Keyence - Company History

A third start-up after two failures, built on automatic wire-cutting machines

Takizaki Takemitsu (滝崎武光) was born in 1945 and graduated in 1964 from Hyogo Prefectural Amagasaki Technical High School[1], after which he learned electronic control at a foreign-owned maker of plant control equipment[2]. The electronic-equipment maker he set up on his own was driven to dissolution, and the machinery-assembly subcontractor he founded next went bankrupt[3]. His school years fell in the middle of the campus disputes, but he took the view that ideology will not change the world[4] and set his mind on becoming a businessman who could compete with numbers. In March 1972, at 27, Takizaki started for the third time, founding Lead Denki (リード電機) as a sole proprietorship in Itami, Hyogo[5], and taking up the development, manufacture and sale of automatic control equipment and electronic application equipment[6]. The founding business was automatic wire-cutting machines for cable makers[7]; armed with the miniaturisation that electronic control allowed, he delivered them to cable makers around Amagasaki such as Furukawa Electric and Sumitomo Electric[8].

The wire-cutting machines of the founding business were unglamorous industrial machines used on the shop floors of cable makers[9], yet their operating margin reached 20%[10]. In April 1973 the company developed a range of sensors for factory automation and began manufacturing and selling them[11]. In May 1974 Takizaki reorganised the business as a joint-stock company in order to answer the very large demand in industry for rationalisation and labour saving[12], establishing Lead Denki Co., Ltd. in Amagasaki, Hyogo[13]. Two years and two months had passed between the sole proprietorship and incorporation[14]. From the question of what it would take to keep a company alive rather than let it fail, Takizaki arrived at the pursuit of rationality — the greatest added value from the smallest capital and the fewest people[15] — and set a criterion that placed the rate of profit ahead of growth in sales[16].

The double-blank detector for Toyota, and full entry into sensors

In 1973 Takizaki fixed on the problem of dies breaking on press shop floors[17] and developed a double-blank detector, which used magnetism to sense without contact when two metal sheets were fed at once[18]. He put a unit price of $310 (¥85,000) on a sensor that protected dies worth hundreds of millions of yen[19], laying down a policy of value pricing in which the price was set from the effect the customer gained rather than built up from cost[20]. The product was adopted first by Toyota Motor and spread to the main carmakers — Nissan Motor, Mitsubishi Motors and Honda Motor[21]. As of 1977 the line-up consisted of this detector together with a micro-position detection switch, the D.F DETECTOR, a metal-fragment passage confirmation switch and a seam detector[22], all concentrated on applications that caught metal without touching it. Takizaki said, because these are products no one else has, promoting them through trading houses and distributors does not carry the value of our products to the customer properly[23], and from the founding he built a structure that sold directly to the end user[24].

In 1982 Takizaki transferred to another company the rights to manufacture and sell the automatic wire-cutting machines[25] that had been the founding business at a 20% operating margin[26]. The cutting machines were a profitable line accounting for about a tenth of sales[27], but he let them go on two grounds: the difference in product content wasted development effort, and concentrating on FA sensors, which ran at a 40% operating margin, would make earning power stronger[28]. Through the following year, 1983, he also deliberately cut back the large orders from a machinery maker that had come to account on its own for nearly 30% of sales[29], on the ground that they undermined the stability of the business. The two contractions widened the range of sensor product development, and the customer base reached 35,000 companies[30]. From the year ended March 1981 onwards the company held an ordinary profit margin of 35% or more[31].

Three principles: direct sales, standard products and value pricing

The three principles laid down in the founding years became the backbone of management from then on. The first was direct sales, in which sales staff went to the customer's shop floor themselves rather than through distributors[32]. The second was a line-up narrowed to standard products that aggregated needs, rather than bespoke items for individual customers[33]. The third was value pricing, set from the effect the customer gained on adoption rather than from cost[34]. The markets for measurement and control equipment and for automation measuring instruments were small, each on the order of several billion yen, and the company created the market in each product, took a high share and held the position of price leader[35]. By 1983 it had competitiveness that outstripped the major electronic-equipment and measuring-instrument companies, and in particular a 30% share in level sensors applying the reed switch[36], standing first among domestically made level sensors[37].

The product range grew in stages. In April 1980 the company entered photoelectric sensors[38]. In April 1983 it developed fibre-optic sensors for the electronic-components and consumer-electronics industries and made a full entry there[39], giving it two mainstays: magnetic sensors and photoelectric sensors[40]. In March 1985 it set up a local subsidiary in the United States, KEYENCE CORPORATION OF AMERICA[41], and in September of the same year established a manufacturing subsidiary, Krepo Co., Ltd. (クレポ), in Takatsuki, Osaka[42]. Even so it carried out no actual production itself[43]: only the roughly 25% of products where know-how was the key were made at the subsidiary, and the remaining 75% were contracted out to partner firms. In November 1984 the head office moved to Takatsuki, Osaka[44]; in 1986 the company began selling sensors using semiconductor lasers, and in 1987 programmable controllers.

In October 1986, to unify the brand with the corporate name, the company changed its name from Lead Denki to Keyence Corporation[45]. Starting with the opening of a Tokyo sales office in September 1979[46], it spread sales offices across the country and built a network that could sell directly to more users[47]. The Esaka district of Suita, Osaka, where the head office had been[48], lay five minutes by subway from Shin-Osaka station on the Shinkansen and drew young research-and-development-led firms; it was called a mecca for venture business[49]. Sales for the year ended March 1986 were $36.1M (¥6bn), up 44.1% on the previous year[50], and the operating margin was 39.4%[51].