Transforming Japanese Business

This chapter examines the digital transformation of Japanese business in terms of key technologies, the barriers to their expansion in Japan, and the drivers moving them forward. After clarifying definitions and discussing key technologies, the chapter discusses six sources of pressure toward digital business transformation in Japan. These pressures include overseas partners, fintech, the drop in Japanese population, generational change, and the preference for food grown in Japan. The sixth of these is a sense of innovation deeply baked into the upcoming generation that will likely impact all areas of life and business in Japan. The new generation is impatient with conventional services and feels the need for transformation as available labor decreases and aging increases demands of individuals on society. There is an additional, even though temporary, source of pressure as well – the 2020 Olympics. The sectors that are most likely to feel the impact of new digital technologies are finance, retail, manufacturing, services, agriculture, and elder care. The big question that looms in front of Japan, as with other countries, is how Japanese business and society will provide the human resources and investments needed to bring transformation to fruition.

Japan seems a complicated place, especially in the context of imagining its future. A generation ago, it was poised to rival the United States as the dominant economic force in the world (Vogel E Reimagining Japan: The quest for a future that works. Viz Media, San Francisco, 2011). Today, it remains one of the three largest economies in the world, despite much of the Western world having spent years anticipating its steady decline due to a plethora of problems. These range from a national debt that more than doubles its GDP, to the world’s most elderly population (median age > 46), which demographers project (Smallwood S Dynamic demographic analysis, population studies, Taylor and Francis Online 71(1):135–137, 2017) will shrink from its peak of 128 million in 2015 to below 100 million by 2050, to natural disasters like the 2011 tsunami, to many choices that outsiders perceive as self-inflicted constraints on remaining a global power – a tolerance for corruption (Tepco, Olympus, etc.), the yakuza, language limitations, and consequences of culture.

Can technology save Japan? Can Japan save itself? Does it need “saving”? This chapter explores these questions, largely by assessing its comparative advantages and challenges. After briefly modeling the unique challenges Japan faces with regard to the international trade for which it likely will become increasingly dependent as its workforce and consumer market continue to shrink, the chapter presents a brief overview for each of the ten comparative studies that examine various dimensions to Japan’s progress relative to other countries in preparedness for success in the evolving global digital economy.

This chapter does not deal with the correct goals of a digital transformation or the technologies and specific approaches that one may use. Instead it leverages personal experience of working in digital transformation in Japan, to give perspectives into the key factors that can make, or break, such transformations in foreign companies.

It starts by talking about the challenges that can impact working with Japanese teams, mostly from a Western perspective. Due to its geography and history, Japan has a unique language and culture which impacts all aspects of society and creates a number of challenges for foreign companies. These challenges include not only the obvious, such as the language and different market environment, but also the cultural differences in working styles and interpersonal relationships. This is necessary background as it gives context to the key success factors which are explained later.

Having explained the cultural background, it makes practical recommendations on how to approach each stage of a transformation program, starting with obtaining agreement for the need for change. It goes on to talk about defining the goal and the approach, planning and execution, setting up the governance and management structure, after which it considers communication and change management. It also notes the importance of individual relationships throughout the transformation process.

The chapter concludes by re-emphasising the need to consider the cultural differences when working with Japanese teams. It states that foreign business and transformation models will not work without being tailored to the Japanese people and market. Finally, it talks about the Japanese strength in execution and highlights the opportunities for companies which can leverage that strength by making the necessary cultural and environmental adjustments.

Digital Transformation is a global challenge, and it is particularly challenging for the Japanese financial sector due to the unique complexities of day-to-day business activities. Many organizations were not able to complete their transformation projects because of poor communication, underestimation, and gaps in leadership. Japanese financial organizations must learn from past experiences within their industry, define clear objectives, and prepare their staff to accept changes to ensure transformation projects are successful.

This chapter shows (a) how digitalisation has impacted the way Japanese consumers behave in the B2C retail industry and (b) how successful players adapted to the new purchasing habits, technology improvements and service challenges. It will be of interest to business practitioners and academics as well in Japan as overseas.

The development of E-commerce and M-commerce in the world’s second largest retail market has been a challenge for traditional businesses and a game-changing factor. Nowadays, Japan has shrugged off its initial reluctance. Business conditions have diversified; traditional retailers have transformed. Non-store retailers have flourished together with the spread of the Internet and mobile phones, as shown by market data. Several payment options have also become available. Online shopping has been central to both the economising and the nesting trends. In short, the traditional “Japanese consumer mindset” has been impacted.

