COVER STORY • Digital Society — Issues & Challenges • 8

Interview with Dr. Tsuyoshi Abe, Senior Vice President & General Manager of the Marketing
Headquarters, Yokogawa Electric CorporationA

VUCA World in DigitalSociety

By Japan SPOTLIGHT
Our key question in the Nov./Dec. 2018 issue is how digital technology, playing a key role in the Fourth
Industrial Revolution, will affect the nature of our social economy. According to a distinguished IT
engineer and business executive of Yokogawa Electric Corporation, Dr. Tsuyoshi Abe, digital society canbe described as a “VUCA world” — that is, a world of Volatility, Uncertainty, Complexity and Ambiguity.
How is it that digital society can be described as such? What are the key characteristics of this world?
How well can Japanese businesses adjust their management style to this world?
In the following interview, Dr. Abe introduces this VUCA world based on his wide range of working
experience in Intel and Yokogawa as senior vice president of the marketing headquarters withsemiconductor and IT engineering expertise. We will apparently need knowledge of both engineering andnatural sciences to survive in this digital society. Thus, the classical distinction between natural science
departments and social science departments at universities could become meaningless.
(Interviewed on Aug. 30, 2018)

Introduction

create new business. We are eager todevelop a new business that we have
JS: Could you please introduce
never tried. Yokogawa was founded inyourself briefly?
1915 as a measurement equipment maker
but these past 40 years has been engaged
Abe: I am the general manager of thein working on production and sales ofMarketing Headquarters at Yokogawa
control equipment for plant facilities toElectric Corporation, the largest
achieve process automation and design ofmeasurement and process automation
control rooms. I believe we are now at aequipment maker in Japan and the thirdpoint to reconsider our business for thelargest one in the world. Yokogawa has
future. In line with this thinking, webeen a leading company in the area offounded amnimo Inc. in May 2018, a newprocess automation in industrial
company aiming to provide Industrial
automation for a variety of production
Internet of Things (IIoT) services that canplant facilities, such as oil, gas/LNG,
be easily carried out by our customers.
refinery, chemical, pulp/paper, power,
This company is 100% affiliated to thefood, medicine and so on, since we
Marketing Headquarters, a non-profit
developed a distributed control system incenter.
1975 as a pioneer. Over the life cycle of a
The third activity is marketing for theplant facility, Yokogawa has been
existing industrial automation or process
Dr. Tsuyoshi Abe
providing optimal solutions for the
automation business. The R&D center,
efficiency of the facility as well as its
named the innovation center, is also undersafety and security.
our supervision, which is unusual. Market communication, product
Our Marketing Headquarters is a bit different from those of otherbranding, managing M&As and strategic alliances, activities relatedcompanies. We have 10 activities under our supervision (Chart), andto patents and global standards are also subject to our command.
this distinguishes us from others. The first one is to make mid-term
Finally, industrial design is another activity supervised by us, which
or long-term business plans and monitor them. We announced ais very unique. I believe it is only Yokogawa in Japan that has so
new mid- and long-term plan in May 2018. The second one is to
many business activities supervised by its Marketing Headquarters
32 Japan SPOTLIGHT • November / December 2018https://www.jef.or.jp/journal/

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CHART

Accountabilities of Yokogawa
Marketing HQIndustrial
DesignStrategic
Standard
MGMT

Biz Plan(MTBP& LTBP)

Marketing
HQ(MKHQ)

Strategic
IP
MGMT

M&A /
Alliance
Branding

New BizDevelopment

IAMKTG(MI)

Innovation
Center(R&D)
MarketCommunication(MA)

Source: Yokogawa Electric Corporationand there are very few companies like us in the world.
I think these 10 business activities are all assets of marketing. We
are now living in a so-called VUCA world where the key to surviving
competition must be to make business decisions as quickly as
possible. Considering that we must fail fast and fail forward in thisvolatile and uncertain business world today, our Marketing
Headquarters must make decisions faster than environmental
changes. It will probably be difficult to survive in a VUCA world
unless even a factory makes a decision as quickly as the Marketing
Headquarters does.
I had been working for Intel for 31 years and transferred to
Yokogawa in 2016. I have knowledge about semiconductors and ICT
industries thanks to my experience with Intel. When I became
interested in working in other business areas like the energy industry
and the biology industry, I got the chance to be transferred to
Yokogawa.

