MyVisi
MyVisionon
No.7

2015.3

Stimulating Innovation toBreak Japanʼs Deadlock
While the winning of the 2014 Nobel Prize in Physics by three Japanese physicists for their inventionof the blue LED sounded a brief note of optimism, innovation is at a standstill in contemporary Japan,
and the nation’s economy has also failed to effectively overcome its stagnation since its two lost
decades. What type of innovation do we need to stimulate in order to guide Japan onto a stable growthtrajectory?

CONTENTS
Expert Opinions

What must We Do to Create
an Innovative Japan?
Cultivating human resources isa shortcut to innovation

Setting our sights on social
innovation through ICT

Takeo Kanade

Hideko Kunii

U. A. and Helen Whittaker University Professor,
Carnegie Mellon University

Professor, Graduate School of Engineering Management (MOT),
Shibaura Institute of Technology

Create a ﬂat social structure

Turning the tables
on adversity in Japan

Yasufumi Kanemaru
Chairman and CEO, Future Architect, Inc.
Representative Executive Oﬃcer &Executive Vice President, NIRA

Makoto Kigawa
Representative Director, President andExecutive Oﬃcer the Company, Yamato Holdings Co., Ltd.

Generating Service Innovation"
towards the creation of new value
Toshio Yamamura
Operating Oﬃcer of Consumer Service Business Unit,
Mitsui & Co., Ltd.

Expert Opinions

What must We Do to Create
an Innovative Japan?
What type of innovation is necessary for Japan to break away from its long-term state of stagnation andreach a steady growth trajectory?
What measures can realize this type of innovation?
In this issue of MyVision, we discuss these questions with an academic with a deep involvement in science
policy, a world authority on research in the ﬁeld of artiﬁcial intelligence, and executives of companies
which have won high praise for their innovative business development in the areas of IT, logistics, andmedical care.

Interviewer: Naoko Mori, NIRA Research Coordinator Editor: Kazuyoshi Harada
Period of interview: October – December 2014

Cultivating human resources isa shortcut to innovation
Takeo Kanade
U. A. and Helen Whittaker University Professor,Carnegie Mellon University
Innovation means finding and solving problems the solution ofwhich will generate value. The most important aspect of this value
is economic impact, and this is linked to enabling Japan toovercome its economic stagnation.
Initiatives like Google and Facebook were groundbreaking
ideas. The standard thinking is that the user who receives theservice pays for that service. These initiatives, however, enable theuser to establish an account free of charge, and it is the service
provider who pays the network managers. Their creators saw thatmechanisms in which the consumer, the person who receives thegreatest benefit, does not pay for the service would actually havean enormous economic impact (i.e., yield tremendous profits).
This is an example of finding and solving a problem whose
solution will generate value.
The qualities that are essential to this type of innovation are thepower of observation to perceive what is necessary to improvesociety and quality of life, the insight to set its concrete agenda
and the intellect and energy to bring about its realization. Japan
faces a large number of challenges, including an aging population,
natural disasters, and educational issues. Unless we have people tofind the problems, and solve them, there will be no innovation.
There is no miracle or shortcut that will magically produce
innovation. The most important factors are human resources andeducation. We must foster the habit of active problem-solvingfrom the years of childhood. Offer children the experience of

discovering and solving for themselves problems that will
generate value, and feel the joy of doing so. Encourage university
students to offer concrete solutions to the problems of local
businesses in their regions. This will take 20 years, and it sees acircuitous path, but it is the shortest route to innovation. After 20years, the generation leading Japan will have changed. It will beessential for us to foster human resources with strong commitment
and conviction to lead the nation then. ■Professor Kanade is an authority on robotic engineering and image
recognition. He conducts original research in Japan and the U.S. As thedirector of a research institute at a U.S. university, Professor Kanade brings
an international perspective to Japanʼs science and technology policy.

Create a ﬂat social structure

Yasufumi Kanemaru
Chairman and CEO, Future Architect, Inc.
Representative Executive Officer &Executive Vice President, NIRA
Innovation is born either from a sense of crisis or from freedom.
The reason that it is difficult to spark innovation in Japan is thatthe majority of Japanese company organizations are oriented
towards affirming the past and extending past traditions. This
dampens the spirit of innovation and impedes risk-taking.
Innovation in the IT industry occurs through the combination ofsmall ideas. For example, Amazon incorporated innovations
occurring in the computer industry into its own business model,
combining book sales, the Internet, and distribution. This is an
example of a small inspiration leading to the dynamictransformation of a business model.

