DI Report:

Growth and Business Creation after COVID-19
Updated: May 27, 2020
Dream Incubator Inc.
After COVID-19 Research/Analysis Team
This material is intended to provide insight and best practices to clients rather than specific advice.

All copyrights in this material belong to the Company.
Any duplication, reproduction, quoting, reprinting, translation or lending of all or part of this material without permission is prohibited.

DI’S PERSPECTIVE ON THE CURRENT SITUATION AND CONTENT OF THIS MATERIAL

Two big waves are approaching● Wave 1: Acceleration in Change– Organizational and social issues that have been covered are now exposed, and immediate action isrequired● Wave 2: Game change and industrial structure transformation– Assumptions and standard of society and businesses are changing in response to avoidance of the“three Cs” and decoupling among countries, igniting game change and industrial structuretransformation

Leaders need to tackle this change “brightly and positively” and “both proactively and reactively,”● Leading companies are already considering and promoting efforts to grow and create businesses after

COVID-19

DI expects Japan and Japanese companies to develop and grow significantly during this era of change
caused by COVID-19● Therefore, DI has published in this material what are likely to be the seeds for growth and businesscreation after COVID-19 and hope they will lead to the acceleration of efforts by leaders and companies
creating a new society

1Table ofContents

1. Changes and Challenges Underway

2. Message from the Representative● For Young People and Young Companies

2

HOW WOULD THE AFTER COVID-19 WORLD BE LIKE?
Existing “assumptions” that made up society, life, industries and businesses will change.
COVID-19
disasterNow (before COVID-19)(While there is concern about risks,) simple
efficiency is pursued by actually aggregating
and scaling various factors

Future (after COVID-19)
High productivity will be achieved when actual
aggregation and scaling becomes difficult due
to avoidance of the “three Cs” and decoupling
among countries

Work environment/
office: All employees
visit offices
in cities
Planning, R&D:
In-house andreal

Suppliers: Achieving
low cost by aggregationand volume-based
discounts

Work environment/ office:
Offices/working styles notbased on going to offices

Employees: Bulk hiringand developing
multi-skilled workers

Real
x aggregationx scaling

Planning, R&D:
Utilization of outsource
and investment functions,decentralization, online

Employees: Task
segmentation,
standardization,
digitization,
specialization

Suppliers:
Decentralization,high productivity

Sales channels:
Mainly online(changing therole of real)

Online & realx decentralization
x automation

Sales channels:
Mainly real
Manufacturing
sites/plants:
Concentrated
on low-cost sites,
mainly human power

Manufacturing
sites/plants:
Decentralization,
further
automation

Various things will be reconfigured3

DEGREE OF IMPACT ON EACH INDUSTRY
Based on stock prices, less affected industries are “infrastructure, healthcare, and information andcommunication.” Conversely, more affected industries (including estimates) are “accommodation, food andbeverage, finance, construction, business services, real estate.”
Scale of each industry and degree of impact fromCOVID-19 disaster based on stock prices

Future movements (DI’s views)

Industry scale (Nominal GDP**, trillion yen)
00Degree of impact of the COVID-19 disasterbased on stock prices(Decline in market capitalization*, %)

-5

10

-20

-25

30

40

50

Manufacturing(Pharmaceuticals andfoods)
Information andcommunication

Agriculture,
forestry andfisheries
Manufacturing(Transportationequipment)

Medical andnursing care
Retail

Education, learning
supportWholesale

Manufacturing(Raw materials)

Transport,
postal services**
Source:Manufacturing(Electricity andmachinery)

Construction
Finance, insurance
Business support services
Accommodation,(Human resources, advertising, etc.)
food and drink,
services

-30
*

60

Electricity, gas and water

-10

-15

20

Decline in market capitalization for each industry from the end of January to the end of March 2020
(See page 20 for details.)
Estimation of DI based on annual estimates of national accounts (See page 20 for details.)
Economic and Social Research Institute of the Cabinet Office “Annual Estimates of National Accounts
for FY2018”, SPEEDA, DI analysis.