The VUCA World
JS: VUCA world is a term describing digital society.

Could you explain to us exactly what this means byshowing us specific examples?

Abe: Yes. In recent years, the World Economic Forum’s annual
conference at Davos in Switzerland has always covered topics related
to VUCA. This conference is an important venue for policy-oriented
discussions among leading politicians, journalists, businessmen andacademics worldwide. VUCA stands for Volatility, Uncertainty,
Complexity and Ambiguity.
VUCA is what the law of increasing entropy in the second law ofthermodynamics tells us about nature. Simply put, natural
phenomena always move toward disorder and diffusion, according tothis law. First, any natural phenomenon starts with stability, but astime goes by it becomes volatile and uncertain, and then cause-andeffect relations concerning this natural phenomenon will beambiguous. Under these circumstances, there will be an increasing
variety of responses to this phenomenon, because of this ambiguity.
There will be many exogenous variables which could influence thisphenomenon, and also many multiple interdependencies among
these variables will be observed. This increased complexity leads to
unpredictability about the future progress of the phenomenon. In the
final stage, the ambiguity of the cause-and-effect relations of thephenomenon reach extremity, and because these relations remaincompletely unknown we cannot apply empirical deductions toachieve a solution. This law of nature must be applied to our social
development today. As our society faces unprecedented large-scalechanges, we cannot predict the future of any social phenomenon.
For example, in the recent US presidential election, Hillary Clinton
won 64.2 million votes, while Donald Trump won 62.2 million votes.
But Trump won more electors than Clinton did and becamepresident. There were very few who predicted this outcome before
counting ballots started.
Looking at a company’s corporate value, in the taxi business Uber
has the largest corporate value in the world, I believe. However, they
do not own a single car. Likewise, Alibaba, with the largest sales
channel in the world, has no stock of any shop item. Assuming thatthe largest media in the world now is Facebook, it has no contents of
its own. Though Airbnb is supposed to be running the largest
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accommodation-providing service in the world, it has no real estate.
You can see that companies with no fixed costs have the larger
corporate value. We have a limitless number of those examples.
I had been working in the semiconductor business while I was at
Intel. In the 1970s, American firms were leading the business and in
the 1980s Japanese firms like NEC, Fujitsu and Panasonic emerged
as its frontrunners. However, after the 1980s, Korean firms like
Samsung prospered and very few Japanese firms have survived therace until now. Thus we see changes in the leading companies in thisdomain very quickly. Prosperity and decline happened very rapidly.
There must be no other business area where such a speedychange among the principal players has happened every decade. In
our VUCA world, such speedy changes have become the new normal
and they occur now in many sectors. This is amazing and at thesame time terrifying.

characteristic of digitalization. Under such circumstances, any delay
in management decisions could be fatal for earning profits, as thebest market situation for a company will be over if management
remains reluctant to make a decision on changing the principal
products for sale. Such cases can be observed in many sectors inthis VUCA world.

Rules of the Game in the Digital Economy
JS: The speed of digitalization is high and the

Is platform business replacing it?

regulations necessary for smooth operation of digitalbusiness are lagging behind the trends. For example,
the European Union adopted General Data Protection
Rules (GDPR) in May 2018 to try to meet theincreasing need for privacy protection resulting fromthat enormous amount of private data being
processed by digital technology. But it does notseem to be good enough to achieve the goal.