My Vision No.7

Innovation should spring from young people, but in Japan mosttalented young people join large companies. When they enter
these companies, they are treated as inexperienced members ofstaff, but during the period that they gain experience, their ideas
progressively become stale. In order to change this social
mechanism, it will be necessary to abandon our focus on results,
and create a flat social structure in which young entrepreneurs areable to deal with major companies.
Hewlett Packard’ s first major user was the Walt Disney Studio.
When Bill Gates was just starting out, he was already engaging indealings with IBM. We should create the conditions for the people
who actually do the work in the contracted companies at thebottom of the corporate hierarchy to engage on an equal basis withcompanies at the top of the hierarchy. The side that provides thetechnology and the side that provides the funds should be equal.
The value system that privileges the contractor because that is theside that pays is not universally shared. It should be the case thatthe people who take the risks and do the job are fairly evaluatedand receive appropriate remuneration. ■Mr. Kanemaru established Future System Consulting (now FutureArchitects), an IT consulting ﬁrm specializing in the realization ofstrategies, in 1989. Making its mission the maximization of its clientsʼ
future value, the company is unique in the IT industry.

Setting our sights on social
innovation through ICT

Hideko Kunii
Professor, Graduate School of Engineering Management (MOT),
Shibaura Institute of Technology
Innovation is not simply technological revolution, but also thecreation of new value with social meaning through the realizationof new connections between various things. Google and Amazon,
which have displayed such dramatic growth, were powered by thistype of innovation. If we consider the transformations that haveoccurred in the world over the past 20 years, the questions thathave been asked are how can we introduce and utilize ICT togenerate new value, and how can we quickly employ user
feedback to promote the next revolution?
Japan has not kept pace with this trend. What is lacking at theroot is a sense of crisis. Following the publication of thePalmisano Report in 2004, the U.S. government reconsidered
where the nation’ s international competitiveness lay, and there
was a movement throughout the country towards the achievementof increased innovativeness through the use of ICT. In Germany,an initiative termed “Innovation 4.0”, which seeks to implement
an advanced technological strategy that fuses manufacturing andICT, has been commenced.
For Japan, the fostering of human resources who understandboth business and technology is a matter of urgency. AmongJapan’ s managerial class, there are few individuals who have astrong sense of personal involvement in the use of ICT, seeing it as
an issue that relates directly to their own business, and who areable based on this perspective to create new business models.
There are also problems in Japanese university education. Japan
does not have curricula like those in the U.S., which enable core
subjects in information science and information engineering andthe practical application of the technology to be taken in parallel,
and as a consequence does not adequately produce engineers able
to put ideas into practice. Student numbers are also lower by anorder of magnitude.
The workplace environment is also important. Major
innovations and new initiatives are born from nodal points at
which diverse ideas fuse together. Corporate cultures andworkplaces should be transformed at the initiative of top
management to encourage eccentric opinions and ideas to bebounced off each other. ■Based on her experiences in the IT industry, Professor Kunii focuses herenergies on university education that takes innovation and globalization
into consideration. She has contributed to policy in the ﬁelds of innovation and support for business creation.

Turning the tables on adversity in Japan

Makoto Kigawa
Representative Director, President andExecutive Officer the Company, Yamato Holdings Co., Ltd.
Ideas that will help Japan turn the tables on its contracting
economy will generate innovation. How can we contribute to theinvigoration of regional areas facing depopulation and the aging of
their remaining population? What can we do to embrace the era ofborderless logistics and recover Japan’ s international
competitiveness? A revolution in logistics could power thesolutions to these problems and generate a variety of innovations
both in Japan and overseas.
Yamato Group’s home delivery network, known as “TA-Q-BIN”,
has taken root throughout the nation as a community-based
service, and is already part of the nation’ s social infrastructure. If
we eschew the focus on maintaining a closed company network,
this network could be turned into an open platform and be thrownopen to regional administrations and regional businesses,
including businesses in the same industry. This would produce thepossibility of generating new business fields from the ingrained
problems of individual regions. For example, ports in Japan’ sregional areas are lacking in packaging and unpackaging, customs
clearance, and international procurement and delivery functions.
The provision of services that would supplement these functions
would make it possible to realize efficient logistics using theseports. The generation of new demand, for example by using
Yamato Group’ s international controlled temperature shipment
and delivery service, known as “ International Cool TA-Q-BIN” todirectly ship high-quality fresh produce from Japan’ s regions tooverseas markets would create a significant business flow thatwould encompass both the public and private sectors.
It is also not wishful thinking, as internal demand in Asia
expands, to consider exporting high-quality Japanese-styleservices to the region, which would then become the Asian defacto standard. The quality of Yamato Group’ s delivery services
has evolved through meeting the expectations of its Japanesecustomers. We seek to make this level of quality the Asianstandard, and we believe that the citizens of the region support us
in the achievement of this goal. If we are successful, then wecould help not only service businesses but also manufacturingbusinesses to enter the Asian market. ■Mr. Kigawa works to realize new innovations that will contribute toJapanʼs economic growth as the head of Yamato Holdings, a company
that has implemented innovations of great signiﬁcance to the logistics
industry.

