The Future of People and Digital Technology-- What is Digital Transformation? What Must Business Leaders do Now?

[Fujitsu Forum 2016 Conference Report]

Now, digital technology advances rapidly and changes business and our everyday lives. What should business leaders do now? How can they lead in the era of digital transformation? What are the primary issues in leadership and management for Japanese companies? On May 20, at Fujitsu Forum Tokyo 2016, Koichiro Tsujino, Founder and CEO, ALEX Corporation, Yoshinori Fujikawa, Associate Professor, Graduate School of International Corporate Strategy, Hitotsubashi University, and Yoshikuni Takashige, VP, Head of Marketing Strategy, Fujitsu gave presentations and discussed these points under the theme of "the future of people and digital technology."

Real-time management and disruptive innovation

First, Mr. Tsujino gave a presentation, titled Challenge, Innovation, and Entrepreneurship, and talked about the importance and challenges of innovation.

Mr. Tsujino pointed out that the world moved from the Before Internet era to the After Internet era, which caused significant changes in our everyday lives and business styles. He described these changes as 'redefinition.' For example, in the home appliance industry, the definition of consumer electronics changed. As a result, a television is being redefined as a computer device to explore the world of cloud computing. Similarly, a huge transformation is also already underway in the automobile industry, such as the evolution of smart cars and autonomous driving with IoT technology as well as and the rise of the sharing economy represented by Uber. The financial industry is no exception, where innovative "Fintech" services are bringing about changes that even threaten the very existence of banks.

Mr. Tsujino pointed out that in this age where technology is changing everything around us, real-time management and disruptive innovation are keys for companies to survive. He explained real-time management, by taking Google's work style as an example, and saying "To make full use of the real-time performance of cloud computing, it is not enough just to take cloud as infrastructure but we need to change our work style itself." He emphasized that it is important for CEOs to take the initiative to embark on internal transformation and flatten organizations by eliminating hierarchical structures and vertical divisions and delegating a broad range of authority to field-level personnel. He also explained disruptive innovation as follows: "What we should take now is not an incremental approach in which the future is plotted based on the projection of the past, but is an approach in which we look ahead to the next 50 years and decide the 'current' actions by backcasting from there."

Mr. Tsujino summarized, "For companies to revitalize themselves in an era of significant transformation, it is important for them to bring back the spirit of challenge, take risks, exert entrepreneurship, step away from an inward-looking attitude, and continuously extend their scale to the world."

To the era of co-creating value between companies and customers

Next, Professor Fujikawa from the Graduate School of International Corporate Strategy at Hitotsubashi University talked about changes occurring on a global scale from the viewpoint of 'value creation' in business activities by presenting three keywords, SHIFT, MELT, and TILT. "SHIFT means the world economy is shifting towards the service economy as it matures. MELT means boundaries between conventional industries, such as the service industry and the manufacturing industry, disappear with the advance of digitalization. And TILT means the places where the future is happening, such as movements of money, business, and people, are shifting from 31 degrees north latitude to south," he explained.

Professor Fujikawa pointed out that the concept of "value creation" in business activities has been greatly changing as the world economy is changing in accordance with these three keywords, and stated, "In the past, companies created value, and customers acknowledged it and paid to consume the value. Now in the era of co-creation, value is created by combining companies' business activities and customers' consumption activities." Behind this is a transition from a "goods-dominant logic (GDL)", in which goods are regarded as the source of value, to a "service-dominant logic (SDL)", in which companies and customers co-create value, regarding services as the source of value without separating goods from services.

Then he concluded his presentation by talking about the future of value co-creation: "The possibility to build a Multi-Sided Platform (MSP) that accelerates co-creation involving multiple customer bases and partner companies has been expanding across a variety of fields, without limiting the value co-creation partners to only one customer base."