Real estate70

Easier to move proactively● It is relatively easy to promote planningand investment for growth, businesscreation, and introduction of new value
propositions
Need to move to proactive
transformation after taking protective
measures● As demand decline and sales and cash
flows decrease, defensive efforts are
made– Securing cash, reducing
unnecessary costs, increasing
productivity, downsizing, etc.
● The renewed role will be formed while
proactively utilizing excess resources4

CHANGES/CHALLENGES (1/3):(A) PRODUCTS/SERVICES IN EACH INDUSTRY (VALUE PROPOSITION)
Review of ideal products/services (value proposition) will be accelerated in each industry
Manufacturing (to consumers)

Medical and nursing care

Introduction of
Responding to
subscription
services and Online branding
changing consumer
developmentof DtoC*
preferences
channels

Review of customer
portfolios

Transformation of
product portfolios

Introduction ofsubscription models

Finance, insurance

Industry scale (Nominal GDP***, trillion yen)

New productdevelopment
New credit criteria
Online consultation(Insurance forunattended delivery, etc.)

*
**
***

Self-medication

Efficiency/
automation of
personal services[Repeat] Scale of each industry and thedegree of impact of the COVID-19
disaster based on stock prices

Degree of impact of the COVID-19 disasterbased on stock prices(Decline in market capitalization**, %)Manufacturing (to businesses)

Strengthening of
in-home services

Abbreviation for Direct to Consumer
Decline in market capitalization for each industry from the end of January to the end of
March 2020 (See page 20 for details.)
Estimation of DI based on annual estimates of national accounts (See page 20 for details.)

0
-5

0

10

20

50

60

Manufacturing(Transportation equipment)

Information and communication
Enhanced
Utilization ofcommunication
personal/location andcapacity
other types of information

Remotemaintenance

Manufacturing(Electricity and machinery)

Finance, insurance
Real estate

-30

70

Information andcommunication
Manufacturing(Raw materials)

-20
-25

40

Manufacturing(Pharmaceuticals and foods)
Medical and nursing care

-10
-15

30

Real estatehygiene standards
Shift from cities to New
for buildings, such as
suburbs
ventilation

Online viewing

5

CHANGES/CHALLENGES (2/3): (B) ORGANIZATIONAL AND MANAGERIAL ASPECTS
Ideal organizations and management are changing
2 changes/challenges common among
various organizations(i) Task segmentation and visualization● As connections weaken throughtelecommuting, subdividing anddefining each person’s tasks andvisualizing progress is required● There is a need for visualization of jobs
with business partners as well as withincompanies⇒ On the other hand, there are someproblems/needs that irregular creative
jobs are difficult to conduct(ii) Decentralization● Needs for decentralization of suppliers
and manufacturing sites to ensurebusiness sustainability are increasing● In order to avoid the risk of businesssuspension due to infection, a businessdesign that doesn’t leave the executionof individual task to a specificindividual is also an issue– This leads to introductions of systems
and robots
Source: DI Interview and analysis

Changes/challenges in efforts by organization and function
R&D: Review of themes andchanges in methods

Supply chains: Visualization,
decentralization, automation● Formulating visions and road maps for futuresocial transformation● Utilizing the internet and simulations, andpromoting external partnerships (CVC, investment,
industry-university collaboration, etc.)

Research/
Development

Purchasing/
Procurement● Maintaining high levels of differentiation andproductivity while promoting visualization anddecentralization to ensure stable supply● Further promoting human-independent
automation

Manufacturing

Logistics

Marketing/Sales

Corporate (personnel, general affairs, legal, finance, IT, etc.)
Personnel: Fundamental review of
HR policies● Identifying all tasks, conducting BPR, utilizing

freelancers and outsourcing to maximize thevalue of telecommuting● Redesigning policies for recruiting and training
personnel

Marketing/Sales: Digital utilization andhigh value addition● Increasing importance of digital tools and EC toconnect with clients● As sales move online, it is difficult to use

personality as a selling point, and it is important toelaborate on materials
6

CHANGES/CHALLENGES (3/3): (C) EMERGENCE OF GAME CHANGE
Game change begins in various areas, and new opportunities are emerging
Changes taking place
during COVID-19 disaster

Changes in consumers(i): Softening consumer sentiment
Example) Further spread of
cashless payments
EC and non-face-to-faceservices, etc.

