SIGMAXYZ Holdings Inc. (the group transitioned to a holding company structure in October 2021) is an independent business consulting firm founded in May 2008. Its main mission is to support clients in their digital transformation (DX) efforts. To this end, the company deploys a diverse team of professionals and combines the expertise of internal and external resources to execute projects aimed at creating value in a wide range of industries and companies. SIGMAXYZ’s professionals cover a breadth of specializations: namely, business strategy formation, operational innovation, organizational reform, IT system-building, digital technology application, project management, and new business development.
In addition to its mainstay consulting business, SIGMAXYZ actively pursues alliances with other companies to generate new businesses. It also invests in and operates various related businesses, and supports startups, with a view to creating new markets and value that can resolve social challenges.
Representative Director and Chairman Hideki Kurashige and Representative Director and President Ryuichi Tomimura have previously held top management and other key positions at companies such as IBM Japan, PwC Consulting, Japan Telecom (now SoftBank), and RHJ International. They have spearheaded SIGMAXYZ’s substantial growth achieved in the mere ten years since its inception.
SIGMAXYZ was established as a joint venture between Mitsubishi Corporation (TSE1: 8058), which held 51% of SIGMAXYZ’s shares, and RHJ International, which held 49%. Receiving orders from Mitsubishi helped SIGMAXYZ establish itself quickly, but efforts to cultivate new clients have helped it establish its own foundation for growth and a structure for pursuing its growth strategy. As of FY03/19, the ratio of revenue from clients unaffiliated with Mitsubishi has exceeded 90%, the number of clients increased to 202, and the number of projects to 1,165. Mitsubishi sold its entire stake in SIGMAXYZ in June 2018.
SIGMAXYZ distinguishes itself by offering hands-on support for each project and focusing on achieving a high level of service delivery and value creation. The company benchmarks its performance on all projects using its proprietary Net Satisfaction Index (NSI), which is based on client surveys of project satisfaction levels. The NSI has remained stable at 92–95 points (out of a total 100 points) over the past nine years, and the repeat business rate has trended at around 90%.
Digital transformation (DX) and labor shortages are driving demand for business consulting in Japan. The digital technology-related business consulting market grew 36.3% YoY to JPY96.7bn in 2019, and the market is projected to have a CAGR of 25.0% in 2019–2024 and reach JPY295bn in 2024 (source: IDC Japan). SIGMAXYZ is working to achieve above-market growth by attracting demand related to increased business investment as well as by expanding and improving its business consulting service.
SIGMAXYZ provides M&A support to medium-scale companies and businesses through wholly owned subsidiary SXA Inc. (unlisted), an M&A advisory company. To provide financial electronic data interchange (EDI) services, the company established SXF Inc. (unlisted), an electronic payment agent in 2019. SXF provides finect Cloud Services, which support global companies’ fund management.
FY03/22 results: For FY03/22, the company reported consolidated revenue of JPY15.7bn (+11.6% YoY), operating profit of JPY2.8bn (+57.9% YoY), recurring profit of JPY2.8bn (+53.8% YoY), and net income of JPY1.7bn (+37.5% YoY). Revenue in the mainstay consulting business came to JPY15.5bn, driven by contracts to help the migration of enterprise resource planning (ERP) systems to the cloud and other digital transformation initiatives, more consulting gigs helping companies restructure to make better use of personnel and develop new services and businesses. Meanwhile, revenue in the investment business amounted to JPY334mn. On the earnings front, SG&A expenses rose due to overhead costs associated with the return of face-to-face activities, but this was offset by an increase in gross profit stemming from higher sales and lower cost of sales, resulting in a 57.9% YoY rise in operating profit. As of end-FY03/22, the company had 478 consultants (minus three consultants YoY).
FY03/23 forecast: The company's FY03/23 earnings forecast projects full-year consolidated revenue of JPY17.2bn (+9.9% YoY), operating profit of JPY3.2bn (+15.2% YoY), recurring profit of JPY3.2bn (+15.0% YoY), and net income of JPY2.0bn (+57.5% YoY). With respect to business activities, the company aims to achieve further coordination between its consulting and investment businesses to provide client support for digital transformation initiatives and new business startups, as well as investing in and offering business support to startups, while also securing earnings from past investment projects to promote further growth of the business. In the investment business, the company plans to make new investments of about JPY2.0–3.0bn in the regenerative and well-being area aimed at enriching people’s lives while making wise use of the earth’s resources, with a particular focus on the energy and health care fields.
Shared Research views the company’s strengths as the following.
1) A management structure and culture that allow collaboration of diverse internal assets; an agility to join hands with external resources in proposals and projects
2) Experienced management team driving a virtuous cycle of successful hiring and new projects
3) Successful client relationship building at multiple levels, from top management to on-site counterparts, helps improve proposals, service delivery, and repeat business rate
We view the company’s weaknesses as the following.
