Shiseido CEO explains why the cosmetics giant buys start-ups

Key Points
  • In order to keep up with the trends in the beauty space, Shiseido looks at combining the knowledge from younger companies with the its own years of experience, CEO Masahiko Uotani told CNBC at the annual Singapore Summit.
  • The 146-year-old Japanese firm has over the past few years acquired a number of start-ups.
Shiseido's growth trajectory
Shiseido's growth trajectory

Shiseido, one of the largest cosmetics companies in the world, isn't relying on its reputation alone for business success.

Instead, the 146-year-old Japanese firm is looking to combine the knowledge of start-ups with the its own extensive experience, the company's chief told CNBC on Friday at the annual Singapore Summit.

"Everybody is looking at, you know, new fronts of businesses. Yes, so we are in competition," said Shiseido CEO Masahiko Uotani.

The company has over the past few years acquired start-ups, including Olivo Laboratories, which developed "second skin technology" that creates nearly invisible artificial skin. Another acquisition was Giaran, a start-up with artificial intelligence technology to enable consumers on their phones or computers to virtually remove and apply makeup, The Japan Times reported.

Uotani was quick to note that simply acquiring start-ups with cutting edge technology was not enough for businesses to do well, but it was important to combine expertise that each party could bring to the table.

An advertising hoarding for the Shiseido Co. new makeup line, left, is displayed at the company's news conference in Tokyo, Japan, on Wednesday, Aug. 1, 2018. 
Keith Bedford| Bloomberg | Getty Images

A new combination needs to be created between what the the start-ups offer and the company's expertise built over many decades, he explained.

The most valuable assets from those start-ups are "the patents and the people," he said.

"They are entrepreneurs. They are not people working for big corporations. So bringing them into our organization, it is creating a new culture, working with them and learning from them as well — it's a win win," he added.

Weighing in on Shiseido's strategy to appeal to a younger crowd, Uotani said the company will be using a more personalized approach in its marketing and improving the speed at which information reaches audiences.

"We have been acquiring some new technologies so that we can connect with consumers fast. We have to let them know there is a new brand, new services we are offering to them," he said.