Message from the COO

We are fully devoted to creating a corporate culture
and structure that will reestablish our business performance
and generate sustained growth

Hitoshi KobayashiRepresentative Director and President, COO

My objectives as president
Review of fiscal 2020
Progress of the Medium-Term Management Plan
Business strategy for fiscal 2021 onward
For medium- and long-term growth
The Benesse philosophy and sustainability
Message to stakeholders

The COVID-19 pandemic has upset the lives of people around the world and the circumstances continue to prevent us from living our normal lives. We would like to express our deepest sympathies to everyone who has suffered from the infection or has lost loved ones during the pandemic. We also wish to convey our heartfelt gratitude to all those working in the medical profession and maintaining the social infrastructure for everything you are doing for the safety and well-being of us all.

My objectives as presidentUnifying management and worksites to create value amid the major changes

The world is rapidly changing, and the COVID-19 pandemic has only accelerated the changes to society. It is more difficult than ever to see ahead to what will come even just one year from now.

Benesse Holdings adopted a new corporate structure in April 2021 to respond to these changes, in anticipation of even faster changes in the business environment, and to deepen the synergies within the Benesse Group. Under this new structure, I was appointed Chief Operating Officer.

One of my main themes as president is to keep management in close touch with the worksites. Our customers are also facing rapidly changing business environments and new issues because of the pandemic. In times like these, it is critical that management understands the situations at our business sites that are our front line to our customers. I am seeking to build an organizational structure that can quickly and flexibly respond to the rapid changes by hearing and responding to input from our business sites and by quickly incorporating information from the front lines into our management activities.

I have held various positions in the Benesse Group’s business divisions during my 35 years at the Company. I always felt that every business site had a sincere desire to help their customers. All of our employees have taken our corporate philosophy to heart and are devoted to the “well-being” of each customer. I believe this is our Group’s greatest strength. I also believe that the major changes in our business environment is an opportunity to dedicate ourselves to understanding and addressing various issues and for management and employees to work closely together to lead our Company forward.

Review of fiscal 2020Progress with new initiatives in the harsh pandemic conditions

The whole Group was impacted by the COVID-19 pandemic in fiscal 2020. Shinkenzemi business was brisk as school closures increased demand for home-study solutions. New 12-month enrollments at the April start of the fiscal year increased, and the retention rate also rose. Use of our study materials also increased following the introduction of digital versions. All other businesses struggled as businesses with in-person locations, including the school and teacher support business, preparatory schools, and nursing care business all restrained their activities during the period. The consolidated results for fiscal 2020 included net sales of ¥427.5 billion (down 4.7% year-on-year), operating income of ¥13.0 billion (down 38.4%), ordinary income of ¥9.2 billion (down 44.7%), and net income attributable to owners of the parent of ¥3.1 billion (down 50.3%).

In the harsh operating environment, the businesses took great effort to respond to customer needs and to create systems that would enable safe and secure business activities. The Shinkenzemi and Kodomo Challenge businesses were strongly driven to help their customers and quickly created innovative ways to provide services. When nursery schools, kindergartens, and schools were closed to students in March 2020, Shinkenzemi distributed free spring practice drill booklets and national evaluation tests, and Kodomo Challenge began offering online kindergarten programs. To help students stay on track with their studies while schools were closed, Shinkenzemi introduced online lessons for tablet computers and other lessons combining digital technology and live instruction. To prevent the spread of COVID-19 and provide a structure where students can learn safely during the pandemic, the Group’s preparatory schools provided online classes and video programs.

Progress of the Medium-Term Management PlanA V-shaped recovery in two years and new growth phase in three years as we prepare for the world in 2030

The Benesse Group began implementing structural reform with the five-year medium-term management plan launched in fiscal 2018, which included restructuring the Berlitz business and digitalizing the Shinkenzemi business. We also revised our business portfolio through selection and concentration as well as by selling non-core businesses and increasing investment in growth areas. These efforts had put our earnings performance back on the growth track; however, the major changes in the market conditions, which included revisions to the national education and school entrance examination systems, derailed our momentum and caused our earnings to deviate from our plan. Then the COVID-19 pandemic that arose in 2020 substantially impacted all of our businesses that relied on in-person activities, including our school and teacher support business, preparatory schools, nursing care facilities, and Berlitz.