Abe: Yes, it is. “Digitalization” or “digital transformation” is bringing
about this situation. In digitalization, anybody can copy any productor technology. When the Japanese manufacturing industry was
highly competitive, there was the Trinitron picture tube for televisionsets, which was a technology that made a clear and beautiful picture
in color for TVs. Such technology, or any other, can be copied easily
by anybody in our digital era. Thus, such new technology users
would lose competitive advantage in a very short period. Under thesecircumstances, any technological competitiveness would be lostquickly and price would be the sole factor determining the winner ofthe competition. Any TV maker successful in selling the product at
the cheapest price would dominate the market.
We have a hypothesis of an S-shaped curve concerning the life
cycle of a product. A company is gaining profits when its products
are on the upward trend of the curve. After that, arriving at the peak,
it will be a mature industry. It took more than 33 years for the
Trinitron picture tube to prevail in the market. As it expanded in themarket slowly, the producer gained profits over a long time and thisproduct assured the company of big profits. However, another more
recent component of TV sets — the liquid crystal panel — had asteeper S-shaped curve and it could bring in profits for only 10
years. Such rapid change in best-selling goods is a major

Abe: Yes, exactly. The GDPR is an attempt to deal with Complexity inthe VUCA world. Another issue could be related to taxation in termsof the macro-economy. Our tax system seems to fail to deal with theincreasing e-commerce emerging everywhere through digitaltransformation. Tax authorities have not found any countermeasures
yet to collect tax from such e-commerce. They have not decided yet
where to tax e-commerce — the venue of the server or thecompany’s headquarters. They cannot keep up with cyber business.
Governments must be pressed to find a solution as quickly as
possible.
The same is true of a company’s decision-making process. In
Japan, changing business decisions too frequently was traditionallyconsidered bad management. But today, a quick change of decision
is considered good management. This is a big change in thedecision-making process largely adopted by Japanese firms. PDCA
(Plan-Do-Check-Action) is not working any longer. Japanesebusinesses have been fully tuned to raising the quality of a productby the PDCA process. However, PDCA cannot keep companies up
with the rapid changes in market situations. Today another decisionmaking process has been adopted by some Japanese firms — OODA
(Observe-Orient-Decide-Act). Under this process, more decision
making is left to the factories or the shops working on the daily

JS: Our manufacturing industry is not solid anymore.

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business and facing the reality of the market directly. As a matter offact, Yokogawa’s mid- and long-term business plan adopted in 2018
recommended OODA, while also retaining PDCA. If we have thewrong plan at the starting point, then the PDCA process would
produce the wrong outcome, in which case we would need OODA.
To achieve OODA, we would need a different team in our shops or
factories. We would need a team of employees with a diversity of
talents and expertise, like those portrayed in films like Mission
Impossible or The A Team. Diversity is a key word. A team with thesame kind of talents or capacities would not be able to achieve thedesired outcomes. People with diverse talents and expertise at thebusiness spots directly dealing with customers will need to observe,
decide and act quickly.
JS: Consumers and producers have been consideredseparate entities. But from now on, will consumers
need to participate in the business decision-making
process to meet the needs of the market more
quickly?

Abe: Yes. In our VUCA world, innovators are not the enterprises
anymore. Since around the middle of the 2000s, end users in general
have been considered innovators, due to the influence ofdigitalization, namely in this case the emergence of SNS. I would say
at least 70% of innovators now are general end users. So it would bemeaningless for a company to think about future business on its
own. Corporations will need to collaborate with their customers evenfrom the stage of R&D. So I believe R&D will be turned into C&D(Connect and Develop), meaning product development bycollaboration between the corporation and the customers. Amongthe 25 projects running in parallel in my office, most of them aresuch C&D projects.
JS: It is often pointed out that Japanese companies

today fail to create attractive products for customers
and that Japan’s stagnant economy is due not only togovernment policies but to Japanese business firms.
But I guess many big Japanese companies are
beginning to understand what the VUCA world
means and are now prepared to produce goods thatmeet customers’ needs.