Generating Service Innovation
towards the creation of new value
Toshio Yamamura
Operating Officer of Consumer Service Business Unit,
Mitsui & Co., Ltd.
In Japan, the cultural climate does not encourage value to befound in services. However, the idea that evolution in services will
generate new value is an important one. Japan’ s population isaging rapidly, and unless we change the nation’ s social
mechanisms looking towards 2025, when the baby boom
generation will turn 75, Japan’ s finances will collapse. “ ServiceInnovation” is certain to result from efforts to avoid this.
A mechanism is currently coming into being by means of which
new medical devices and drugs are developed and used to provide
community-level support for elderly citizens in regional areas. If
we could export a system for the provision of medical care andnursing services in an aging society overseas as “ the Japanesemodel,” we would not only make an international contribution, butwould also invigorate the Japanese economy.
Healthcare is by nature a community-based service, butelements such as prevention, treatment, and responses toprognoses are basically the same in every country. Because of this,
this field is a highly universal and global one. There is demand
from people within the Asian region for advanced healthcare
services that are not available in their own countries, and the trend

towards medical tourism in and migration to Singapore, India, andThailand is accelerating.
Japan’ s healthcare system has been closed to the world up to thepresent, but the nation possesses unique advanced technologies. In
the future, if we are able to link up with the healthcare networks ineach of the countries of the Asian region and create mechanisms
enabling bidirectional movement of patients and healthcare
workers between developed and less developed nations, we willproduce new healthcare networks and generate enormous
innovation in healthcare in Asia.
Japan’ s medical care industry and its peripheral industries
possess an international advantage, and if we can lower theregulatory barriers, there is a strong possibility that theseindustries could be Japan’ s next world-leaders, after cars andhome appliances. Experimenting with the entry of businesses fromother industries into the healthcare market can be seen as an
example of “ Industrial Innovation.” Mitsui as a general trading
company could serve a connecting function in this field. ■Mr. Yamamura has worked for many years in the areas of service andhealthcare business, which are being targeted by Mitsui and Co., Ltd. as
growth areas towards the creation of new value and the realization ofincreased competitiveness.

This is a translation of a paper originally published in Japanese.
NIRA bears full responsibility for the translation presented here.

About this IssueStimulating Innovation to Break Japanʼs Deadlock
The Internet is said to be driving “Industry 4.0,” thefourth industrial revolution, and the socioeconomicchange in focus from manufacturing to IT is producing
significant change in Japan’s industrial structure.
Since the collapse of the bubble economy, Japan has
seen a long-term shift in management towards a focus
on cost-cutting. During this period business operations
have been streamlined, but at the same time we are notopening up new horizons. Will Japan’s manufacturingindustry become a mere parts maker for U.S. IT
companies that specialize in the creation of platforms?
And is there any prospect of Japan coming out on top
in the intense competition in the field of artificial
intelligence? Ultimately, will Japan’s strengths,
typified by the sharing of implicit knowledge and thecoordination of initiatives into a balanced whole,remain strengths amid the new industrial trends?

The determination of measures to respond to theseissues is an urgent matter. The difference between thisand Japan’s past efforts at modernization is the factthat it is no longer possible to simply attempt to catchup. It will be essential for us to build systems that
produce value appropriate for the 21st century. Thismeans breaking through the shell of the systems thatsupported Japan’s high economic growth.
The experts interviewed for this issue of My Vision
discussed what they consider to be the keys to Japan’stransition to becoming an innovative economy. The
realization of the initiatives that they suggest will not
be easy, but there is no question that this represents anissue that should be addressed as a priority by thecurrent administration.

Reiko Kanda, NIRA Executive Vice PresidentNational Institute for Research Advancement (NIRA)
4-20-3 Ebisu, Shibuya-ku, Tokyo 150-6034, Japan(URL: http://www.nira.or.jp/english/)(Facebook: https://www.facebook.com/nira.japan)
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