The Group revised its medium-term management plan to reflect the major changes in the business environment and introduced a new plan for the fiscal years from 2021 to 2025 with strategies to “evolve core businesses and expand into new fields.”

Operating income

The new plan describes our vision for the Group in the society and business environment we envision in the year 2030. Japanese society is facing deepening structural issues from its low birthrate, aging demographics, and shortage of labor. As one of Japan’s leading education and nursing care companies, our role in society will become even greater. We have therefore set an image for 2030 to be a corporate group “at the vanguard of directly addressing issues in education and nursing care issues in Japan and worldwide, helping people seeking to better themselves and make their lives what they want them to be.”

The new medium-term management plan has a growth plan for the next five years with two main phases of growth strategies. Phase one in the first two years will generate organic growth in sales and operating income to drive a V-shaped recovery in earnings to the regain the levels of fiscal 2019. Phase two for the three years beginning in fiscal 2023 will continue the organic growth while adding a layer of inorganic growth. Our existing businesses fields will be the primary focus in phases one and two, but we will also leverage the Group’s strengths to expand business into new areas. Our quantitative targets are to generate annual growth in existing business sales of 3% during fiscal years 2023 to 2025 and to raise the operating margin to 8% and ROE to 10% by fiscal 2025.

Business strategy for fiscal 2021 onwardGenerating growth by evolving existing businesses and expanding into new fields

Fiscal 2021 is the first year under the medium-term management plan and an important year for setting up the V-shaped recovery in business performance. The Group is aiming to raise operating income to ¥26.0 billion in fiscal 2022, bringing it back above the ¥21.2 billion in fiscal 2019.

In our education related operations, the school and teacher support business and the prep school and classroom education businesses are already recovering from the impact of the pandemic. Shinkenzemi is developing new educational services combining “digital + human support” and courses to meet diversifying learning needs in course lessons as well as in career education using the roughly three million dedicated Shinkenzemi tablet computers as a platform. In the Kids & Family business, in fiscal 2021, we integrated the organizations of Tamahiyo, which is a major brand in the pregnancy, childbirth, and childcare segment, and the Kodomo Challenge courses for preschool children. We are combining their product and service offerings through mobile applications to increase the customer contact points and also developing peripheral businesses targeting families and parents.

In the nursing care business, we will expand our area coverage in conjunction with staff recruitment and new facility opening strategies following our fundamental approach of managing facilities from the perspective of the residents. We will also design nursing care homes with unique features by continuing to improve the Benesse Method that has been systematized over 25 years of practical knowledge using a scientific approach, and form our own Benesse version of nursing homes with sensing technologies. We will seek to expand the nursing care business in the medium term by growing the recruitment business and other peripheral services.

Our current plan for the Berlitz business is to reestablish its profitability in fiscal 2022. We will be closely monitoring the achievability of that target and will take early action in fiscal 2021 to determine the future direction for the business.

We will also be exploring new fields with promise for growth where we can use the Group’s strengths to aggressively develop new businesses. In our services for universities and adult education, which centers on Udemy, we are constructing and expanding a new profit model and are conducting local research overseas with the main objective of developing peripheral operations to our core businesses.

Overview of the Medium-Term Business Plan

For medium- and long-term growthGroup-wide initiatives transcending organizational and business boundaries

Digital transformation across the entire Group

A major key to fulfilling the new medium-term management plan is the accelerating of digitalization of our businesses and improving the digital skills of Group employees. We believe we can use DX to transform our abundant knowledge and assets in the education and nursing care fields into new value that will further augment our already high value and competitiveness.
We have made great strides with DX in the education business in the past five years, and in June 2021, Benesse was selected for the DX Stocks 2021 list by Japan’s Ministry of Economy, Trade and Industry and the Tokyo Stock Exchange. Yet we believe we are at a stage where we need to further deepen the digital skills throughout the Group. We accordingly established the Digital Innovation Partners (DIP) in April 2021 integrating all of the Group’s digital, IT, digital technology training for human resources, and DX consulting. DIP will support the digital shift of all of our businesses and accelerate the digitization of the entire group, and is already working with all departments to advance their digitalization. At the same time, we are improving the digital technology training for human resources. Improving the digital skills of employees with expertise in the education and nursing care fields will boost the value we provide to customers and help drive business growth.