1) Undeveloped in-house structure for handling cross-border projects
2) Being relatively young, the small scale of the company limits the capacity to respond to demand
3) Low overseas name recognition, as no global presence
|Gross profit margin||27.3%||31.7%||26.8%||32.6%||31.7%||35.4%||35.4%||38.6%||38.0%||46.3%|
|Operating profit margin||6.9%||8.6%||-1.9%||6.0%||7.1%||9.0%||9.5%||13.8%||12.5%||17.6%||18.5%|
|Recurring profit margin||6.9%||8.5%||-1.6%||6.2%||6.8%||9.2%||9.9%||13.5%||12.8%||17.7%||18.5%|
|Per-share data (JPY)|
|No. of shares outstanding('000 shares)||18,000||19,800||19,948||20,218||20,267||20,431||20,968||21,068||21,104||46,309|
|EPS (fully diluted)||-||37.9||-||17.1||26.6||32.0||46.5||72.6||63.3||-|
|Dividend per share||-||-||12.0||12.0||12.0||15.0||18.0||22.0||22.0||26.0||15.0|
|Book value per share||118.2||207.0||192.0||193.3||197.4||203.6||236.6||263.8||287.6||242.9|
|Balance sheet (JPYmn)|
|Cash and cash equivalents||1,089||2,690||1,845||1,758||2,030||1,965||2,146||4,824||5,991||9,639|
|Total current assets||3,383||5,094||3,625||3,173||3,641||3,502||4,124||6,943||8,016||12,147|
|Tangible fixed assets||210||171||169||225||210||181||202||251||179||286|
|Investments and other assets||153||151||432||1,008||1,044||1,609||2,177||2,050||1,588||1,719|
|Total current liabilities||1,955||1,765||1,108||987||1,148||1,324||1,684||3,425||3,239||2,765|
|Total fixed liabilities||4||0||26||86||214||460||758||1,208||1,582||1,590|
|Total net assets||2,128||4,098||3,831||3,831||3,830||3,902||4,556||5,037||5,463||10,294|
|Total liabilities and net assets||4,087||5,863||4,964||4,903||5,193||5,687||6,998||9,669||10,284||14,657|
|Total interest-bearing debt||12||4||26||20||15||15||8||1,516||1,911||10|
|Cash flow statement (JPYmn)|
|Cash flows from operating activities||618||677||-262||950||1,074||1,245||941||2,336||1,598||2,506|
|Cash flows from investing activities||-151||-301||-632||-891||-72||-810||-677||-3||285||-546|
|Cash flows from financing activities||-47||1,226||47||-348||-529||-591||-335||35||-784||474|
On May 17, 2022, SIGMAXYZ Holdings, Inc. announced an investment in Forest Energy Inc.
SIGMAXYZ Holdings Inc. announced that its wholly owned subsidiary SIGMAXYZ Investment Inc., had invested in the Forest Energy Inc. (unlisted; headquartered in Shinagawa-ku, Tokyo), a company engaged in the planning and development of locally produced and locally consumed woody biomass power plants, as well as running the gamut from financing to operation.
Forest Energy is a comprehensive developer, engineer, fundraiser, and plant operator for woodchip-powered biomass power plants. Thus far, it has developed four power plants in Japan, which currently generate about 22 MW. SIGMAXYZ Investment
chooses to invest in areas that enrich people's lives (in a regenerative & well-being sense) while making wise use of global resources. On May 17, 2022, SIGMAXYZ Investment acquired common stock in Forest Energy in the amount of approximately JPY200mn.
On May 9, 2022, SIGMAXYZ Holdings, Inc. announced the acquisition of shares for its performance-based stock compensation plan and the extension of its trust period.
At a Board of Directors meeting held on the same day, the company resolved that the trustee of the trust for its performance-based stock compensation plan for directors (limited to executive directors), which was introduced on August 10, 2016, will acquire additional shares of the company's stock (no additional funds will be entrusted) and that the term of trust will be extended.
Also on May 9, 2022, SIGMAXYZ Holdings, Inc. announced a decrease in the company's capital and capital reserve (capital reduction).
At a Board of Directors meeting held on the same day, the company resolved to submit proposals to reduce its capital and capital reserve to the Annual General Meeting of Shareholders scheduled for June 24, 2022.
The company aims to ensure the flexibility of its future capital policy through this reduction in capital and capital reserve. It plans to reduce capital from JPY4.6bn to JPY3.0bn and capital reserve from JPY2.9bn to JPY1.3bn. The capital reduction will be carried out without compensation and the total number of issued shares will remain unchanged, and the entire amount of capital and capital reserve to be reduced will be transferred to other capital surplus.
Also on May 9, 2022, SIGMAXYZ Holdings, Inc. announced that it will make an additional contribution to its employee stock ownership plan (J-ESOP).
At a Board of Directors meeting held on the same day, the company resolved to make an additional cash contribution to its employee stock ownership plan (J-ESOP).
In continuing the employee stock ownership plan (J-ESOP; trustee being Mizuho Trust & Banking Co., Ltd.), the company has decided to make an additional cash contribution to the plan to fund the acquisition of shares expected to be needed to provide benefits in the future. The additional contribution amounts to JPY200mn.