This chapter discusses the impact of digitalisation on Japanese consumer behaviours. The shift in attitudes of consumers stems from structural factors such as the digital revolution, the emergence of a less materialistic younger generation, the economic downturn and the “post March 11 consumer” effect. Among the consumer changes, let us highlight (i) spending more time surfing the Internet, (ii) buying differently and comparing prices anonymously and (iii) another perception of ownership.

The chapter also identifies how retailers adapted. At the beginning, key players have been reluctant to invest online and to reinvent themselves (limited use of up-to-date technology), as online stores and physical stores are run differently. Illustrating with concrete examples, a focus will be done on online food, apparel and second-hand retail as well as luxury goods.

Finally, the paper issues recommendations for building a successful online retail business, as B2C digital marketing and reinforced online presence (in Japanese) have become key. Successful brands increasingly rely on social media promotion and word-of-mouth marketing.

Japan’s economic competitiveness has continued to decline, compared to other developed countries, since 1995 as the information society started. In Japan, Europe, and the USA, the number of employees engaged in the tertiary industry reaches 70%; the promotion of tertiary industry has a large impact on each country’s economy. Examining Japanese and Western fast fashion and food service companies, it may be that Japanese companies have high labor productivity for services, but low labor productivity when measured by the usual comparison tool, value-added productivity. Consideration of this disconnect from the perspective of the Japanese work ethic leads to the conclusion that the general Japanese work ethic in these industries does not match well with the current global information society, at least regarding retail industry. Finally, a discussion is undertaken regarding the way in which the mechanism for Japanese work ethic in retail can mesh favorably in this era of digital challenge.

This chapter investigates the transformation of a conventional manufacturing company into a knowledge-based, digitally focused firm and the process of its next transformation into a fully digital company. The company at the focus of this case study is developing its third main business model as it prepares for a future in which it maintains existing strengths and learns to exploits new market niches and the capabilities of digital platforms. The company’s innovation of its business model is driven primarily by the realization of its philosophy regarding work, customers, and employees as well as more conventional factors such as profits and technology. The roles of the key actors, redirection of resources, and decision-making processes are considered in this case.

A maintenance, repair, and operations (MRO) e-procurement platform, which was established in 2000, has become one of industrial electric commerce platforms in Japan. A three-part entrepreneurial strategy in the MRO e-procurement platform integrated business strategy, marketing strategy, and management of technology as one. This chapter tries to clarify the MRO e-commerce platform development and business ecosystem formation and discuss the three-part entrepreneurial strategy. The platform has adopted a core and periphery structure and an open and close strategy as the management of technology and encapsulated value inside the platform. It activated boarding strategies for large-volume customer and third-party platform as the marketing strategy step-by-step and drove its successive service formation. It executes on an organizational ambidexterity and an organization continuum as the business strategy and accelerates its successive service formation. The three-part entrepreneurial strategy can be one of the best management strategies for startup to grow a cloud-based service platform with two-sided market structure sustainably.

Following the bursting of Japan’s “bubble economy” in the 1990s and the subsequent start of the country’s two-decade period of economic stagnation, a number of foreign companies were eager to look for business opportunities by introducing “best practices” they had successfully implemented elsewhere and adapting them to the needs of the Japanese market. The early 1990s was also the start of the global e-commerce economy, and in many cases, companies were looking for ways to leverage technologies to help them do this. Conversely, many local companies had been caught up in the speculative bubble and were now struggling to survive and needed to raise capital by shedding assets.

One such example was the Minebea Corporation. The company had branched off into a number of non-related areas, including consumer finance, and sold this subsidiary to US financial conglomerate GE Capital in 1994. Re-christened as Gate Finance, it was seen by GE as an entry point to make more deals in Japan. GE Capital’s global strategy was to buy personal loan companies at reduced rates, invest in technology and restructure the business, and then reap the benefits of a healthier bottom line. Their thinking was that if they could succeed with Gate, they would be able to use this as a platform into which they could pour more consumer loan portfolios. As they went about implementing this strategy, they encountered a number of challenges and sources of resistance, particularly from the employees of the company they had just purchased. Ironically 20 years later, new players would enter the marketplace and start implementing even more sophisticated technologies that are shaping up to become a new norm for a significant segment of the consumer loan business in Japan.

