organization. Products that truly resonate with customers will not be created by an organization where some employee collects customer feedback then passes it along like a game of telephone. I want our employees to demonstrate their professionalism based on a field-oriented approach.

This is why I believe a flat organizational structure rather than a pyramid hierarchy along with project-based management joined by professionals from different fields is vital. Immediately after becoming president, I announced a policy to transition swiftly to project-based management, the global standard, and we have been reinforcing this structure particularly in the Eye Care Business, considering the importance of addressing pharmaceutical regulations by nation and establishing a unified development process. In Europe and the U.S., lower language barriers and similar methodologies have allowed for smooth transition, and I sense we have made significant improvements over the past two years, including in Japan.

In the TOPCON 2.0 endeavor, I would like employees to transform and embrace a mindset of taking on challenges without fear of failure. Topcon has many projects led by young employees as well as a corporate culture characterized by open communication, where anyone may share their opinions proactively, regardless of age or length of service. We will continue to upgrade our work environment to one that is flat and open to challenges, so please stay tuned.

Right now is a period of transition toward future growth. Significant growth almost always requires a phase of hunkering down to build up strength. This is, so to speak, a step function, and discontinuity is vital as well. We will pursue synergy with global resources to grow into a solutions company that delivers the optimal solutions to diverse customers, so I sincerely hope that employees view this positively and demonstrate their capabilities in each and every project.

1. MBO (Management Buyout): A type of M&A where management buys out company shares and acquires management rights from existing shareholders.

Building a Sustainable Society

Taking the Eye Care Business as an example, while we initially provided support for eye examinations and diagnoses through hardware, we have now made remote diagnosis and AI diagnosis possible through cloud-based IoT platforms as well. This is creating an environment in the U.S. and elsewhere where people can easily receive eye health checkups by a primary care doctor or optician without having to go directly to an ophthalmologist, and has developed to the point where diabetes and heart disease risks can be shared with medical institutions.

We are currently promoting the spread of remote eye examinations and launching shared care models in the U.S. A shared care model is a system in which primary care doctors and opticians conduct eye disease screenings instead of ophthalmologists, then share the results with ophthalmologists in the cloud. This is expected to reduce the burden on ophthalmologists and improve medical access. Promoting shared care will lead not only to increased sales of screening equipment through the use of AI and vast amounts of data, but also to the creation of new data platform businesses.

In agriculture, we are contributing to environmentally friendly farming that both boosts productivity and lowers environmental impact through auto-steering systems for agricultural machinery, the crop monitoring sensor, and agricultural management systems that manage farming cycle data centrally in the cloud. In construction work, we are addressing labor-saving needs stemming from labor shortages through solutions not only for conventional large-scale civil engineering projects but for small- to medium-scale civil engineering projects as well. ICT integrated systems for road pavement work help to support new construction projects, primarily in emerging nations, while contributing to labor savings and shortened time for repairs and resurfacing work in developed nations.

Sustainability management has been a hot topic in recent years, and a major feature of Topcon is that our business itself is in sync with social issues pertaining to sustainability. Through solutions only Topcon can offer, we will work to build the foundations for a society where everyone can live in safety and prosperity, thus making the world a brighter place. Keep an eye out for new endeavors by Topcon. Topcon will continue to excite the world.