On March 16, 2022, SIGMAXYZ Holdings Inc. announced that its wholly owned subsidiary SIGMAXYZ Investment Inc., had acquired shares in the unlisted eWeLL inc. (headquartered in Chuo Ward, Osaka City), which is engaged in development, maintenance and sales of the cloud-type electronic medical record system “iBow" for home-visit nursing stations.
SIGMAXYZ Investment was established in April 2021 as an investment company to take responsibility for the SIGMAXYZ Group's investment business. As reason for acquiring shares in eWeLL, SIGMAXYZ Investment cited its expectation of further growth in demand for the home-visit nursing station business support services offered by eWeLL. SIGMAXYZ Investment took possession of stock acquisition rights issued by eWeLL on February 22, 2022, and exercised the stock acquisition rights on March 14, thereby acquiring 1.6% of the common stock of eWeLL. The acquisition price was JPY135mn. The company has not commented on the impact this matter will have on business performance in FY03/22.
|(JPYmn)||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||Q1–Q3||Q1–Q4||% of Est.||FY Est.|
|Gross profit margin||35.8%||37.3%||38.0%||38.6%||38.6%||38.5%||39.0%||38.0%||41.6%||44.1%||46.2%||46.3%|
|Operating profit margin||8.1%||12.6%||13.8%||13.8%||4.5%||9.1%||11.4%||12.5%||11.1%||15.3%||18.4%||17.6%|
|Recurring profit margin||7.8%||12.9%||13.6%||13.5%||4.9%||9.3%||11.8%||12.8%||10.7%||15.2%||18.4%||17.7%|
|Gross profit margin||35.8%||38.7%||39.3%||40.2%||38.6%||38.3%||39.9%||35.3%||41.6%||46.4%||49.8%||46.6%|
|Operating profit margin||8.1%||16.9%||16.2%||13.8%||4.5%||13.6%||15.9%||15.3%||11.1%||19.0%||24.1%||15.5%|
|Recurring profit margin||7.8%||17.7%||14.9%||13.4%||4.9%||13.8%||16.7%||15.5%||10.7%||19.1%||24.3%||15.7%|
Revenue by quarter
Operating profit by quarter
|Number of projects||398||636||886||1,165||363||588||802||1,019||348||571||760||987|
|Number of clients||114||148||170||202||125||169||194||213||117||142||157||181|
|Revenue per contract (JPYmn)||9.6||12.2||13.3||13.7||9.3||11.5||12.7||13.8||9.8||12.7||14.9||15.9|
The SIGMAXYZ group provides support for corporate digital transformation and innovation initiatives. The group transitioned to a holding company structure on October 1, 2021. Under the umbrella of holding company SIGMAXYZ Holdings Inc., the various group companies, including newly established subsidiaries SIGMAXYZ Inc., which is in charge of the Consulting services business, and SIGMAXYZ Investment Inc., which oversees the company’s investment activities, will promote their respective businesses with the aim of growing the group as a whole via collaboration among those businesses. In addition, the company entered a capital and business alliance with Itochu Corporation (TSE1: 8001) in April 2021, and began collaborating with Itochu and its group companies. Furthermore, in Q3, the company decided that the importance of its investment business had grown, and split it into two categories of consulting business and investment business.
FY03/22 consolidated revenue of JPY15.7bn was up 11.6% YoY. Consulting business accounted for JPY15.5bn of that figure. The company benefited from rising revenue from contracts to help the transitioning of ERP systems to the cloud and other digital transformation initiatives, and more consulting gigs helping companies restructure to make better use of personnel and develop new services and businesses. Investment business accounted for JPY334mn. By Q2, the company had sold all equity interest in JTB Benefit Service, Inc., and in September 2021, the company took a 5% stake in Wellness Communications Corporation, which operates a health management SaaS business and other businesses in the corporate wellness domain, by using Itochu Corporation's network. In Q3, the company invested in Progrit, Inc., a coaching service for English language learners. Furthermore, in Q4, the company invested in eWeLL inc., which provides a business support SaaS for home-visit nursing stations, and in Shizen Energy Inc., which develops and operates renewable energy power plants.
Operating profit was JPY2.8bn (+57.9% YoY). Higher revenue and decreasing cost of revenue drove a 36.1% YoY increase in gross profit and an 8.3pp YoY increase in the gross profit margin to 46.3%. SG&A expenses rose 25.4% YoY to JPY4.5bn due to overhead costs associated with return of face-to-face activities to normal, but OPM still rose 5.1pp YoY to 17.6% on improvement in gross profit.
The company’s Net Satisfaction Index (measure of project satisfaction) remained basically flat YoY. The number of projects and the number of clients both declined, but revenue per contract increased.
|(JPYmn)||1H Act.||2H Act.||FY Act.||1H Act.||2H Act.||FY Act.||FY Est.|
|Cost of revenue||4,153||4,547||8,700||4,063||4,345||8,408|
|Gross profit margin||38.5%||37.5%||38.0%||44.1%||48.1%||46.3%|
|Operating profit margin||9.1%||15.6%||12.5%||15.3%||19.7%||17.6%||18.5%|
|Recurring profit margin||9.3%||16.0%||12.8%||15.2%||19.8%||17.7%||18.5%|
For FY03/23, the company is projecting full-year consolidated revenue of JPY17.2bn (+9.9% YoY), operating profit of JPY3.2bn (+15.2% YoY), recurring profit of JPY3.2bn (+15.0% YoY), and net income of JPY2.0bn (+57.5% YoY).
