This series introduces trendy and popular themes from among those covered in Fujitsu Research Institute's information magazine Chisounomori by interviewing consultants who are working on actual business projects. The seventh theme is "Game Change."
Yasuaki Matsumoto (Chief Senior Consultant, Distribution and Life Service Business Consulting Division, Fujitsu Research Institute)
Hirohisa Nakatani (Principal Consultant, Cross-Industry Business Consulting Division, Fujitsu Research Institute)
Seiji Takahashi (Principal Consultant, Finance and Local Community Business Consulting Division, Fujitsu Research Institute)
Yoshinobu Sawano (Research Manager, Fujitsu Laboratories of America, Inc.)
*Affiliations and titles are as of the interview held on October 13, 2016.
New Business Framework Required in a Mature Society
― As the society and economy in developed countries are becoming saturated, value in such a mature society or desired services for customers are changing. This situation creates a need for a new societal and business framework. As a growing society turns to a mature society and the need for ownership changes to utilization and subsequent recycling, what technological innovations (game change) are happening in businesses? Today, we have gathered to discuss on the theme of game change. I believe that Mr. Sawano has had opportunities to meet people from various companies in the Silicon Valley. Could you tell us about the current situation?
Sawano: It is said that today's middle class is relatively poor. Behind this are several social issues, including the European refugee problem and the difficulty for young people to find employment. Faced with lower income, consumers have had to streamline their lifestyles, leading to a strong connection with the sharing economy*. In Silicon Valley, young people knowledgeable in technology but only earning moderate income are actively using the services offered by the sharing economy. This trend is also fairly strong in the financial industry.
― The Japanese financial industry is becoming more liberal. Do you think that the industry is concerned that it will not be able to keep up with its competitors by continuing traditional practices?
Sawano: While executives in financial institutions are showing interest in fintech, they often take a marketing approach so that they will not lose any existing customers. I think this is because the elderly are the ones who with the assets in modern Japan, and also because young people are losing interest in financial products due to their lower income. There is a tendency for companies to focus on the market for the elderly who already hold assets, since the income for younger generations is not improving.
― Mr. Takahashi, do you see any change in the awareness of the people involved in local government or industrial promotion in terms of the industrial revitalization of rural communities?
Takahashi: Collaboration is the key for rural communities and regional revitalization simply addresses changes in the social environment and other issues as an entire community. IoT, big data, robots, and AI (artificial intelligence) are also important for working in rural communities.
― So it is important for the regional government, SMEs and local residents to desire the same thing.
Takahashi: My opinion is that the local government is unable to directly contribute much to industrial promotion in a community. They can provide subsidies, etc. for events aimed at revitalizing shopping districts, because by doing so it can attract consumers, which contributes to safe and affluent life for the community.
― Mr. Matsumoto, I understand you are creating new services for retailers, services, events, etc. using blockchain technology**. What are prominent trends in customer expectations?
Matsumoto: For example, a blockchain is extremely effective for letting shopping districts, general businesses and local governments collaborate with each other. This approach has a single person manage and provide all services, with every participant paying a certain fee to share data. The right to use the collected data is also loosely shared among participants instead of allowing the management side to collectively manage and provide data as a paid service. Since it is difficult for small shops in a shopping district to enter into a large corporation's network, loosely and easily sharing information is greatly beneficial for them.
― It is like playing a game built upon a relationship of trust by creating a marketplace that does not consider a controller or organizer and where every participant follows rules in conducting business, isn't it?
Matsumoto: Previously, large corporations collaborated for years to build a system, and the project ended there if it was not successful. In the future, however, I feel that a system that allows companies to share information while they moderately communicate with the community will be required.
Blockchain Serves as the Trigger to Enter into a New Business
― The manufacturing industry is also trying to expand its business domain. By undertaking commission-based operation and upkeep tasks, only the services that are valuable are used, instead of merely selling products to customers. When a blockchain is adopted by the industry, I think it would be possible to develop a concept-based business triggered by advanced technology.
Matsumoto: Traditional solutions were intended for specific industries, which made it difficult to link them to other services. With a blockchain, however, you can easily link a solution to other services. While it was difficult to create new businesses using conventional packages targeted for specific industries, I believe using blockchain technology will enable us to shatter this preconceived notion.
― Chatbots*** are also being increasingly adopted by the financial industry. This technology seems to be usable by any industry that needs a concierge function as a person-to-person interface.
Sawano: I consider a chatbot the first step in adopting fintech in terms of its ability to link the user to other types of business or communities. The reason why Microsoft, Oracle, Google, and Facebook are focusing their efforts on developing chatbots is that they are looking ahead to implementing voice interface and even virtual reality (VR).
― Do you think that we will be able to talk with English speakers without studying the language if such interfaces are improved in the future?
Sawano: We are almost there. For example, Amazon Echo understands the characteristic pronunciation of an individual as it listens to their accent and distinguishes Japanese-spoken English from natively-spoken English. Google has recently announced that it will specialize in personalization. Going forward, I expect many new business models to continuously come out.
― So you're saying that while previously, users adapted themselves to task-specific packages, but future systems will be personalized in a way so users are no longer required to do this? What about public services?
Takahashi: It is important to build more affluent and safer local communities while effectively mitigating the regulations imposed by the national and local governments where possible. The local governments of Setagaya, Mitaka, Kawasaki, and Yokohama, among others, are engaged in advanced initiatives and collaborating with companies to generate a breakthrough. These activities will lead to other actions that will result in deregulation or generate new things in communities.