Due to recent technology progress in areas such as IoT, AI, big data and robotics, Japanese industry is heading towards the Fourth Industrial Revolution. The industrial system is shifting from manufacturing worksite superiority to intelligence or software superiority in manufacturing. The government promotes these trends through its Society 5.0 initiative. Software superiority in manufacturing facilitates front loading; the conversion of skills to explicit knowledge makes progress in manufacturing processes through the use of IT and craftsmanship. This research deals with three cases. The first case is a company-developed system that’s scalable from customized products to standard products and that realizes diversified products via microscale production. The second case, focusing on the introduction of robots and a robot system integrator (SIer), is the keystone company within the SIer community; its business consists of robot engineering projects and FA educational system projects. The third case, metal 3D printing manufacturing, is invigorating. The company is the first service bureau in Japan that is capable of providing comprehensive services in the field of metal additive manufacturing (AM), handling everything from powder development and manufacture to prototyping and mass production needs. Clearly, IoT and the servitization of industry are the two wheels of a cart in industry, significantly transforming not only manufacturing sites but also business models. Although each case represents a different field of industry, each meets a unique and remarkable challenge in standardization, platform and ecosystem. In the digital age, IoT is an enabler and provides a background for transformation of business models. Through servitization, businesses can be the field for co-creation by feeding back the experience of learning-by-doing and reorganizing it. It is a powerful option for company to meet the challenge of service platform building.

This chapter analyzes five Japanese software small and medium-sized enterprises (SMEs) to better understand how their decision-making pathways inside the organization evolve as they develop new business models. Event-state mapping method was applied to analyze the business model pathways of the case firms. We found that once triggered, pathways included various actors and a series of steps until an outcome, the new business model, was reached. The findings indicate that the decision pathways to new models became increasingly complex over the years and the number of individuals and teams involved increases as business model evolved further.

Japanese manufacturing firms are known for their competitiveness in the global market; however, firms in the service sector have drawn less attention. This chapter investigates the Japanese market research industry and sheds light on how digital technological innovations have changed firms’ business models and competitive dynamics. One of the main jobs of market research firms is to prepare questionnaires, choose suitable respondents, and analyze results to evaluate the effects of advertisements, brand image, and customer satisfaction. Before 2000, these firms conducted surveys via mail, telephone, fax, home visits, and group interviews—Internet research emerged in 2000, becoming a disruptive innovation in the industry. Internet research consists of questionnaire surveys posted online and completed via the Internet. This disruption drastically changed the business model of market research. Traditional research methods incurred large variable costs, but new business models utilizing Internet research spent their budget on information systems investment, causing market leaders to enjoy economies of scale. A successful Japanese startup, Macromill Inc., grew rapidly in the 2000s; it gained the second-largest market share in the industry 10 years after its founding. However, a unique development in this industry was the rise of another startup that connected incumbent firms with disruptive technology. Cross Marketing Inc. formed alliances to provide Internet research services to companies that found it difficult to respond to disruptive technological changes. As a result of Cross Marketing’s strategic positioning, incumbent firms have survived the disruption caused by Internet research, and the company holds the third-largest market share in that industry. These case analyses of the Japanese market research industry reveal a unique aspect of the competitive dynamics raised by digital disruptive innovation.

In the 1970s, Japan advanced to become the icon of radical modernity and raised, in many ways, the bar for how firms should innovate. Today, Japan’s image is that of a giant that fell from grace, outpaced by the alluring size and growth of consumer demand in China and the digital transformation of South Korea. However, we should never write off Japan’s ability to bounce back or forward from disruption. An exploration of shifts in the retail environment is a good starting point for looking at how Japanese organisations square up to the challenges of the digital age. Retail makes a huge contribution to Japan’s economy. An exploration of shifts in the retail environment is a good starting point for looking at how Japanese organisations and, by extension, Japan’s economy square up to the challenges of the digital age.

Its mix of intellectuality and technology means that Japan continues to inspire how firms and consumers should (or could) interact. Japan has consistently been the second-largest consumer economy in terms of per capita or household consumption expenditure, and even though it has been overtaken as the second-largest economy in absolute terms by China, Japan is a vibrant retail market. Japan accounts for 55% of the Asian retail market, and the Japanese market attracts almost 40% of the worldwide spending on luxury goods. Japan also has one of the fastest growing e-commerce markets in the world.

Amidst the disruptions of digital transformation, Japan provides answers to two fundamental challenges: (i) How can retailers engage customers on an experiential level both instore and online, and (ii) how can new technologies help span boundaries of the supply chain? Retailing offers a rich context for analysing how Japanese firms continue to innovate. Our contribution aims to track new forms of firm-consumer interaction in Japan and charts attempts to converge online and offline channels.