With respect to business activities, the company aims to achieve further coordination between its consulting and investment businesses to provide client support for digital transformation initiatives and new business startups, as well as investing in and offering business support to startups, while also securing earnings from past investment projects to promote further growth of the business.
In the consulting business, the company aims to expand its consulting capabilities, which it equates to consulting skills multiplied by the number of consultants, in order to drive business growth. To secure more talented consultants, the company plans to raise the standard annual salary for young consultants, including new graduates, and step up communications to drive recruitment.
With respect to new hiring for its consulting business, the company hired 36 new college graduates on April 1, 2022. It is working toward hiring about 50 experienced consultants in FY03/23 and bringing in about 50 new college graduates in April 2023.
In the investment business, the company plans to make new investments of about JPY2.0–3.0bn in the regenerative and well-being area aimed at enriching people’s lives while making wise use of the earth’s resources, with a particular focus on the energy and health care fields.
|Results vs. Initial Est.||FY03/13||FY03/14||FY03/15||FY03/16||FY03/17||FY03/18||FY03/19||FY03/20||FY03/21||FY03/22|
|Revenue (Initial Est.)||9,700||8,600||9,780||11,850||12,400||15,000||14,500–15,500||16,000|
|Results vs. Initial Est.||-15.9%||10.5%||9.7%||-4.1%||7.5%||6.7%||-||-2.2%|
|Operating profit (Initial Est.)||910||420||620||800||1,250||1,500||-||2,500|
|Operating profit (Results)||703||829||-159||574||759||1,021||1,269||2,212||1,748||2,760|
|Results vs. Initial Est.||-117.4%||36.7%||22.5%||27.6%||1.5%||47.4%||-||10.4%|
|Recurring profit (Initial Est.)||900||450||650||800||1,250||1,650||-||2,500|
|Recurring profit (Results)||704||819||-133||591||726||1,047||1,322||2,164||1,798||2,765|
|Results vs. Initial Est.||-114.8%||31.3%||11.6%||30.8%||5.8%||31.2%||-||10.6%|
|Net income (Initial Est.)||600||340||490||550||800||1,050||1,050–1,520||1,500|
|Net income (Results)||1,153||724||-321||340||527||623||909||1,407||1,210||1,664|
|Results vs. Initial Est.||-153.5%||0.1%||7.6%||13.3%||13.7%||34.0%||-||11.0%|
During the previous five years, the company consistently exceeded its initial earnings estimates. In FY03/20, the company went so far as to issue upward revisions to its full-year forecast on December 23, 2019 and again on March 9, 2020. In FY03/21, the harsh operating environment in the wake of the pandemic left the company short of its initial range-estimate for consolidated revenue but it was still able to meet its initial range-estimate for net income with the help of new client wins and cost cutting. In FY03/22, earnings surpassed initial plans as revenue was roughly in line with plan while cost of revenue fell.
SIGMAXYZ unveiled a growth strategy on June 26, 2019, outlining the company’s aspirations in the form of FY03/23 numerical targets. (Refer to presentation materials from Representative Director and Chairman Hideki Kurashige’s speech following the general shareholders’ meeting on June 26, 2019.) The company has not disclosed numerical targets in the manner of a medium-term management plan since changes in the market occur rapidly and drastically.
SIGMAXYZ listed on the Tokyo Stock Exchange’s Mothers Market only five years after its inception, a feat it achieved largely because it was started as a joint venture between Mitsubishi Corporation and RHJ International, with ample capital to hire 150 employees off the market during its startup period. It also had a stable project pipeline from major shareholder Mitsubishi Corporation. These factors helped realize a solid organization and foundation for business growth early on. Thereafter, it expanded its businesses and client base using its own sales channel, enjoying increased name recognition and reputation after going public. The company had maintained an equity ratio of around 70% until FY03/19, and had ample capital with an equity ratio of 52% in FY03/20 when it took out borrowings, and 53% in FY03/21. SIGMAXYZ has been expanding business investments since its listing, and these businesses have gained value each year.
SIGMAXYZ’s growth strategy calls not for any remarkable speed of growth, but for sure and steady growth achieved by maintaining a sound financial base as the company develops services suited to market needs and maintains a healthy investment cycle. It plans to maintain this stance.
Earnings in the consulting business can be interpreted as manpower x utilization rate x unit price. For example, if SIGMAXYZ wanted to double its sales, it could do one of the following: double the number of consultants, improve the utilization rate, raise the unit price, or improve productivity in some other manner. Judging from the scope of market growth, the company will need to increase personnel, but if hiring is too rapid, a balance with maintaining service quality becomes difficult. Merely bolstering headcount is not a solution, since quality of its personnel is critical to the company’s success. Business expansion through M&A may be an option in this respect, but would depend on the market environment. Unit prices are strategic for service operators, so if prices are currently in an appropriate range when compared with competitors, it is not easy to raise them significantly. The company upholds a utilization rate target of 65% (average), which Shared Research sees as appropriate when considering the necessity of consultants’ motivational improvement through improved ability and self-growth, capacity to respond to the market and make proposals to clients, and new service development.
