How a cosmetics giant’s transformation strategy is unlocking value

From its origins as the first Western-style pharmacy in Japan that opened its doors over 150 years ago, Shiseido has evolved into the largest cosmetics company in Japan and Asia. Throughout its history, the business has remained true to its founding principles: blending art and science in its products and putting people at the heart of its culture. A truly global enterprise, it serves approximately 120 countries and regions worldwide with a workforce of around 39,000.

Over the past five years, the company has focused on expansion in China, the US and Europe, growing both organically and through acquisition.

Similar to many Japanese companies, Shiseido has been operating successfully with a matrixed operating model. As the company’s international business continued to expand, the matrixed model resulted in a suboptimized IT landscape and unwieldy data management processes. This made finding business-critical information time-consuming. To pursue its ongoing growth strategy, the leadership team realized that it needed to build a globally consistent operating model that would transform and standardize its back-end operations, so management had the data needed to make decisions quickly.

In 2019, the company embarked on FOCUS (First, One Connected and Unified Shiseido), a multi-year global business transformation program. Through FOCUS, Shiseido aims to become a data-driven organization to leapfrog other globalized competitors.

The scale of this program is vast. At its core is the implementation of a global ERP platform that will digitalize and standardize functions, processes and systems across the company, from finance and manufacturing, to supply chain and HR operations. It involves thousands of employees from different cultures across the world, whose engagement is critical to the success of the transformation.

Historically, globalization and standardization have proved particularly challenging for Japanese-headquartered companies. For this reason, large-scale transformations are typically spearheaded from operations in the US or Europe. However, Shiseido took the bold step of making Japan the program hub.

Once the leadership was aligned on the future-state vision and approach, an IT vendor and platform were selected. Shiseido then needed an execution partner that had not only the global capabilities, but also an understanding of the nuances of supporting effective local operations within a global business. From past experiences, Shiseido had learned that business transformations are not simply a matter of connecting strategy and technology – the best outcomes are achieved when there is a focus on the human experience of change.

“FOCUS is not an IT project,” explains Francois Keet, Vice President, Global Head of Business Transformation, Shiseido. “It is a business transformation program and it can only work once you have the business taking the lead. You can have the best technology in the world, but without the proper change management, you will not be successful.”

EY teams were initially selected to support a small part of the larger project. EY teams had successfully worked with the IT vendor on other digital transformation programs, but it was Shiseido’s relationships with EY partners in EY-Parthenon, the strategy arm of EY, that initiated the EY team’s role as strategic execution collaborator.

A select EY team was installed to work alongside the Shiseido leadership to help deliver the program. “We started with a small engagement team with a limited scope, but as Shiseido began to see the value we were able to bring through delivery, we grew the breadth and depth of services EY teams were able to offer,” explains Nobuko Kobayashi, EY-Parthenon Asia-Pacific Strategy Execution Leader.

As FOCUS gathered momentum, the company recognized that aligning the IT infrastructure with the operating model presented enormous challenges – both technical and human – and it needed more strategic support. “The client acknowledged that the program was going to get very complex, very quickly,” says Niyi Ojemuyiwa, Director, Strategy, Business Transformation and Digital Enterprise Applications, EY-Parthenon. “Strict project governance and robust methodology were needed to address this complexity, to identify and mitigate risks, and to standardize solutions.”.

From a vantage point that spanned the entire program, the EY team was appropriately situated to identify areas where it could offer strategic support. One such area was the Target Operating Model. “We encouraged the client to look beyond the transformation program and think about the end state,” says Ojemuyiwa. “This opened a conversation that led to us developing the tech strategy and the target operating model. In developing the tech strategy we also got involved in defining the identity and access management strategy and methodology.”

“When we started the program, EY helped us to bring in the best practices and ensure we had a strong foundation for this global program,” says Venkat Somasundaram, Global Solution Delivery & Enterprise Architect, Shiseido.

