How Japan can make digital ‘big moves’ to drive growth and productivity
27/02/2021 15:33
Incrementalism will not close the digital-competitiveness gap. Japan must undertake some transformative steps, which we call big moves—concerted efforts by major industries or stakeholders to reform their operations, capitalize on emerging trends, and embed digital technology across the value chain . These big moves are anchored on four themes:
· Digital talent: A bold plan to more than triple the bench of digital talent, focusing disproportionately on software developers, data engineers, data scientists, machine learning engineers, product managers, agile coaches, designers, and other types of new jobs. This is in addition to the continued deepening of hardware talent, which is already a strength. Achieving this requires a mindset shift that software expertise is just as valuable as traditionally Japanese-prized hardware or non-software-engineering disciplines. These big moves will also call for upskilling of the workforce and the digitization of the education sector itself.
· Industry transformation: Leapfrog moves by the four core industry sectors that contribute nearly 50 percent of Japanese GDP: industrial and automotive manufacturing, wholesale and retail, healthcare, and financial services. All of these sectors have single-digit digital-penetration metrics, such as the number of digital-manufacturing lighthouse factories or the percentage of e-commerce penetration. Their value chains have potential to scale up more than 100 proven use cases that leverage cloud-based applications, machine learning, deep learning, e-commerce technologies, the Internet of Things (IoT), 5G, cybersecurity, and others to drive an increase in revenues and a reduction in costs and expenses. By 2030, Japan needs an artificial-intelligence-enabled industrial sector, digital healthcare at scale for the elderly population, omnichannel retail experiences, and a modern, streamlined mobile-banking system underpinned by a globally interoperable frictionless payment infrastructure.
· Digital government: A strategic commitment from the government to drive connectivity, cybersecurity, and the availability of cloud resources to build a new wave of applications. More importantly, this big move requires the build-out of digital applications in the public sector to digitize the services it provides to citizens and businesses and doing away with lengthy processes that require physical visits, paper, seals, faxing, and other analog methods.
· Economic renewal: Japan has more than half of the world’s oldest founded companies, many of which are facing declining revenues and profitability. The country needs to inject economic renewal. This renewal mandate is best suited for the start-up ecosystem, which needs to boldly address global customer problems with software, shifting from its current inward and hardware focus. Reforms are needed to encourage founders, attract talent, and enable start-ups to scale. Another key to economic renewal involves the transformation of Japanese systems integrators: they account for over 60 percent of Japanese technology-related spend and 70 percent of IT hired talent, and it is crucial that they bring their clients along on the journey. Japan’s digital transformation will require bringing talent and technology back into the core operations of businesses, and systems integrators need to develop new business models to help their clients make the transition.