What Executives Must Consider for Corporate Transformation: An Interview with Avant Group President Morikawa

This series delves into the essence of top executives who break all biases and personally execute business transformation within their companies as architects (overall designers).

Our guest this time is Mr. Tetsuji Morikawa, President and Group CEO of Avant Group Co., Ltd.

Avant Group develops consolidated accounting software and operates business divisions including group management support, financial closing outsourcing, and DX/data utilization support. Its consolidated accounting system, "DivaSystem LCA," has been implemented by over 1,100 companies.

To realize its materiality goal of 'becoming a software company that contributes to enhancing corporate value,' the group underwent restructuring in October 2022. Masafumi Koyama and Hideaki Fukui of Dentsu Inc., who are accompanying Mr. Morikawa as partners in this transformation, interviewed him as he leads the organization through change.

Avant Group President and CEO Toru Morikawa (right) with Dentsu Inc.'s Hideaki Fukui (center) and Masashi Koyama (left)

Becoming a software company that contributes to enhancing corporate value

Koyama: The Avant Group was born following the group reorganization in October 2022. First, could you tell us what led to this reorganization?

Morikawa: Our company started in 1997 as a developer and seller of consolidated accounting software. At that time, Japan was in the midst of accounting system reforms known as the "Accounting Big Bang." This reform mandated consolidated accounting, but there was no system to support companies' consolidated accounting.

Therefore, we created the consolidated accounting software "DivaSystem LCA." "DivaSystem LCA" gained a high domestic market share, praised for its overwhelming processing speed and other features. After that, we continued to upgrade the software, and currently, it is used by approximately half of the top 100 companies by market capitalization.

Furthermore, we expanded beyond consolidated accounting software development. One area is our SI business, which supports management using tools beyond our own products. Another is our BPO (Business Process Outsourcing) services, designed to solve staffing shortages in year-end closing operations.

In 2021, we defined our materiality as "becoming a software company that contributes to enhancing corporate value." This means not only streamlining our customers' accounting operations but also implementing and supporting data platforms that accurately visualize a company's "pricing," i.e., its corporate value. Furthermore, we aim to broadly provide systems that support management and enhance corporate value. Looking ahead to future business direction, we reorganized the group in October 2022, transforming into the Avant Group consisting of four operating companies: Avant, Internet Disclosure, Zeal, and Diva.

Excerpt from Avant Group Integrated Report "CREATIVE DIALOG 2022"

To enhance corporate value, it is necessary to view the company as a "product"

Koyama: Regarding the group reorganization, we assisted with refining the philosophy framework and creating the new logo. Could you explain the background behind defining the materiality that underpinned this reorganization: "Becoming a software company that contributes to enhancing corporate value"?

Morikawa: In the past, corporate value was primarily measured by financial metrics like sales and profits. Today, however, non-financial indicators such as human capital, CSR, and ESG are also emphasized. Furthermore, corporate value is now assessed from various perspectives, including metrics like PBR (Price Book-value Ratio), which shows the relationship between stock price and net assets. Yet, the Japanese business environment lacks tools for companies to grasp their own corporate value.

Ultimately, corporate value is the price of a company, and it cannot be measured solely by stock price. To grasp a company's price, it is crucial to recognize the company and its business as a "product." While this is common sense globally, I feel few Japanese executives truly internalize this concept. As a result, corporate value fails to increase, or companies end up being undervalued by others.

Koyama: Indeed, we often hear news that many Japanese companies have market capitalizations below their net assets. Looking overseas, Apple's market cap can be dozens of times its net assets. The gap is simply too vast.

Morikawa: I believe both Japanese executives and employees need a stronger sense of "the company's price." To cultivate that sense, creating an environment that actively focuses on enhancing corporate value is crucial. Business leader Kazuo Inamori introduced Amoeba Management, didn't he? Simply put, Amoeba Management involves breaking down profit centers into smaller units, fostering a sense of ownership for each business unit at the smallest possible level. By carefully tracking cash flow within these units, employees develop a pricing sense, which in turn enhances management capabilities.

Koyama: So, you're saying we need an environment where everyone, including employees, can truly experience the appeal of management.

Morikawa: I used to view the company as "part of society, not a product." However, I came to realize that treating the company as a product ultimately makes stakeholders happier. Based on this perspective, we optimized our business structure this time.

A Strong Commitment to a Brand Logo That Encourages Dialogue

Fukui: Moving to matters within the Avant Group, what were your considerations for this group reorganization?

Excerpt from Avant Group Integrated Report "CREATIVE DIALOG 2022"

Morikawa: Avant Group's vision, "BE GLOBAL ~ A Globally Competitive Software Company ~," represents the dream we've pursued since our founding. Our mission of "democratizing management information" aims to spread best management practices by building management information systems that enable many companies to sustainably create value. Furthermore, our corporate philosophy of "creating a 100-year company" means becoming a company that lasts 100 years by having all employees creatively provide value to society.

Fukui: I understand this philosophy formed the basis for your group restructuring. Building on that, we assisted you in changing your corporate logo as part of your brand strategy. Changing a logo involves significant cost and effort. What was the objective here?

Morikawa: We view this group reorganization as a discontinuous step from our company's past trajectory. While methods like changing MVV (Mission, Vision, Values) terminology or restructuring business operations exist, we believed a logo refresh would be the most immediately recognizable change. In fact, when we first started the company, we created the company logo before even developing any software.

Koyama: So you have a strong attachment to logos.

Morikawa: When meeting clients, the first thing we hand over is a business card. If the card contains elements that spark conversation, it helps build closer relationships. That's why we created the logo first back then. For this group reorganization, I vaguely thought starting with the logo might be best. Another reason was that previously, only the company name was in the logo. I wanted something different. I felt a logo symbolically representing what we wanted to convey as a group would have more impact. While it's still early days for public recognition, we've received very positive feedback from our long-standing partners. I did think about the logo myself, but the design concepts proposed by Mr. Koyama and Mr. Fukui were completely unexpected.

Fukui: I proposed a design with 100 squares in a 10×10 grid. This design incorporates our corporate philosophy of "creating 100-year companies," the meaning of "growth" with light shining upward and to the right, and various other concepts.

Morikawa: Our mission is "democratizing management information," and our corporate philosophy is "creating 100-year companies." However, rather than having these words front and center, having the logo first and then explaining the corporate philosophy as supplementary information seems to stick better with customers. It was an interesting attempt to verbalize concepts using non-verbal elements.

Additionally, while the brand logo is monochrome, we offer a color logo option for business cards. This represents the diversity of each employee, and the sentiment behind the logo remains unchanged. Furthermore, even after the group reorganization, while the core of the group remains software development for consolidated financial statements, our business has evolved to include broader management information infrastructure development. We hope the logo can serve as a conversation starter about these changes.

Fukui: Business card exchanges can often feel dry and impersonal. Ideally, the logo would spark conversations with clients and deepen their understanding of Avant Group.

Mr. Morikawa also has many thoughts on the "words" communicated from management and their permeation throughout the company. Next time, we'll hear about "words that drive transformation."

*Continued in Part 2