Putting people at the center of change

One of the hallmarks of this transformation program is the emphasis placed on change management. “The shift to consistent global standard processes and data and one connected system is a significant change for Shiseido,” explains Nancy Ngou, EY Japan Change, Culture and Inclusion Practice Leader. “Shiseido learned from past experience that to be successful, they could not approach this as purely as a technology transformation led by their IT department, they instead wanted this to be a business-led transformation.” To engage and motivate the business to make such a significant change, potentially disrupting their critical operations, the program leadership realized a change management program was essential.

The change management program is driven by a team of EY change management professionals based around the world, using a consistent change management methodology supporting the Shiseido global and regional leaders and teams. Regional teams work closely with the global team, helping ensure a consistent approach to communications, business readiness and training, nuanced to the local culture. As Ngou points out, “Change happens on the ground and is culturally influenced, which is why it’s essential that it’s delivered by regional teams who understand the local culture.”

As the EY Humans@Centre research suggests, successful business transformations are underpinned by an open and collaborative culture. That understanding underpins the team’s acute focus on mindset change. “EY teams worked with the regional and global leaders together to define the FOCUS behaviors needed to improve the value of being globally connected and operating as one Shiseido,” says Ngou. “Once we identified the behaviors that drive success, we embedded them into our change management program.”

Ngou’s team has developed a FOCUS Mindset campaign for employees, provided through consistent messaging, visual artifacts and workshops, leveraging the company’s core values of “think big,” “be open,” and “collaborate.” In China, EY teams ran a program consisting of six EY wavespace sessions for Shiseido, provided at key stages of the program. EY wavespace™ workshops use a range of design techniques in a digital collaboration space to prepare members of the business for the next stage of the program.

 “Change management is the core of business transformation,” says Tammy Nakabayashi, Global Business Process Lead – Marketing, Shiseido. “Change management, to me, is to turn something invisible, to visible to the people involved. Once people can see how new ways of working will impact them in a positive way, they will engage with the transformation.”

A one-team approach

Start small and start strong. This sentiment has driven the EY team’s engagement from the outset, says Stefano Giordano, EY FOCUS lead. “Working closely with the Shiseido leadership we have built a highly motivated multicultural, multilingual team that’s held together by the glue of centralized processes and policies. We are working as a team, irrespective of vocational language.”

Integrating teams, overcoming cross-regional and language barriers, coordinating the needs of Shiseido’s multiple business functions, liaising with vendors and helping ensure that the program stays on track with deliverables – all this requires strong governance. Maintaining this across a program of such complexity can only be achieved through a collaborative, co-centric approach, explains Giordano. “Governance is really the magic that is able to make FOCUS happen in terms of driving consistency, and the unification of the data and the processes.” Somasundaram agrees: “FOCUS is a very large program. It is controlled and headquartered out of Japan, however it’s implemented and applied globally. Huge numbers of stakeholders, regions, systems, processes and data need to be accounted for. With so many parallel activities, the EY team has been hugely helpful in terms of project management and quality assurance.”

A program as ambitious as FOCUS requires thorough strategic execution with the most robust project management and governance. Timelines must be met; risks, issues and dependencies measured; systems and processes tested. Change management is also key – without the buy-in of all the people involved from the leadership down, the transformation will not be sustainable.

Success in this project depended on extraordinary levels of coordination and collaboration across geographies and time zones. It has only been possible because the EY engagement team and the Shiseido team have a shared vision for the program as a whole: a full understanding of the case for change and the business strategy driving it; clearly defined roles and responsibilities; and relationships based on trust that foster open and honest conversations.

To date, FOCUS has been implemented smoothly and on schedule in 11 countries across four different regions, delivering synergies across the supply network, sales, procurement and finance.

“We are very proud of the extent of deployment we have already achieved in what is a very complex transformation. FOCUS has been live for three years and half of company orders are completed through it. In 2023, we will deploy to the remaining 50% of the company,” says Keet. “Without a collaborator as committed as the EY organization, that understands both the global perspective and the unique variables in each location, we would not have been able to accelerate the program and drive its success.”

EY teams continue to work with Shiseido and the technology vendor on its journey of transformation. Ideas and implementation inform each other at every step. But, already, we have been able to bring efficiencies to processes, enhance transparency into business data, and unlock value across a diverse, global organization.