LY Corporation has expedited its business executions since its Group reorganization in October 2023, including the merger of five companies such as LINE and Yahoo Japan.
The first shareholders' meeting as LY Corporation was held on June 18, 2024. A new management structure with a majority of outside directors was approved to strengthen the governance system.
We interviewed CEO Takeshi Idezawa and asked the following questions:
Based on the FY2023 performance, how do you evaluate the efforts so far, and what plans do you have for the next steps?
And how will you rebuild the foundation for security and products and connect it to the Company's growth?
Looking back from the decision on the merger policy to the present, LY Corporation was launched as planned as a new company despite the tight schedule. In addition, thanks to everyone's significant efforts in revenue growth and cost optimization for each business, we have achieved an unprecedented, good performance in our financial results.
However, we caused great inconvenience to our users and stakeholders due to the security incident caused by unauthorized access in October 2023. Currently, our top priority is to rebuild and strengthen the foundation of security and privacy and we are making daily efforts to this end.
To all the employees of LY Corporation, I also feel deeply ashamed that such an issue had arisen during this crucial period of integration, hindering our momentum. I am committing myself hands-on to this effort in order to solve this problem as quickly as possible to create a positive climate.
From the perspective of service growth, the foundation has just been established, and the next important step is how to utilize this foundation to achieve growth.
In addition, the main offices in Tokyo has also been unified, and despite being a large organization with over 28,000 people (on a consolidated basis), we are exploring a new work style that combines remote work with face-to-face encounters as needed. Through this work style, we want to create an organizational structure and culture that can continuously produce new services.
Before, LINE, Yahoo Japan, and Z Holdings were all independent organizations, but the organizational structure of the new company has been simplified and this has significantly expedited management decision-making.
This also enabled us to quickly and selectively focus on key business areas, and accelerated the implementation of individual initiatives such as the LYP Premium membership program. In addition, the system has been changed to allow progress to be made at the discretion of business managers who monitor the growth potential of services and actual profitability.
However, the integration of the organizations is still underway, and I believe we have only reached 20 to 30% of our way to the summit. Our updates should be not only on the management system, but also on the way we create our services.
From June 2024, we will separate the management from the business execution team. Governance is at a very important stage, so as directors, Mr. Kawabe, the Chairperson, and I will take on stronger roles in governance. Mr. Shin and Mr Oketani, who are stepping down as directors, will focus on developing businesses and services as CPO (Chief Product Officer) and CSO (Chief Strategy Officer), respectively.
We will continue to evolve in line with the circumstances surrounding our company.
The linkage of LINE and Yahoo! JAPAN accounts has been a key goal pursued since the business integration to better demonstrate synergies. With this linkage, we were able to release LYP Premium at the end of November 2023.
The number of users has increased significantly due to the impact of campaigns held from January 2024. In particular, we can say that we have made a good start because we could confirm that LINE users who had not used Yahoo! JAPAN Shopping before, have started using the service.
Furthermore, the unlimited use of LINE Stickers is also popular. To make the service more attractive and increase its value, we will continue to add more benefits, especially LINE-related features. There are also new features that allow users to take fun photos online with friends, and a backup feature which has been highly requested from users.
In addition, by refining the commerce experience to make it more convenient and user-friendly, we also aim to increase the actual number of LYP Premium members. Furthermore, we would like to build a foundation that will promote traffic across various services within the Group through cross-use of the services.
Unauthorized access by a third party was the cause of the incident that occurred last year. Companies that provide IT-related services, such as us, are constantly exposed to various threats.
Former LINE Corporation and NAVER Corporation, its parent company, had a close system collaboration for a long time, and this was the largest problem.
As a result, the system that had been shared by the two companies was used as a route for the unauthorized access. There were many points in the system where we could have made appropriate system segregations. However, the former LINE Corporation had not done so, and this was another problem. In hindsight, the key issue and cause were the inadequate development of a thorough security infrastructure and a systematic process for risk analysis and response.
Currently, we are working on measures to prevent recurrence, such as separating networks with NAVER Corporation, strengthening safety management measures, and organizing outsourcing relationships. However, new challenges may always arise in the future, so it is critical to establish a system that can detect these issues and respond rapidly.
There are two main objectives for this change in the management structure.
The first is the separation of management and business execution functions, and the second is to make outside directors the majority in order to make the decision-making process more transparent.
Ms. Yuko Takahashi, the newly appointed outside director, has experience as a director at several large companies and is also a certified public accountant, a professional in finance and accounting. She also has extensive experience in the field of global governance.
The main objective behind these changes to our Board of Directors is to reinforce overall governance. Furthermore, by separating management from business execution, we strive to expedite business operations.
In the Security Governance Committee, which I chair and am directly committed, our discussions cover both the clarification of fundamental issues and progress management. We hold regular meetings about three times a week to discuss progress management, and spend the remaining two days of the week addressing more fundamental issues. These discussions on fundamental issues encompass complex issues related to privacy, security, legal, and business perspectives, requiring multifaceted considerations, which often make decision-making challenging. Therefore, the discussions are held twice a week by all parties involved, without setting an end time.