Abe: Yes, that is true. They are successful in producing attractive
goods. I think the big question for them is marketing. A good
example is mobile phones. Japan has a population of over 120
million and the third-largest mobile phone market in the world, so
Japanese companies can survive just by selling goods only in theJapanese market. Their first priority would be the Japanese market,
while South Korea, for example, has a population of only 50 million
and thus naturally targets a global market. Which market a company
gives priority to would make a big difference between the sales
strategies of the two nations’ companies. In Southeast Asia, forexample, there are many contagious diseases spread by mosquitoes,such as Zika fever or malaria. Both Japanese and Korean companies
sell many air conditioners in Southeast Asia, but while Korean air
conditioners are equipped with ultrasonic technology to ward off
mosquitoes, Japanese ones do not have it. As Koreans target a
global market as their first priority, they produce goods on the basisof an ethnological analysis of the nations overseas to understand theauthentic needs of those countries. Japanese marketing strategy has
not reached that stage yet.
There are of course some success cases for Japanese companies.
For example, Panasonic’s washing machines have won a good
reputation in India. By sending their employees to live in India, theyfound that a sari, an Indian woman’s traditional clothing, was easily
damaged by existing washing machines. So they added a button forJapan SPOTLIGHT • November / December 201835

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washing a sari specifically to their washing machines for Indiancustomers, which won great support from Indian women.

Human Resources Needed for Digitalization
JS: What kind of talents among human resources will

be needed in the age of digitalization?

Abe: I think there are five key elements necessary for humanresources in this century as digitalization continues.
The first one is, needless to say, ICT literacy. You must be amaster of a PC and smartphone, and in addition data literacy for
analyzing statistical data would be desirable. The second one iscommunication capacity, including language capacity, as you may
need to be active anywhere in the world. The third one is competency
in collaboration — you will need the capacity to collaborate withdiverse colleagues and partners. The fourth one is leadership. We
will need leaders who can take initiatives in a transition period where
no fixed values are dominant. Last but not least, creativity. As
digitalization continues, robots and AI will replace human jobs toraising efficiency, so I believe that people will have to play a key rolein creating new jobs.
Concerning Japan in particular, I think we should have moreindividuals with dual or triple degrees. Thus in the age ofdigitalization we will need intrapersonal skills, which are lacking inJapan. People with such skills will be much more creative indigitalization where the distinction between social science andnatural science is blurred and an interdisciplinary approach would be
productive.

them, any attempt to achieve them in this process would need to beassessed. We have very few methods of assessment. But it is often
said that failure is the mother of success, so we will need to improve
our assessment methods. Otherwise, we will not be able to realize
large-scale innovations.

Mitigation of Income Inequality
JS: Income disparity is rapidly growing in all capitalist

nations. Unless we mitigate it, capitalism may not besustainable. In the digital society, we can see a rise in
the sharing economy, for example Uber, which offers
a taxi-sharing service. Would this mean less income
inequality? Would it be considered a positive aspectof the digital society?

Abe: In my personal view, income disparity will not be mitigated but
will even expand in the digital society. The authentic sense of “digital
divide” will be literally “expanded income inequality”. However, I am
not pessimistic about the future of the digital society. I think thebasic philosophy of capitalism could be changed from an“egocentric” one to an “ecocentric” one. So many large enterprises
are now pursuing the 17 Sustainable Development Goals (SDGs)
announced by the United Nations in their next mid- and long-termbusiness plans. Among those SDGs, inclusive growth (growth basedon equality) and environmentally sustainable growth are included.
Yokogawa is no exception. We have decided to pursue all of thosegoals. Of course, we are trying to earn money, but the money must
be used for more ecocentric or altruistic purposes.

JS: In order to achieve such human resources, will weneed to reform the Japanese education system, andif so, how do you think we could change it?

Abe: It is difficult to change our education system. One thing I canclearly say is that we will have to change our working performanceassessment system in companies. The current Japanese working
performance assessment is based upon a zero-sum formula. If you
fail to achieve your goal, you will get a negative assessment and viceversa. We should give up this system.
Instead, we should set high targets and even if we fail to achieve
36 Japan SPOTLIGHT • November / December 2018

Written with the cooperation of Naoko Sakai who is a freelance writer.