Empowering people and creating value by digital transformation

Lastly, Mr. Takashige from Fujitsu, the leader of creating the Fujitsu Technology and Service Vision (see the end of this report), took the podium and first explained Human Centric Innovation, which Fujitsu proposes. "An approach to co-creating value for people by empowering people with digital technologies--we call this Human Centric Innovation. What is important is not only technology but also how people create value using technology," he stated. He also emphasized that in the digital era, innovation is created by bringing together people, information and infrastructure and creating connectivity by putting people at the center of everything.

As one example, he introduced SPATIOWL, Fujitsu's location data cloud service. This is a service to provide a new value by visualizing the traffic situation, for example in the Tokyo metropolitan area, in real time based on location information of taxis running there. By combining other information such as weather, SNS, and information provided by local governments and the private sector to make a multi-layered analysis, this service can be used not only for supporting drivers and pedestrians but also for personal monitoring services or child-care support services of local governments. He explained, "With SPATIOWL, serving as an urban platform, various companies and public institutions are already co-creating innovation in Japan and other countries."

"In the digital era, a new type of platform is required," Mr. Takashige continued, and introduced MetaArc, a digital business platform Fujitsu began providing in 2015. "Fujitsu provides various digital technologies, including mobile, IoT, and AI, as services to realize digital transformation. MetaArc functions as a multi-sided platform that facilitates shaping an ecosystem by connecting customers and various partners' services using API (Application Programming Interface)."

Lastly, Mr. Takashige concluded his presentation by emphasizing, "It is people who create innovation. It is Fujitsu's strong desire to be a business partner of our customers to co-create new value and together realize a sustainable world."

What are required for companies in the era of digital transformation?

In the panel discussion, opinions were exchanged about "leadership required in the digital era" and "how companies should change at the turning point towards digitalization."

Mr. Tsujino said, "Companies at the turning point towards digitalization cannot avoid to decline unless they grow out of their old structures in the Before Internet era and speedily take action to develop an open and flat structure by delegating authority to field-level personnel. Along with the so-called democratization of technologies which allows individuals to use the latest technologies at low costs, democratization of organizations is required for the Wisdom of Crowds to function." He proposed that "in order to generate epoch-making innovations from Japan in the era of digital transformation, it is important for individuals to act on their own motivations, not just carrying out orders transmitted through command hierarchies. This can be made possible by revisiting Japanese strengths."

Following Mr. Tsujino's comments, Professor Fujikawa emphasized that, together with the democratization of organizations, it is necessary for organizations to change their way of creating value. "In the Before Internet era, the main business goal was to maximize the value-in-exchange in the form of what customers pay for products at the end of a value-chain. However, in the After Internet era, value creation may continue to take place in the form of value-in-use depending on how customers use the product or service. This means customers play an important role in value creation. Therefore, it is important to consider how to co-create value with customers by combining various resources held by companies and customers based on the common perspective of new value creation, or a 'value constellation,' by eliminating the conventional idea of value chain," he stated.

Mr. Takashige, who served as a moderator, explained, "As Mr. Tsujino and Professor Fujikawa mentioned, digital transformation demands totally new ways of working and business models. Therefore, we at Fujitsu are presenting the Fujitsu Technology and Service Vision as our future vision so that Fujitsu will transform ourselves together with customers."

Finally, Professor Fujikawa and Mr. Tsujino expressed their expectations for Fujitsu. Professor Fujikawa said, "For Japan to create new things in this situation, I think the possibilities lie in the advanced market development and advanced consumer behavior in Japan. Given that, I'm looking forward to what new sources of innovation Fujitsu can seek out." Then Mr. Tsujino concluded the panel discussion with words of encouragement for Fujitsu: "I expect Fujitsu to serve as the driving force to promote cutting-edge technologies of AI and IoT."

  • Koichiro Tsujino Founder and CEO, ALEX Corporation

  • Yoshinori Fujikawa Associate Professor, Graduate School of International Corporate Strategy, Hitotsubashi University

  • Yoshikuni Takashige VP, Head of Marketing Strategy, Fujitsu Limited

Fujitsu Technology and Service Vision sets out Fujitsu's vision about how to use ICT to create innovation and build a different future.
It introduces challenges to be solved and approaches to be taken by companies to achieve digital transformation.
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