Agenda items include ways to improve the overall security level, setting new rules and standards, and specific discussions on ending the outsourcing to NAVER Corporation. In addition, we hold intensive discussions to further enhance the overall management of subcontractors.
The foundation for service collaboration has been established, so we will now proceed with measures to reinforce the service gateways to achieve service growth. As part of this effort, we will make major revamps of the Yahoo! JAPAN app and the LINE app, which we have not done for a while.
The method of obtaining user information is changing in the Yahoo! JAPAN app, and real-time performance is required more than ever before. Therefore, we will revamp the app to better meet user needs with a new Trend tab that enables users to keep track of trending search words and a tab that allows users to focus on their personalized features. This will encourage users to use the app more actively and to continuously use various services of LY Corporation.
Meanwhile, the revamping of the LINE app will introduce a Shopping tab that leads to purchasing experiences and a Place tab that connects users with local information. Looking at examples from other companies, the volume of traffic from chat to commerce is rapidly increasing in IT services in South Korea and China. We believe that this is an initiative with great growth potential, as the use of LINE GIFT is also increasing on LINE.
Both apps are used by a wide range of generations, and many users are accustomed to the existing UI (user interface), so the redesigns need to be carried out carefully. Through the revamping of both apps, we aim to promote cross-use between various services of the Company and the Group, and to create a cycle with LYP Premium as the foundation.
Note: Yahoo! JAPAN app has already completed the first and second phases of its redesigns in July.
There has been a lot of social debate about generative AI. We have a wide array of services at LY Corporation, and each service has areas where generative AI can be applied well and areas that are not conducive to generative AI. I believe it is important to properly identify such areas and use generative AI for appropriate purposes.
Through dialogue with players from overseas, including the United States, we have found that the greatest need is for various databases in each country, such as local up-to-date data and user touchpoints. To meet these needs, we are adopting a multi-vendor strategy and seeking partnerships with the best partners.
Our strength lies in our extensive Japanese data and numerous touchpoints with Japanese users. We want to leverage this advantage to provide and implement generative AI to our services in a way that best meet the user needs.
In fiscal 2023, we implemented generative AI in 16 or more new services and features, some of which were successful, while others did not fully meet user needs. However, the capabilities of generative AI are evolving day by day, and as this evolution continues, I believe that by 2024 or 2025, services that will make everyday users exclaim "This is amazing!" will become available.
Through our approach at LY Corporation, we aim to demonstrate the necessity of services that utilize generative AI and foster their growth.
With the evolution of generative AI, it is expected that in 5 or 10 years, not only the IT industry but the very nature of industries will change significantly. The life platform advocated by LY Corporation will also evolve in various forms. We want to be the Company and organization that drives this change.
Therefore, it is imperative that we quickly adopt the latest technologies and introduce new UIs. For example, actions such as booking or purchasing may transition from today's web interface to new UIs such as chat and voice. How we shape this future will be a critical challenge.
LY Corporation is a company with many user touchpoints and conversion points (final results in web marketing). The UI for entry points such as chat and search will continue to evolve as they are used. In the coming era, having both the entry point and the exit will become an even greater strength.
The earthquake on the Noto Peninsula occurred on the evening of the New Year's Day, but each department in the company immediately responded to the earthquake. News distribution and fundraising activities played a major role, and LINE's Open Chat was used at the site. It was reassuring to observe each employee taking their responsibilities seriously, underscoring our necessity in society.
As platforms for information provision and search engines, Yahoo Japan has upheld "UPDATE JAPAN" and the "Problem-Solving Engine" to address social issues in Japan.
LINE was also created as a result of the 3.11 Great East Japan Earthquake, and in the past, it has cooperated with local governments to disseminate disaster information during earthquakes.
As the newly established LY Corporation, I reaffirm our commitment to delivering social value and our desire to remain a company that continually contributes to society.
As we strive to enhance our corporate value, we are committed to preserving a product-driven mindset. The mission of LY Corporation is to "Create an amazing life platform that brings WOW! to our users." Therefore, we aim to be close to people's lives, making their daily experiences more enjoyable and convenient.
Our goal is to provide services that not only meet business objectives but also prioritize users, bringing them joy, convenience, and enjoyable moments. We are committed to maintaining user satisfaction while achieving sustainable growth as a company.
Adapting to change is the most important factor for a company. The lifespan of seemingly stable businesses is becoming increasingly short, a trend particularly evident in the IT industry.
We must not only defend our current operations but also take proactive measures to avoid the innovation dilemma. Management should focus on embracing change rather than maintaining status quo.
Therefore, we are committed to fostering an environment where every employee can thrive and collaborate in taking on new challenges. And we will continue to work towards global growth, which has been our objective since the integration.
Interview date: June 7, 2024
*The affiliations and titles in the article are as of the time of the interview.