Changes in practices/rulesof “companies”

Changes in practices/rules of“industries”

Changes in rules/laws of“society”

*
**
***

4 types of game change

Abbreviation for Video on Demand
Abbreviation for Factory Automation
Abbreviation for Over-the-Counter (Refers to OTC drugs requiring guidance)(ii): Economic equilibrium shift
Example) Proactive introduction ofrobots and systems
Reduction andcancellation of offices,
etc.
(iii): Changes in industry practices
Example) Early VOD* distributionof new movies(iv): Regulatory reform
Example) Deregulation of
conducting online
medical examinations

Examples/images of surrounding
changes emerging
ActionCashless-related terminals, system security
and personal information protection

in cash registers, ATMs and cashReaction Changes
related businesses

ActionRobots, FA** equipment, various
maintenance services, various systems

Hiring/training/managing personnel,

Reaction welfare benefits

ActionFood delivery and providing special
customized goods when watching movies
at homeReaction New uses for conventional movie theaters
ActionTelemedicine support tools and drugdeliveryOTC drugs*** and self-diagnosis

uses for conventional hospital
Reaction New
facilities
7

Individual Cases● (A) Changes and Challenges in “Industries”● (B) Changes and Challenges in “Organizations”● (C) Emerging Game Change● Supplemental Data, etc.

8

(A) CHANGES AND CHALLENGES IN INDUSTRIES (1/5): MANUFACTURING INDUSTRY
Shift to decentralized sites for risk diversification and visualization of value from concentration of sites pursuing efficiency
Industrial structure changes
and future themes
Traditional challenges and initiatives
Changes and Challenges Underway
Improved efficiency by concentratingproduction sites and limiting suppliers● “ The Fukuyama and Tenri plants
for camera parts have been
consolidated in Tenri, and further
consideration will be given. ”-Chairman Tai of Sharp● Approving “single-source
suppliers,” Apple improved
efficiency by limiting suppliers
and giving thorough instructions● Sony reduced costs by reducing
the number of suppliers fromapproximately 1,000 to 250 andincreasing the transaction volume
at each company

Purchase fromsingle company

Centralized
production+

The risk of concentrating sites andpurchasing from a single company
materialized, causing stagnation in
production● “ Overseas chemical raw material
plants stopped operations, andcross-border procurement risksmaterialized. ”-Chemical industry● “ We should have established a
supply chain on a part-by-partbasis. ”-Chairman Nagamori of Nidec● Kaga Toshiba Electronics suspended
operations at a plant with 2,000
employees for 15 days due to theinfection of 20 employees

Purchase fromsingle company

There are signs of accelerated
decentralization in supply chains anddiversification of procurement● The Japanese government earmarked
23.5 billion yen in subsidies fordecentralizing production sites● “ In consideration of risks,
decentralization of production sites
will accelerate. ”-Chairman Nakanishi of theJapan Business Federation
Visualizing the value of decentralized supply
chains● It is necessary to convince downstream
manufacturers of increased costs due todecentralization and diversification
Factory automation to support flexible
supply● This will enable flexible production
adjustment in case of emergency

Centralized
production

Source: JBpress article dated May 2, 2020, Nihon Keizai Shimbun (online edition) article dated June 15, 2019, Weekly Diamond article
dated March 28, 2020, Nihon Keizai Shimbun articles dated March 20, 2014 and April 21, 2020, Weekly Toyo Keizai article
dated April 25, 2020, DI interview and analysis.
(Image) Adobe Stock

Decentralized sites
Purchase frommultiple companies

9(A) CHANGES AND CHALLENGES IN INDUSTRIES (2/5): NURSING AND CARE INDUSTRIES
Increase in labor shortages leading to possible renewal of industrial policies/regulations and automation
Industrial structure changes
and future themes
Traditional challenges and initiatives
Changes and Challenges Underway+

Improving the productivity of staff at
Clusters occurred in group homes and day
nursing care facilities and day service
service facilities. Demand for personalfacilities due to labor shortages
home care has increased● Promotion of non-face-to-face work
● At “Akiyama no Sato” in Matsudo
automation including system input
City, 29 people were infected and 13– The introduction is also
diedsupported by the MHLW and● “ Large-scale day service facilities
the METI
are already starting to be avoided,and companies shifting to inFor the same reason, the introduction ofhome nursing care are increasing
support for the independence of therapidly. ”
elderly and integrated community care is● “ Employees are also concerned
also considered
Approx. 2,450,000 people
about the work environment in(Demand**)facilities where they have close
contact with multiple people. ”
Approx. 2,160,000 people-The above comments are**(Demand )from the head of a nursing
Approx.
care facility in Tokyo*