The Key to Business Continuity and Monetization
― In order to make an initial investment to start a business and continue the business, it is necessary to stably collect returns. What do you think is necessary to continue the service being considered and turn it into money?
Matsumoto: In a mature market, it is difficult to differentiate products with their function, and therefore price competition is inevitable. In addition, it is said that young, middle class people are not spending their money. There is no indication that they have no money to spend. Instead, it seems that the market has changed, where people will spend as much as they want on things they like. For example, we recently held a collaboration event between two local governments in Chiba, a publisher, a broadcasting station, a professional baseball team, and a railroad business operator using cartoon characters. Many young people visited the event, spent money, and the community reaped the benefits. Another movement is the use of crowdfunding**** in filmmaking for the U.S. and cartoon creation for Japan, where the cost of production is paid for by investors in China. When this system is used, people from around the world are invited to invest in content creation, etc., creating a global flow of money. By using blockchain technology, it is possible to manage the flow of investments and capitalization on a global basis. In addition, the technology allows individuals to make investments according to their tastes and the user to reach a wide range of investors.
― So the point is that a platform that can support the long-tail and offer a wide lineup of products will win out in the end.
Matsumoto: When companies combine multiple platforms such as sports, cartoons and movies to share their purchasing data, rather than conducting business individually using only their own resources, I think their chance for monetization will increase.
― Mr. Sawano, what do you think is important for a company to monetize and continue its business amid this situation where new business frameworks, such as the sharing economy, are in widespread usage?
Sawano: The first thing that I realized when I came to the US was the difference between the ideas of ownership and usage rights. While Japanese people demand ownership, Americans paid considering how much something was used. Today, automobile companies operate lending platforms and have begun offering financial services. The manufacturing industry has embarked on a so-called leasing service. The manufacturing industry, which produces and ships goods, has advanced to the point where they are leasing their goods.
― I believe that local governments face the biggest challenge when it comes to monetizing. Do you have any good ideas on obtaining returns to continue the business?
Takahashi: For example, a paper manufacturing company in Satsumasendai, Kagoshima, has a system that collects natural bamboo as raw material for pulpwood, as the location has the country's best natural bamboo. This system was utilized in a regional revitalization project, creating a multilayered business where money was earned using the bamboo, working with related companies under various business themes. I understand that the purpose of monetizing a regional area is to create a flow of money and employment for the community. To this end, the government must achieve stable results by providing effective support together with the regional community.
― Shitateru, Fujitsu's first startup program, started a crowdsourcing campaign to connect specifically designed, small lot needs in collaboration with a famous designer in Tokyo and a clothing factory in Kumamoto. I believe that this is exactly the type of new value we want to generate.
Takahashi: Building a business model is difficult even if you already have the platform. I think that creating an IoT system coordinated by a so-called caretaker is the desired form of commercialization.
What Kind of People Will Create New Business?
― Lastly, could you tell us your opinions about the type of people you're looking for or a preferred method of human resource development?
Matsumoto: When building an eco-system between new members who are sharing with each other, connecting players from different businesses is essential. In my experience, I have visited dozens of companies and connected the professional baseball team, broadcasting station, and shopping district for the cartoon collaboration event in Chiba. The important thing is to have the ability to act, from creating channels and making deals with each player, establishing a system.
Sawano: The Silicon Valley gathers not only IT engineers, but also top-class designers and other top players in medical care and finances. A connection between them has created quality services that were previously unimaginable. I sense the importance of specialists more strongly than when I was working in Japan. Also, while education in Japan is good for developing generalists who can achieve an average grade, the first question my son was asked when he went to school here was "What is your difference?" I think that uniqueness will have greater emphasis in the future Japanese education system.
― In Japan, students have been trained to be able to do things the same way as others do by emphasizing uniformity. In the future, our education policy may change gradually so that a difference is considered a strength.
Takahashi: To "think" is a word that I think will become more important in the future. If the singularity***** in 2045 actually happens, simple tasks will be replaced by robots. In light of this, I think it is important to develop people who can think about what makes a person happy or what is beneficial for society. Having opportunities to think and act based on one's own thoughts and beliefs will be essential.
Sawano: The school my son goes to is in Cupertino, the home of Apple's headquarters. Children who go to elementary school there are taught in-depth IT so they can connect with people of different cultures. In this way, teachers drill into students that specializing, in other words expertise and skill, will help them build their careers. Supporting this is increased opportunities for tweets and blogs posted by the students to be seen by many different kinds of people as a result of further developments in SNS culture.
― Education has changed; the means to acquire knowledge have diversified, and IT literacy has dramatically improved. In these circumstances, it is still necessary to diligently learn new things. By networking with others regardless of industry or technology, I will continue to improve my business while sharing information with all of you.
*: Sharing economy: An economic system enabled by the development of social media. The sharing economy is established through the exchange or sharing of things, money, services, etc.
**: Blockchain: A distributed ledger technology, distributed network
***: Chatbot: A program that automatically communicates in lieu of humans.
****: Crowdfunding: The provision of financial resources or cooperation with other people or organizations by many and unspecified persons normally through the Internet.
******: Singularity: The hypothesis that the invention of artificial superintelligence will abruptly trigger runaway technological growth, resulting in unfathomable changes to human civilization.