Will AI and Robotics Turn the Tide in Japan’s Favor?

IESE Alumni event in Tokyo looks at “shortcuts” to growth

15/03/2016 Tokyo

IESE Business School Event in Tokyo

Kazuhiko Toyama, CEO of Industrial Growth Platform Inc.: “The use of robotics in industry in Japan doesn’t incur social repercussions like in other cultures” / Photo: Megumi Asaoka

“We still have a long way to recover our true competitiveness, but we have a chance to tackle it”.

So says Kazuhiko Toyama, CEO of management support consultants, Industrial Growth Platform Inc.

He was addressing an audience of IESE Alumni and Friends in Tokyo this month.

Lifetime Employment “Immobilized”Business Leaders

Japan’s “Kaisha” or corporation employment model – based on a lifetime employment system – worked in the past, says Toyama, because economic conditions were “homogenous and highly communitarian” for decades.

Globalization and the digital revolution fundamentally have altered the business environment. Yet the earlier success of their model – based on organizational immobility – kept business leaders and large companies in a psychological state of inertia: “a sort of business curse,” says Toyama. The proof, he adds, is that in 1995, some 28 percent of Fortune Global 500 companies were Japanese. Today their share is 12 percent, while the U.S. has more or less maintained a similar ranking.

Change, and With it, Opportunity?

The tide may be yet to turn in Japan’s favor though, says Toyama. For one thing there’s the country’s culture of operational excellence, which still very much undergirds corporate ethos. Then there are the opportunities yielded by digitization; among them artificial intelligence (AI) – an area where Japanese companies might have the edge over global competition.

“AI and robotics have a mechanical orientation that is a perfect match for operationally exceptional Japanese companies.”

Moreover, Japan’s changing demographics could be set to become a “very good social experimental ground.”

The aging population is leading to chronic labor shortage. But this in itself means that in Japan where “nobody complains about the use of robots,” the scope of robotics to replace human labor in sectors like construction or automobiles can be tested – without “incurring the kind of social repercussions you find in other cultures.”

Here Toyama also sees an opportunity to restructure Japan’s “outmoded and inefficient” service sector.

Shortcuts to Growth

“The objective is continued growth,” Toyama says, “so the question is: are we courageous enough to drive this?”

Companies can employ short cuts, he believes. “To realize open innovation you have to become an open organization.” Toyama cites the example of Toyota, who has set up an independent innovation outfit in Silicon Valley, thereby bypassing corporate restrictions.

Businesses also should look at creating spinoffs, and connect with outside partners as a means of introducing “much needed” diversity.

Investing in the Future

IESE Dean, Jordi Canals, thanked Toyama for an “excellent, clear and helpful picture of the Japanese economy – one that could be translated to all sorts of economies around the world.”

Japan’s challenges, he said, are indeed shared to varying degrees by most of the world’s mature economies.

“It seems capital markets, politicians and companies are dominated by short-term horizons. The challenge here,” said Canals, “is that the type of renewal that companies need in Japan, the U.S. and Germany is a renewal in management – and that involves long-term investment.”

Toyama agreed, adding that the time may have now come for Japan to return education and training from lifetime employment, to the classroom.