The purpose of this preliminary study was to investigate foreign investors’ acceptance and usage of property technology (PropTech) in the Japanese real estate market. To that end, a purposive sample of eleven participants were recruited to complete an online survey. The survey consisted of a modified and previously validated measure of acceptance based on the unified theory of acceptance and use of technology (UTAUT), as well as a usage scale, demographic items, and open-ended questions. The results of the survey showed that participants were generally accepting of PropTech in the Japanese context. The highest mean values were associated with the subscales of effort expectancy and performance expectancy, while the lowest mean value was found in the social influence subscale. Usage of PropTech was slightly more concerned with the gathering of information on properties and markets than transactions or portfolio management. Interviews were also conducted with two of the participants. Interview responses showed that there is a relative lack of available PropTech resources in Japan, especially for non-Japanese speakers. PropTech which is focused on foreign investors in Japan would fill a needed gap in the industry. This is especially true of property portals and social media forums that would help investors to connect, communicate, and learn.

As artificial intelligence (AI) has progressed, it seems inevitable for countries and firms across the world to change their old notions and attitudes toward new technologies. Since AI could have a major impact on many aspects of business and society, the future competitiveness of nations, let alone of companies, will hinge upon the effective utilization of AI technologies. However, Japan is currently falling behind the USA and China in the global technology race. Many Japanese companies that were market leaders at some point have lost their position in the international market.

Toyota, the global leading car brand that also leads Japan’s automotive industry, is an exceptional case in the Japanese economy today. However, even Toyota is facing multiple challenges because AI is significantly changing the competitive landscape. Whereas the major carmakers have been keeping an eye on AI-directed self-driving cars, initially Toyota had some reservations about the development of self-driving cars. However, the company has recently changed its strategy. Despite sluggish government policies, Toyota has been accelerating its move into the new phase of competition with an unprecedented commitment to self-driving cars.

Toyota’s recent activities somewhat contrast with the slow response of the Japanese government and most Japanese firms to the global trend. This chapter first provides an overview of Japan’s AI, followed by the Japanese government’s plan for self-driving cars. The third section depicts Toyota’s recent activities, focusing on self-driving cars. Reflecting on Toyota’s strategic changes as a benchmark, the last section discusses what Japan needs to do in order to transform itself and compete in the digital age.

The industrial adoption of 3D printing technology continues to gain the interest of industrial professionals and the academic community alike. More Japanese industries are utilizing this technology for different purposes, and there have been some promising results and gains. The utilization of such disruptive technology will alter the way business is conducted and will likely interrupt existing business models and operations. The adoption of 3D printing has the potential to impact some core business functions such as supply chain management. It is, therefore, important to explore the implication of deploying this revolutionary technology on supply chain performance. This paper identifies key areas within supply chains that are directly impacted by the use of 3D printing and explains how such use revolutionizes their performance. The paper also discusses some key benefits supply chains are likely to gain from the adoption of 3D printing as well as key challenges and limitations that are associated with the deployment of 3D printing technology. Furthermore, the situation of Japan’s competitiveness in the development and use of global 3D printers is explored. Finally, the paper presents key lessons learnt and makes suggestions for future research areas. The paper will be of interest to academic scholars interested in aspects related to the deployment of 3D printing in supply chains and can also be a good reference to business professionals and organizations within different sectors interested in understanding more about the impact of adopting 3D printing technology on supply chain performance.

This chapter contemplates the future of Fintech in the context of the Japanese main bank system with the focus on the nontechnical side of Fintech. It first explores the recent development and the current state of Fintech and examines it from the viewpoints of technology and banking for having balanced ideas. It then reviews relevant frameworks, including the theory of diffusion of innovations, as its research foundation of this study. To envisage how Fintech will be incorporated into the Japanese banking sector, it revisits the main bank system and identifies the intrinsic connection between the banking system and the existing collectivistic values as the influential attributes of the theoretical framework. A qualitative meta-synthesis shows that Fintech is likely to replace banking processes and products that are remote from the Japanese shared ways of thinking, while the MBS nature of relationship banking will remain in existence. The grounded element of the findings suggests that Japan’s strength is based on its collectivist culture, and Fintech will blend into the MBS over the course of its future development. This chapter concludes that Fintech is a supporting tool compatible with the core competencies of Japanese wealth creation, including the MBS, which supports Japanese business operations spanning worldwide.