Crosstalk

We will be featuring a cross-talk between Makoto Mizuno, General Manager of the Digital Strategy Division, and Yasuhiro Kitabayashi, Representative Director of Fracta Leap Inc.

Profile

Kurita Water Industries Corporate Officer Executive General Manager of Digital Strategy Division

Makoto Mizuno
Fracta Leap Inc. Chief Executive Officer

Yasuhiro Kitabayashi

"Transformation" is the mission, with digital merely the means Dual-company alliance for water treatment DX achieved with strong management commitment and the drive to change business

Kurita Water Industries and Fracta Leap launched the joint "Meta-Aqua Project" in 2020 with the aim of transforming the business model and business processes of water treatment. Both companies overcame a number of complications for the development of digital solutions including "optimizing plant operation management," "automating plant design" and "materials development with materials informatics." The two key people leading this project look back on the progress made so far and discuss their future aspirations.

Embarking on a dual-company partnership for bringing about transformation

Mizuno: The "Meta-Aqua Project" was started as a joint project between Kurita (Kurita Water Industries) and Fracta Leap, and leverages digital capabilities while "transforming business models and business processes." Determining how to channel our efforts by identifying essential issues and how to bring about specific transformation is the key̶yet the perspectives of those beyond Kurita were deemed essential because there were concerns that we would fall into complacency and fail to attain what society and our customers really needed if we only leveraged the resources available at Kurita. So we began searching for a partner that could help guide us along the appropriate path and work together on projects̶we decided to team up with Fracta, a U.S. startup that became a Group Company in 2018 and that provides software services for predicting degradation in water mains.
Kitabayashi: I had the role of CFO in 2018 when Fracta was seeking opportunities for procuring funds. We wanted to ensure we retained our "unique culture" even after securing funding, and so we sought a partner that would not only be able to provide funding, but also respect our desires. We did find a number of potential partners other than Kurita, but we ultimately decided to partner with Kurita as the management team seemed most sympathetic to our approach. A fact that both our companies had in common was "water infrastructure," and we both had an understanding of the challenges that arise when setting out to create new businesses in this sector ー this gave us peace of mind when working together as a partner. The corporate culture and scale of Kurita and a startup like Fracta were on completely different levels, and naturally this was a cause for concern at the time. Yet when actually discussing with Kurita's management team, they were much more open-minded and enthusiastic than I had thought, and while I was genuinely amazed at this, I felt that this was to be the start of some interesting prospects.

Embarking on a dual-company partnership
for bringing about transformation

The chemistry between organizations with different characteristics

Kitabayashi: Fracta subsequently set up a Japan team with the view of gaining a better understanding of Kurita's businesses and its corporate identity, by visiting water treatment sites and conducting interviews. We then put forth the proposal of launching the "Meta-Aqua Project" for jointly bringing about digital transformation (DX) in the water treatment industry, and establishing Fracta Leap as the core entity driving the project.
Mizuno: Our work has always included some members from the Kurita Group, so teaming up with people who have different corporate cultures caused all sorts of friction. Kurita was enjoying strong business performance at the time, and we tended to be thinking: "There'll be no problem keeping things the way they are now" and "We just keep doing the same thing as before and change up a few things." While we were working together, the challenge we faced was how we could best be open to suggestions raised from an outsider's perspective by Fracta Leap, and how those suggestions could be used to consistently resolve issues after we had accepted them. There are times when we decide that we should stop, but I am personally curious about what would happen if we continued. It is for this reason that I let people continue raising any voices of opposition. The chemistry generated between two organizations with different characteristics goes on to create a new organization̶ this is something that is so interesting.
Kitabayashi: This was exactly what Kurita's management team told us when we rst started working together. While Kurita has been steadily posting positive business results, the water treatment industry has become a true battleground, and overseas, new players have come to the fore and former competitors have joined forces. When viewed from the standpoint of Kurita's management team, I think that one of the goals of the Meta-Aqua Project was to bring about a chemistry within Kurita by partnering with Fracta Leap, based on the inherent fear that Kurita could be left in the wake if it merely continued with its existing approach.