A consulting business is a service reselling the knowledge and wisdom of consultants, and it typically operates on a one-off (pay-per-project) revenue model. In addition, consultants are people, not things, and there must be ongoing improvement in their abilities and motivation or there can be no growth. Therefore, the degree to which productivity can be improved and revenue models diversified becomes the key to accelerating growth.
Leveraging technologies such as artificial intelligence (AI) and robotic process automation (RPA) in its services allows SIGMAXYZ to improve the productivity of its consultants, but also permits optimization of overhead costs. Developing its recurring revenue (subscription-type) model, expanding sales of partner company licenses, and raising the return on equity from its investment business are all related to new revenue models that differ from the model of the traditional consulting business.
SIGMAXYZ is also exploring a hybrid business, making proposals that couple its consulting services with its investment business. One scenario would be for the company to invest in a client’s new business, send in a consultant to provide support, charge a regular consulting fee to recoup costs, and secure a return in the end through share prices or capital gains. SIGMAXYZ’s proprietary Deep SIGMA DPA (AI-powered platform for automated input of documents) and finect Cloud Services (financial EDI services provided by subsidiary SXF) are examples of subscription-type businesses, which the company is already handling. According to SIGMAXYZ, more and more companies are inquiring about such a scheme because they want to accelerate starting up their new businesses.
SIGMAXYZ’s has stopped accepting system development contract work. This means revenue per employee will decline, but the company has since shifted its focus to raising employee profit margins.
Considering the increasing market uncertainty and speed of change, the company believes it is impossible to gather in-house all the abilities needed to resolve the many challenges faced by companies and by society at large. The management team strongly believes instead that the quality and speed of the company’s value creation can be enhanced by allowing its diverse consultants—with their grasp of new business opportunities and challenges—to gather information, expand networks, improve their abilities, and enter collaborations both inside and outside the company autonomously. For this reason, the management team maintains an environment suited to ongoing innovation by eliminating hierarchical and algorithmic management concepts to promote active and healthy trial and error, and ensuring an autonomous organization that supports improvement in the abilities and motivation of each employee.
SIGMAXYZ has identified “three transformations” (digital transformation, service transformation, and management transformation) as the cornerstones of its growth strategy. To achieve business growth based on this strategy, it became a holding company in October 2021. Under this new structure, the consulting services business and the investment business (formerly alliance business), which were until now handled by the company itself, will be handled by distinct subsidiaries, and the company plans to provide unified management of the group. The subsidiaries will promote professionalism in the fields for which they are responsible, while also collaborating with each other to improve the value they offer as a group.
The company has also announced a capital and business alliance with Itochu Corporation (TSE1: 8001) through a third-party allocation of shares, but has not disclosed details of the alliance. The Itochu group includes companies such as Itochu Techno-Solutions Corporation (TSE1: 4739) that are compatible with SIGMAXYZ’s three transformations, and Shared Research thinks there is potential for collaboration with these companies.
SIGMAXYZ was established in May 2008 as a joint venture between trading firm Mitsubishi Corporation and investment fund RHJ International S.A., with a mission to strengthen Mitsubishi’s IT and consulting services. The joint venture was proposed by the company’s current representative director and chairman Hideki Kurashige, who previously held key positions at IBM Japan (vice president), PwC Japan (chairman), Japan Telecom (president), and RHJI Industrial Partners Asia (president). In August 2008, the company absorbed Eupholink Inc., a wholly owned consulting subsidiary of Mitsubishi. In February 2009, Mr. Kurashige became a senior corporate advisor of Mitsubishi. SIGMAXYZ maintained a close relationship with the trading company, which remained both a major shareholder (32.95% stake as of end March 2018) after RHJI’s divestment, and a key client. About a third of SIGMAXYZ’s revenue in FY03/11 came from Mitsubishi. However, in June 2018 Mitsubishi changed its business strategy and sold its entire stake in SIGMAXYZ. While the two companies no longer have capital ties, the business relationship is ongoing.
SIGMAXYZ offered an M&A consulting service from the time it was established, but to expand the service it split off the business as SXA Inc. in July 2011 and made SXA a wholly owned subsidiary. SXA has been involved in a variety of M&A deals, including cross-border projects, thereby contributing to SIGMAXYZ’s earnings. In February 2019, the company established SXF Inc., an electronic payment agent. This subsidiary aims to strengthen the governance and efficiency of money management operations at clients who have overseas businesses. SXF’s cloud-based service seamlessly exchanges data on remittance orders and account information with the clients’ correspondent banks.
The company’s corporate philosophy consists of three components: mission, vision, and values.
SIGMAXYZ’s mission is to “work with clients and partners to realize Society 5.0 and help attain the Sustainable Development Goals (SDGs).”