Creating a culture that encourages learning and taking on challenges

Benesse is presently working to create a Group culture where employees can be continuously learning. This learning culture will encompass various topics including digital technology, and will have a structure and environment encouraging learning of all forms and reach across the business framework, such as one business division learning another division’s know-how.

We have also created a mechanism to promote “taking challenges.” As I mentioned earlier, the passion and sense of mission of each employee at the worksites to follow the Benesse philosophy is a major strength of the Group. To fully utilize this strength in our management, in 2021, we introduced the new B-Stage suggestion system enabling any employee to submit proposals for new projects and ideas for new businesses and improvements for our operations.

Benesse’s original company Fukutake Publishing had a system for employees to write letters beginning with “Dear President.” The president read some 2,000 letters each year and received numerous valuable tips for better company management. Reviving that idea and making B-Stage a permanent part of our management system will provide candid insights from employees at worksites with direct customer contact that we can incorporate into our business and management activities to make us more competitive.

We have also launched the Group-wide Bringing the Future Closer for Children Project. Benesse Corporation selected some 80 individuals from an open call for participants for the project, which seeks to provide a forum to share various perspectives on what kind of education children will need and how to provide that education in a society that is undergoing such major changes. We are eager to hear the ideas that the project participants come up with in the hope that they will provide new directions for business development that are outside the scope of our current business content and profitability.

Reform of corporate division and management meeting

I believe that the major changes in society and our business environment has made it more important than ever for the Group and the corporate division to decide precisely what we want the Benesse Group to be and to begin working toward that vision. To fulfill that vision, officers in the corporate division and at the operating companies will need not only to carry out their specific business functions but to have a deep understanding of business initiatives throughout the Group so they can determine how each function can be applied to the greatest effect and how various functions can be linked to generate new business activity. The Cross-sectional Meeting of Corporate Headquarters Managing Directors was therefore created in April 2021 to bring together Group staff with professional expertise in human resources, general affairs, accounting, finance, legal affairs, public relations, and investor relations to share issues and to unite and strengthen the effectiveness of our business functions.

The format of the meeting, whose members include executives from Benesse Holdings, the operating companies, and the corporate departments, has been changed from “information sharing” to “a discussion by executives about issues from across the Group.” This format will create a uniform understanding of the Group’s position and enable a more dynamic interrelation of Group activities.

The Benesse philosophy and sustainabilitySustaining growth fueled by the cycle of customer, social, and economic value

The Benesse Group follows its corporate philosophy of “Benesse = well-being” by actively addressing social issues in education and nursing care. Sustainability is by no means a new concept for the Group and it is deeply intertwined with our corporate values and business practices.

Our objective is to raise our corporate value on a cycle of three different types of value—customer, social, and economic value. Earnest efforts to increase customer value and social value will lift our economic value. I consider management’s most important job is to ensure executives and employees assimilate all three types of value and that each value is integrated into our corporate activities.

The nursing care business, for example, may not be tenable if only profitability or investment efficiency were considered, but it has incredibly high value and need in society. My primary mission is to create the best balance for society, customers, and employees to contribute to the sustainability of society and create conditions for the Company to continue growing.

We are currently in discussions to clarify non-financial indicators for our business performance based on our vision for the sustainability of our business and our medium-term management plan.

The cycle of value

Message to stakeholdersCreating value with “philosophy-driven” management

In our business supporting each customer’s desire to grow and learn and make their life what they want it to be, the decisions we make are rooted in our corporate philosophy of “Benesse = well-being” and our customer-centric values that motivate us to help each customer individually. In that sense, I also consider Benesse to be a “philosophy-driven” company.

Being philosophy-driven is not easy. We can lose sight of the philosophy when there is a tailwind and business is steadily expanding; and we can forget the reason for our existence when there is a harsh headwind that causes us to narrow our focus to only the immediate profits. That is why I believe management must continually remind everyone about the importance of the philosophy, even at the risk of repeating the same thing over and over.

The Benesse Group will remain centered on its philosophy as our society continues changing and our management and all of our worksites will work together to take on new challenges and generate sustained growth. We look forward to the continued understanding and support of our stakeholders.

Benesse Integrated Report 2021