Discussion between Outside Directors

Evolution of Yamaha through increased management speed under leadership of new president

Atsushi Yamaura assumed the position of president in April 2024. What type of discussions took place at meetings of the Nominating Committee with regard to the nomination of the new president?

Shinohara: I became a member of the Nominating Committee in June 2021. In fall of the year, the Nominating Committee was provided with a list of candidates for the next president from the executive team. Over the years that followed, the Nominating Committee sought to gain an understanding of the dispositions, insights, and thoughts of the candidates through a variety of venues.

Candland: We had opportunities to get to know the candidates on a monthly basis, and these opportunities took forms such as meetings of the Board of Directors, lunch meetings, and online meetings. We were thereby able to develop a solid understanding of each candidate.

Shinohara: Based on these understandings, the Nominating Committee engaged in a series of discussions aimed at narrowing down the list of candidates. These discussions went relatively smoothly, and the final list of candidates was approved via a unanimous decision by all members of the committee. In June 2023, after this unanimous decision, I was appointed to the position of chairperson of the Nominating Committee. In this capacity, I was tasked with compiling the results of our discussions for use in making the final decision on who would be the nominee. Each of the remaining candidates had their own areas of extraordinary strength. As such, we had to devote a lot of time to discussing exactly which of these strengths best matched the needs of Yamaha in the future.

What sort of discussion process led to the decision to choose Mr. Yamaura and what qualities of his were areas of praise?

Shinohara: To put it quite simply, the new president of Yamaha needed to have the capacity to drive the development of the Company. This does not just mean recovering performance, but rather also entails driving the ongoing growth of Yamaha. Driving such growth will require the Company to build upon its existing strengths while transforming to create new value. Accordingly, this was the lens used to assess candidates. As an engineer, Mr. Yamaura has a deep understanding of sound and music-related technologies. He is also capable of thinking logically and viewing matters from a multifaceted perspective to formulate visions and make bold decisions. Mr. Yamaura’s career is characterized by the creation of products based on completely new concepts that are not directly related to Yamaha’s traditional product lines. He is not a particularly flashy individual, but he has a history of generating steady success. This is why he was deemed to be the ideal future leader for the Company.

Candland: I share Mr. Shinohara’s praise for Mr. Yamaura’s strong commitment to innovation. He is an extremely curious individual, and this makes him a good listener. Able to turn an attentive ear toward those around him, he is the type of person capable of fostering an environment conducive to the creation of ideas and innovation and of encouraging teamwork.

Shinohara: Creating new value through innovation requires collaboration between individuals with diverse areas of expertise, values, insight, and experience. In other words, rather than making decisions in a top-down manner, it is important for the president to be able to create an environment in which employees tackle new challenges through bottom-up action. Given his listening skills, I am sure Mr. Yamaura will be highly proficient at supporting such action and ambition.

Candland: The operating environment is incredibly volatile, meaning that management must be able to act with great speed. It is crucial to be able to make swift decisions based on a detailed understanding of user needs and the trends of competitors. I look forward to seeing President Yamaura evolve Yamaha to exhibit even greater speed in its management.

Yamaha has just appointed a new president, but what are your thoughts regarding the next cycle of succession planning?

Shinohara: The cycle of succession planning has, once again, started with the preparation of a list of candidates. Of course, this list is not absolute. The conditions required of the president’s successor will need to continue to be updated in line with the changing operating environment, and the list of candidates should be revised as necessary.

Candland: Effective cultivation of the candidates included on the list is imperative. The ideal approach toward cultivating candidates is something that will be discussed by the Nominating Committee going forward.

It was mentioned that the Company must build upon its existing strengths while transforming to create new value. What do you think is required for Yamaha to improve its corporate value?

Shinohara: Mr. Candland mentioned the importance of speed, and this is something that is required to improve corporate value. Yamaha will need to continue to devote the necessary time and effort to creating and supplying quality musical instruments and other products. At the same time, if the Company aims to swiftly generate innovation in relation to software and services, it might want to consider a more agile approach. Such an approach could involve releasing offerings that are only about 70% complete so those offerings can then be refined and completed based on feedback received from customers. This might go beyond the scope of the question, but it could even be said that Yamaha’s position as the world’s unrivaled comprehensive musical instruments manufacturer is holding it back. After all, the word “unrivaled” means exactly that: Yamaha has no rivals with which to compete on equal footing.