Society 5.0 is defined as a human-centered society that balances economic development with the resolution of social problems through an advanced system that integrates cyberspace and physical space. It represents the next step in societal evolution, following the hunter-gatherer society (Society 1.0), agricultural society (2.0), industrial society (3.0), and information society (4.0). The realization of Society 5.0 was proposed by the Japanese government as a plan for societal transformation; the term first appeared in the 5th Science and Technology Basic Plan in reference to the future society that Japan should aspire to create.
Sustainable Development Goals (SDGs) are a collection of global goals—to be achieved between 2016 and 2030—adopted at the United Nations Sustainable Development Summit in September 2015 by 193 UN member states. They consist of 17 major goals and 169 associated targets.
SIGMAXYZ previously focused on the success of client companies, providing services as a Sherpa sharing in both the risks and the fruits of the projects on which it worked. However, in May 2018 the company sought to clarify its mission, stating anew that it aims to resolve social challenges via a range of initiatives conducted in cooperation with its clients and business partners. To that end, it has stated its intention to engage in the following specific actions:
①Promoting digital transformation of companies
②Creating/managing joint ventures; providing support to startups
③Developing multi-sided platforms that support advanced value creation (as a community)
Realizing Society 5.0
Source: Cabinet Office, Government of Japan
SDGs: 17 major goals
Source: United Nations
SIGMAXYZ’s vision is captured in the slogan “Create a beautiful tomorrow together.” Its outlook for the future society of Japan is premised on the concept of “social capital” measured on three axes: trust between people, standards of reciprocity to help each other, and a network of connections through bonds.
The company’s core values can be broken down into business values and human values. Business values comprise key concepts such as sharing ideas, collaboration, aggregation, Sherpa, agility and speed, and intellectual combativeness. Human values entail openness and trust, sincerity, hospitality, an awareness of esthetic beauty, respect for difference, and camaraderie.
The term Sherpa refers to one of the major ethnic groups of Nepal, members of which often serve as mountaineering guides in the Himalayas. SIGMAXYZ uses it to mean “taking joint action (with clients) and seeing a task through to completion,” and applies it internally to organizational units categorized by services and skills. Aggregation is another term used internally by the company to mean the creation of new value by freely combining people, products, and experiences. SIGMAXYZ considers aggregation skills to be an essential quality of its consultants, whom it refers to as aggregators*. A factor contributing to the company’s high customer satisfaction rating is that instead of limiting itself to specific consulting services, it can provide a comprehensive “hybrid” digital transformation-related consulting service that also sees the client’s perspective.
* Aggregator: In the book Aggregator, co-authored by Shunichi Shibanuma, aggregation is defined as “a method of rapidly gathering and fusing a diverse range of internal and external capabilities to create highly differentiated products and services at a speed on par with or above the market.” Aggregators have “the ability and motivation to identify the tasks they need to undertake and see these through to completion in any environment.” The book presents aggregation as a next-generation work style allowing people to work freely without being hampered by societal or organizational conventions. It argues that “the knowledge-based society of the 21st century powered by IT innovation is changing the relation between companies and individuals dramatically, and that human resources with a clear vision and an ability to create new values will be entrusted with a greater degree of freedom at work (both internally and externally), paving the way for a future society where one can simultaneously work for several companies.” Aggregators’ role is to present a vision toward the resolution of challenges faced by clients, and they achieve their missions by assembling the required internal and external human resources, assets, and technologies. Professionals are defined as human resources that either have expertise in a specific field or are well-versed in technology, while aggregators are expected to have several fields of specialization, and be business-savvy, well-networked, and equipped with management skills that allow them to oversee an entire project from a higher perspective.
Source: Excerpt from Aggregator (Shirarezaru Shokushu Aggregator)
Shunichi Shibanuma, Akihide Segawa; Nikkei BP
Managing Executive Officer Shunichi Shibanuma explains that the current-day movement of returning to the principles of Adam Smith (who expounded the idea that “people are capable of empathizing with others” in his book The Theory of Moral Sentiments), and rediscovering the notion that “the ability to empathize can drive markets” reflects the budding of “empathy-driven capitalism.” This philosophy is consistent with SIGMAXYZ’s belief that empathy is critical to the success of the company and to its ability to grow.
The company’s business areas include consulting services, and the startup and operation of various related businesses. In addition, SIGMAXYZ forms networks (which it refers to as “ecosystems”*) between a diverse range of professionals and companies with a view to creating values that transcend the boundaries of a single company or industry. The consulting services and investment businesses constitute the twin pillars that support the creation and management of such ecosystems. Rather than consulting as a one-way street, the company may even propose a joint venture with a client in the process of consulting, supporting the client’s business while becoming involved in its operation.
* Ecosystem: SIGMAXYZ aims to create new values via three approaches toward corporate transformation: Innovation, Collaboration, Motivation (internally shortened to ICM). It believes innovation derives from collaboration, which it defines as “value creation activities in which people in different positions work toward a common goal, synchronize processes, and share related outcomes.” This corresponds to the concept of open innovation. The actual nature of collaboration changes over time, and has been shifting from governance to ecosystems. Governance refers to rule-based control and administration of capital and human resources when establishing relations with other companies (subsidiaries, business partners, etc.). However, the key to expediting innovation does not lie in imposing rules on capital and human resources, but in building ecosystems, which rely on the development of relations through a shared vision and strategy. Important factors in managing such ecosystems are diversity management (enhancing diversity) and striving to maintain harmony with a wide range of value systems. In the absence of any form of management, diversity can lead to disorderly conditions. Consequently, there is a need for individuals who share a voluntary, high-level goal awareness (Motivation 3.0), and for the development of an environment in which such individuals can work together while transcending barriers between companies.
