What are the challenges in moving Japan from analog to digital?

Japan has been known as one of the most advanced societies, but we are behind when it comes to digital transformation. Ryosuke Akiyoshi, Head of the Public Innovation Lab at EY, is looking to change that.

We had the honor to sit down with Ryosuke to talk about DX in Japan. In part 1 we cover Japan’s challenges, differences between private and public sectors and the Covid-19 effect. In part 2 we will cover the role the Public Innovation Lab plays in promoting DX, some of its projects and its midterm goals.

This interview is part of Wahl+Case’s Tech Executive Connection interview series with our host Milos Cavic, Manager of the Enterprise Tech and FinTech teams.

Watch the full Interview

Part 1: Japan's Digital Transformation

As you mentioned, many people talk about DX or digital transformation and it has many different concepts and definitions but for me digital transformation is a tool or a methodology to expedite an existing business or operation in order to increase efficiency or productivity. 

For me it is very important to highlight that DX is only a tool to add value, it’s not the goal or objective. It’s a means to an end. I’m saying this because in a lot of Japanese companies as well as public sector entities DX has become the goal itself. But the goal should always be to solve a problem; your customers’ problem, your employees’ problem or your residents’ problem if you are a local government for example.

So, oftentimes it can be a bit misleading in Japan as to why some companies are doing DX. The outcome and objectives have to be clearly defined before starting.

I think there are a few common things for both the public as well as the private sector and they face a few of the same challenges. Both have to understand the purpose of the DX as well as the technologies involved. 

However, for the public sector, including local governments, they have to deal with a lot of restrictions and regulations like privacy policies or data management. Local governments have a lot of stakeholders. They have their own employees and staff, they have to take care of their residents and work closely with people from other government agencies or the central government. This means there is much more negotiating and coordinating between the different parties. It is a lot more time consuming than DX in the private sector. The decision making time and turnaround for private businesses is much faster and has less approval steps in general.

As mentioned in several international studies, Japan is far behind in their DX efforts, behind China as well as other Asian countries. This has become a big problem for the country and its economy. That’s why this year the Japanese cabinet decided to establish the new Japan Digital Agency which will be responsible for accelerating DX across the government.

This will help a lot of government agencies and many people will benefit from this. I’m a bit skeptical about local governments though because they lack the resources, both human and monetary, to really promote DX. 

Absolutely yes. The pandemic had a huge impact on DX in Japan. Your hanko example is very good, but going paperless is only one aspect of the transformation. The pandemic also largely changed the way we work and how we collaborate in the workplace and this applies to both the private and public sectors. 

I expect that DX in Japan will be accelerated by Covid-19 as well as the establishment of the new Japan Digital Agency to a certain level but more than that every business owner has to think about how DX can be used to add more value to their businesses. External drivers can only do so much but real change must come from the inside.

One of the biggest challenges I often see is the mindset of the people. There are a lot of customs and rules regarding the day to day operations and tasks for government workers and in many cases the people don’t know why. They simply follow those customs and rules because it was always done this way. The pandemic however helped many people realize that it is possible to change those customs.

The most prominent example is obviously regarding remote work. Pre-Covid everybody believed that going to the office every day, seeing people and communicating face to face was the only way to do your job but once people were forced to work from home, they realized that it worked and so people have started to change the way they work and how they interact with their team members and staff. 

Sure. I think the most prominent one is the central government’s super city initiative. This bill was enacted by the Diet in May 2020 to help solve social problems, such as depopulation and the aging of society, by utilizing technologies like AI, Big Data and more. They are starting the proposal process to choose the 5 cities that will receive subsidies and other support from the central government. 

Also, many local governments have started initiatives to promote smart cities to implement new technologies to public services, healthcare or transportation to enhance the quality of life of their citizens.

In part 2 we will deep dive into the role the Public Innovation Lab plays in promoting DX in Japan.

If you like our content, join our mailing list and receive our latest startup stories, market insights and job trends for Japan’s tech market.

More Market Insights