The chemistry between organizations with
different characteristics

Commitment of the management team is the key to transformation

Kitabayashi: Kurita's businesses play a crucial role throughout society and industry, which makes it imperative that we "never cease our operations." In this sense, there was significant opposition to "changing what was considered as stable" from those working in the field, especially at the outset.
Mizuno: We thought that there were no problems maintaining our current approach. In this light, I think that more people were afraid of making unnecessary moves that could result in making circumstances worse.
Kitabayashi: To separate ourselves from the stance of maintaining the status quo, we launched Fracta Leap that would become the core of the project as an independent organization from Kurita. Boosting this was a strong level of commitment from Kurita's management team. Ever since being founded through to today, we have been reporting our progress monthly to the president and management team, and are receiving the full support of the company. I have not seen many publicly traded companies of this size that are pushing ahead with DX projects with such a level of unity between the management team and frontline sites. I think it would have been difficult to achieve such an extensive partnership that goes far beyond the traditional lines between startups and large companies without this level of commitment from the management team.
Mizuno: Our initial approach was that we would receive technical guidance from Fracta Leap for rolling out digital solutions, so we may have tried to create a contractor-vendor relationship without really meaning to. This approach might have been possible if we had possessed the proper knowledge and experience, but Kurita is a novice when it comes to the digital realm, and details would be incorrect if we were the ones to be giving out instructions. I think the importance of bringing Fracta Leap on board for the Meta-Aqua Project is to drive such discussions forward with people saying "No, I don't think so" instead of simply repeating "Yes." Such discussions came about due to the management team repeatedly highlighting the importance of the project and partnership, and showcasing their commitment to it. As a result, I think this has led to a sense of security amongst our employees and trust for Fracta Leap.

Commitment of the management team is the
key to transformation

Conflicts stemming from differences in corporate culture and work

Mizuno: As we moved ahead with the project, there were some disagreements and conflicts in opinions that arose. An example that highlights this was the uproar created by simply handing over data to Fracta Leap in the early stages of our partnership. Fracta Leap was more involved in R&D at the time, and it was not possible to do anything positive without a proper understanding of Kurita. The members in charge at Fracta Leap did their best to explain the circumstances to Kurita, but Kurita employees were naturally apprehensive about handing over such crucial company data. Yet friction like this can be considered as part of growing pains for functioning as a team. The fact that there was such a reaction meant both sides could bring about change, and in turn, positive results. A proper understanding of the other side is crucial for achieving this.
Kitabayashi: Conflicting opinions are what naturally happens in life. This stems from the fundamentally different approach we had regarding data. An example of this is the traditional work of a data scientist̶creating and optimizing algorithms for managed data. In contrast, Kurita records data solely for operating plants, and such data was not traditionally collected for analysis purposes. This resulted in conicting views from a range of perspectives. There was also friction arising from differences in culture. For instance, many young engineers work at Fracta Leap̶ this sometimes made it difficult for them to fully comprehend the approach and passion of Kurita employees have been working for countless years to earn our customer's trust. The opposite also held true, where Kurita employees found it hard to take on board new technologies and concepts. Therefore, the key approach for both company's management was how to remain patient and reach a position based on mutual understanding. And this is why I always mention to new members taking part at Fracta Leap: "Bringing about transformation of infrastructure is no easy task, but please stick with us."

Conflicts stemming from differences in
corporate culture and work

The positive circle achieved with positive results

Mizuno: The moment that clearly brought about a change in our mindset was when the prototype for "Optimizing plant operation management" was developed. This was around a year after we first began working together. The application for "automated plant design" was then developed̶something that we have yearned for some time̶and as results began to take shape, I noticed a shift in our mindset as we realized that we could make what we had thought of as distant dreams become a reality. There is no denying things anymore when it comes to this stage. Over time, the voices of pessimism faded, and I felt that this was how changes can occur throughout a company.
Kitabayashi: I feel the same thing. Breakthroughs in technical development were also naturally important, but I think Kurita's attitude changed significantly after we all came to share a common understanding of the purpose underpinning DX, especially from the business perspective. Since then, Kurita employees began visiting the Fracta Leap office on a weekly basis, and we quickly developed a mutual understanding and enriched our sense of trust. When it comes to DX, digital is merely the means̶transformation (of businesses) is the objective. With this in mind, I think that setting objectives and taking the initiative for achieving transformation from a business perspective is the real driver.
Mizuno: With this project progressing in this way, work has expanded into the field of R&D such as the application of materials informatics, materials exploration method that leverages AI. The Meta-Aqua Project is setting an example for the development of digital solutions like data quality and the ideal approach to system development, and I feel that it has fostered a culture of questioning the current state of things.
Kitabayashi: The next key milestone for existing solutions ("Optimizing plant operation management" and "Automated plant design") will be to create a clear financial impact during PSV-27 Plan. Separately, we have also taken on the challenge of creating new businesses. I hope to leverage the results, knowledge and networks that we have developed with this project to create new areas of value that not present with DX for existing businesses. Looking ahead, the value of "water" is sure to grow further as issues related to water shortages become increasingly severe around the world. In light of this, I see that Kurita̶given its contacts with a broad range of industries on a global scale̶will be called upon to ensure comprehensive social value on an industry, supply chain and regional level that extends far beyond the bounds of individual customers. In light of this, I am excited about the future developments with our projects as I see digital technology playing an increasing greater role into the future!
Mizuno: With rapidly changes throughout society, there is the risk that sensor manufacturers and companies in other industries specializing in data science will mark their entry into the industry and alter the playing field, leading to competition that we had never envisioned before. To ensure sustainable growth for the Kurita Group, we need to keep pushing ourselves toward pursuing transformation. To achieve this, we will be concentrating on bringing about change for ourselves first.

The journey of digital change