From its inception, SIGMAXYZ aspires to be “a company that joins forces with the client to bring proposals to fruition.” In the consulting and IT industries, the involvement of consultants typically ends when they deliver assessments, reports, or requested systems to their clients, and confirm that their proposals have been put into motion. They do not (or cannot) bear any responsibility for the actual effects of their proposals.
However, from the perspective of client companies, whether they hire a strategy consulting firm, business process/IT consulting firm, or system integrator, the consultants do not support the execution process from start to finish. Despite having to cover the cost of such services, the companies themselves must shoulder the full responsibility for outcomes. SIGMAXYZ believes this structure of the business and IT services industries impeded the success and growth of client companies. As such, it launched its operations as a group of professionals that takes a hands-on approach of working with clients to execute the company’s proposals and jointly assuming responsibility for the outcomes.
At the time of its start, SIGMAXYZ assembled professionals from a wide range of fields, including former employees of strategy consulting firms, business process/IT consulting firms, system integrators, M&A advisory firms, financial institutions, and CPA firms. The company was able to gather the team in a short period because it was committed to providing these professionals opportunities and an environment to wholeheartedly pursue true success for clients. The company also hired several consultants with work experience at foreign firms such as McKinsey & Company (US, unlisted), Accenture (Ireland, NYSE: ACN), BearingPoint (US, OTCBB: BGPTQ), and IBM (US, NYSE: IBM).
One significant difference from foreign consulting firms is the way in which SIGMAXYZ is committed to getting results by providing not only consulting services, but also a scheme that embraces the possibility of business investment, including joint ventures. In addition, one of its appeals is physical proximity to clients in Japan, which means decision-making is faster and consultants are more agile, allowing them to concentrate on creating value for clients. By contrast, at foreign firms, there is often an awareness gap between the firm’s headquarter and Japan, and employees may experience frustration at having to submit to decision-making made more complicated by this gap.
The experience of the joy of success, when shared with clients, leads to improved satisfaction and motivation on the part of both the clients and the company’s own consultants. This virtuous cycle has led to SIGMAXYZ’s high customer satisfaction and repeat business rate. The Net Satisfaction Index (NSI), which the company discloses as a KPI, has trended above 90 points (out of a total 100 points) in the past three years.
There are limits to what the company can do on its own, which is why, in order to resolve complex corporate challenges and even some of the bigger social challenges, SIGMAXYZ understands it needs to bring together diverse abilities and join hands with client companies and business partners, major corporations and startups, getting them to work together on projects leading to a common goal. Adhering to self-sufficiency would only make it difficult to keep pace with rapidly changing market needs, and trying to keep all required resources in-house would only mean that attention must be given to keeping those resources active. For these reasons, SIGMAXYZ has gathered distinguished professionals versed in strategy, project management, business processes and systems, digital technology, personnel and organizational innovation, and new business development, and employs a highly flexible framework for executing individual projects in cooperation with outside experts and specialist organizations and companies. Simply put, SIGMAXYZ aims to present itself as a company any client could consult to handle a range of challenges.
From the time it was established, SIGMAXYZ has regarded itself as an “Xpartner” (cross-partner) for its clients. Reference to the term lessened since the unveiling of the new corporate philosophy but the thinking behind it remains unchanged and is deeply rooted in the company’s core values. Xpartner refers to partnerships in which the company works with clients to create value while sharing related risks and achievements (as opposed to the typical consultant-client relationship of two parties placing and receiving orders). SIGMAXYZ places great importance on reinforcing the sharing aspect of such partnerships. The name SIGMAXYZ is a combination of the summation symbol sigma (Σ) and the three letters XYZ, which are used in mathematics to represent unknown numbers and the three coordinate axes (X-axis, Y-axis, Z-axis). The company regards clients, business partners and itself as the three axes, so the meaning of the company name is to sum (SIGMA) the infinite possibilities of the three parties (XYZ) to generate maximum value. Note that AXYZ can also be read as “axis.” The name of the company incorporated its vision from the start, and that vision is carried on today as an indelible part of the company’s spirit.
The SIGMAXYZ group operates in a single segment that mainly offers consulting services, and therefore does not disclose revenue, operating profit, or other data by segment.
A distinctive feature and strength of the company’s consulting services business is the way it forms its project teams. Instead of utilizing a traditional matrix organization with vertical and horizontal axes, SIGMAXYZ adopts a structure where teams are assembled by matching and combining the different skillsets of its professionals. The focus is placed on how much value these teams can generate though collaboration.
The company has a flexible organization, which has gone through numerous changes to keep pace with market needs and movements. The current structure comprises the following.