Candland: I have served as a director at a company with a similar dilemma in the past. Although this company had the strength of an unrivaled positioned, it also lacked the drive that comes from competing with rivals. A lack of drive makes it difficult for a company to feel motivated to innovate at all costs. For this reason, if the unrivaled Yamaha wants to move to the next level, it will need frameworks to encourage such forward momentum within the organization.

Shinohara: Even if Yamaha does not have any rivals that can compete with it as a comprehensive musical instruments company, it does face competition in its individual business lines and in relation to specific musical instruments. Personally, as a short-term measure, I think it might be prudent to consider more granular competition strategies that look at the conditions pertaining to the specific markets, customers, and rivals of a given product line.

Candland: I agree about the need to gain a better understanding of user needs. An example of a need that should be understood is how beginners feel when trying to learn a musical instrument. A lot of people at Yamaha are quite skilled at playing instruments, but some of the Company’s customers are no doubt, like me, not experienced at instruments. I suspect that a lot of people may start trying to learn an instrument, only to give up on getting better and eventually stop playing the instrument all together. It is possible that Yamaha is missing out on business opportunities due to a lack of understanding with regard to such customers. If Yamaha were to, for example, use technologies to provide functions that make instruments easier to play and enjoy or to allow such new musicians to play with others, it might help the Company access a wider range of business opportunities.

Shinohara: I can also imagine business opportunities in relation to senior citizens. Playing a musical instrument can entail using both of one’s hands and feet as well as their breath. Such an activity has the potential to help people live longer healthy lives. Populations are aging in Japan and China. In these countries, it is possible that instrumental music education for senior citizens could be used to create significant value in the area of social welfare in a manner similar to how music schools for children help foster music culture. To be honest, I bought an instrument when I became an outside director at Yamaha and started trying to teach myself, but that has proved to be quite difficult. Therefore, I personally would be quite interested if there was a wider range of instrumental music education services for adults.

Next, we would like to ask about the most important intangible asset for Yamaha’s ongoing value creation efforts-its people. What kind of matters are discussed with regard to human resource development at meetings of the Board of Directors?

Shinohara: I believe that Yamaha’s Board of Directors is effectively playing its role in monitoring circumstances related to respect for human rights as well as diversity and inclusion. The topic that gets the most discussion with this regard is how to make working at Yamaha more comfortable and motivating for employees. A comfortable workplace should not mean one that does not involve hard work. Rather, I am more interested in seeing if Yamaha can create a workplace environment where employees are able to tackle new challenges and feel a sense of accomplishment for overcoming them.

Candland: Yamaha conducts employee engagement surveys each year, and the results of these surveys are monitored by the Board of Directors. The Company also constantly offers opportunities for Board members to talk with employees, and the feedback gained through such engagement is discussed at Board meetings.

Shinohara: Achieving the increased speed mentioned earlier will also require that every employee be able to take effective action at their own discretion. I look forward to seeing how President Yamaura will manage Yamaha in a manner that encourages employee ambition and promotes innovation guided by the front lines in order to foster a corporate environment that is conducive to such speed and autonomy.

The Make Waves 2.0 medium-term management plan launched in April 2022 has entered its final year. How would you evaluate the progress of this plan?

Shinohara: Smooth progress was made toward non-financial targets, but the past two years have proved to be challenging when it comes to financial targets. It does feel like Yamaha’s performance has finally bottomed out, so I anticipate that we will see steady growth going forward.

Candland: Yamaha has struggled to cope with the changes in its operating environment, whether that be the difficulties in procuring components or the slumping market. As the Company prepares to launch the next medium-term management plan, I anticipate that President Yamaura will accelerate management to spur new growth for Yamaha. However, accelerating management will require all employees to be aligned toward the same goal. This is why it will be crucial for President Yamaura to effectively communicate his management vision to employees in order to ensure that Yamaha can move on to the next level in fiscal 2026 and beyond.

In closing, do you have any messages for Yamaha's stakeholders?

Shinohara: Yamaha is well armed with both diligent manufacturing capabilities and a propensity for new value creation. I have complete confidence in Yamaha’s ability to rapidly create products and services that respond to user needs, and to grow as a result, by engaging in more extensive communication with users and utilizing these strengths accordingly. Moreover, I am committed to helping Yamaha accelerate its short-, medium-, and long-term strategies through effective oversight of the Board of Directors in order to contribute to improved corporate value.

Candland: Yamaha’s more than 135-year history has seen countless examples of innovations that have helped the Company carve out its leading market position with its unparalleled quality and build a truly strong brand. Together with the other members of the Board of Directors, I will work to support Yamaha in surpassing stakeholder expectations through ongoing growth.