SIGMAXYZ’s operational structure comprises Industry Sherpa, which serves as the client interface; three divisions involved in offering development: Digital & SaaS Sherpa, Heuristic Sherpa, and Cutting-Edge Technology Application Center; and wholly owned subsidiary SIGMAXYZ Investment Inc., which invests in and creates alliances with client companies.
Digital & SaaS Sherpa is the largest group in terms of personnel, and handles management of critical and difficult projects related to client company management, including complex large system development, business reform projects, and new research and development. Digital & SaaS Sherpa targets major companies pursuing projects related to the migration of backbone operations to cloud environments using SaaS, as part of digital transformation efforts. In regard to digital technologies, the company has a diverse team of digital technology experts in fields such as AI, IoT, robotics, and cloud solutions, and offers a wide range of services, including AI Integration and Development (AID) programs.
Industry Sherpa is the second largest group and is divided into several teams by key industries. It was this group that won the Japan Airlines (JAL) project. Main industries covered are retail, public sector, digital media, trading companies, aviation, communication and platforms, insurance, logistics, pharmaceuticals, broadcasting and advertisement, manufacturing, transportation, finance and banks, services, and utilities. The company has positioned the Industry Sherpa as the client interface.
Heuristic Sherpa promotes three transformations advocated by the company (decarbonization, digitalization, and business restructuring) and explores solutions to various issues (CXO agenda) faced by the management teams of its client companies. It is involved in management transformation and digital transformation, and leads projects such as Vision Forest, an organizational transformation program that leverages art, and assumes functions such as driving innovation and cultivating new businesses. It also takes the lead on the Smart Kitchen Program, which is working to expand the food tech market.
Cutting-Edge Technology Application Center conducts research on advanced technologies, along with proof-of-concept testing for business applications. It is building a network with tech companies.
The company established SIGMAXYZ Investment Inc. in 2021 as a wholly owned subsidiary that will be responsible for the overall investment business previously handled by the company itself, including investing in client companies, stocks and bonds, and limited partnerships, and for consulting regarding corporate management and M&A.
When making a DX proposal to a client company, SIGMAXYZ explains its vision for digital transformation business strategy from the following three angles—Digital Transformation (DX), which deepens existing businesses through digitalization; Service Transformation (SX), which explores the creation of new services; and Management Transformation (MX), which refers to reforms of the management platform that underpins DX and SX. This is set in the context of social change that has a major impact on business, including the shift from an analog society to a digital society and shift from a “goods-dominant society” to a “service-dominant society”. Thus, the company not only considers digitalization as a priority, but aims to make more in-depth proposals, including the creation of new services in response to the “service-dominant society” and the involvement in transforming clients’ organization and corporate culture.
Challenges for companies are becoming increasingly complex in a rapidly changing business environment due to the evolution of digital technology and globalization, and projects are ongoing that straddle the company’s internal and external issues. SIGMAXYZ calls groups of such projects “programs,” and views the process of developing these programs and improving corporate value by generating results “program management.” It works with management to develop a corporate vision, puts together a selection of the requisite personnel, technology, and networks from inside and outside the company, and assembles teams to provide powerful support for company executives’ program management. For example, the Sakura Project for Japan Airlines Co., Ltd. (TSE1: 9201) involved a complete overhaul of core IT systems for the first time in 50 years. First, in addition to the establishment of a PMO, system requirements were defined. Next, consultants from the company were embedded in all of the project teams so SIGMAXYZ could develop the project in cooperation with Japan Airlines: these included a management coordination team from the user divisions such as airport operations and call centers, preparation team from the user side, and team responsible for switchover processes. The project attracted widespread media attention, and is fully up and running, following a two-stage rollout in November 2017 and March 2018.
A report on digital transformation by the Ministry of Economy, Trade and Industry (METI) highlights the need for Japanese companies to overhaul their complicated legacy systems by 2025. SIGMAXYZ thinks that companies should take this opportunity to improve their business processes by migrating their core IT systems to the cloud and combining them with global packages. The company has stepped up its efforts in this area since April 2018, when it strengthened its consulting proposal systems. In 2H FY03/19, it migrated core IT systems to the public cloud and upgraded workflows to be compatible with standard cloud processes at NTT Advanced Technology in a short six months. The project won the Project Award in SAP Award of Excellence 2020.
This initiative supports the introduction of cloud-based expense settlement and workflows that comply with the Electronic Books Maintenance Act. Not only is improving the efficiency of the internal expense settlement process a matter of urgency for companies, it strengthens governance and compliance. SIGMAXYZ created medium-term numerical targets in light of work style reforms and the use of new technologies and is building a novel next-generation expense settlement platform. This will help companies keep up with changes to the environment stemming from the advent of new-generation devices that will replace current mobile devices, ongoing advances in AI and automation, and further loosening of legal requirements, in a timely fashion. The company succeeded in the complete computerization of expense settlement processes including electronic receipts for Shionogi & Co., Ltd. (TSE1: 4507), introducing new business processes and systems for all 5,000 employees in 10 months in 2018. In addition, it has realized the complete computerization of invoice management for its own expense reimbursement and indirect material procurement, and, based on the knowledge gained from this initiative, has begun offering a service for the digital transformation of indirect operations.