1,900,000 people

2016

*

**
Source:Approx.
550,000 people

Approx.
260,000 people

2020

2025 (FY)

7th period

8th period

9th period(2018-20)(2021-23)(2024-26)

More efficient nursing care may berequired as labor shortages accelerate● Centralized nursing care at facilities
has been avoided, and theefficiency of nursing care has
declined● Meanwhile, the number of people
in need of nursing care willcontinue to increase, aggravating
labor shortages
Technology utilization andstandardization in the nursing careindustry needs to be seriously
considered● Automation of face-to-face workand use of robots, which have notyet been introduced due to fear of
accident risks● Industrialization of support forindependence, etc., in line with thereview of nursing care insurance
and incentive plans

A total of the number of nursing care personnel in the “Surveys of Nursing Care Service Facilities and Offices” (after adjustment by the recovery rate, etc.) and the number of nursing carepersonnel engaged in services equivalent to the former in-home nursing care for prevention of nursing care, etc., among comprehensive businesses (estimated value: approx. 66,000
people).
Expected demand (approx. 2,160,000 people and 2,450,000 people) is the aggregate of the estimated value by prefectures based on estimated service volume (including comprehensive
businesses) positioned as the 7th nursing care insurance business plan by municipalities.
The Ministry of Health, Labour and Welfare website, NHK, DI interview and analysis.
(Image) Ministry of Health, Labour and Welfare, “Measures to Secure Welfare and Nursing Care Personnel,” RIKEN website “ROBEAR.”

10

(A) CHANGES AND CHALLENGES IN INDUSTRIES (3/5): MEDICAL INSTITUTIONS
Signs of accelerated shift from face-to-face to remote medical care, including drastic review of regulations
Traditional challenges and initiatives
Medical care is mostly provided on a faceto-face basis, and remote medical care isutilized only in certain regions and forcertain diseases● Remote medical care is mainly forrevisiting patients with chronic diseases inremote areas
There are both technical and regulatory
hurdles to remote medical care
● Information available to doctors is limited
and there is a problem of responsibility for
misdiagnosis● Therefore, in principle, new patients are
required to take face-to-face medical careand receive medication instructions● “ Remote medical care is only
complementary to face-to-face medicalcare. ”
-Japan Medical Association, MHLW

+ Changes and Challenges Underway

In-hospital clusters frequently occurred, anddemand for non-face-to-face medicalcare is rapidly growing● At Eiju General Hospital (Taito Ward),
210 or more people were infected– “ Both COVID-19 positive andnegative patients existed in multiple
wards ”, “ The infection has spreadthrough medical personnel. ”-MHLW● “ Since there are no specific guidelines,
different hospitals respond differently. ”-Medical personnel● An increasing number of patients buy
drugs at drugstores and treat themselves

Source: The Ministry of Health, Labour and Welfare website, the Japan Medical Association website, Mainichi Shimbun article dated May 4, 2020, the Cabinet Officewebsite “Summary of the Press Conference Held After the 4th Regulatory Reform Promotion Conference,” DI Interview and analysis.
(Image) Adobe Stock

Industrial structure changes
and future themes
The range of remote medical care isextended for a limited period of time.
And it may spread rapidly● New patients may take medical care andreceive medication instructions online orby phone● “ It may be widely recognized that online
medical care is not complementary to
main face-to-face medical care. ”-Chairperson Kobayashi of the Council
for the Promotion of Regulatory Reform
Systematization of informationacquisition/management and cooperation
with self-medication will become is suesin the future● It is difficult to obtain biologicalinformation, and the quality of medicalcare depends on the ability of doctors
to ask questions

11

(A) CHANGES AND CHALLENGES IN INDUSTRIES (4/5): TRAVEL AND LEISURE INDUSTRIESNew opportunities in utilizing technology and securing public health to develop domestic demand(Trillion yen)

<Trends in travel consumption>

20

CAGR: 0.05%
10
0

2010

2012

2014

Japanese domestic
travellers

20162018 (Year)

Foreign travellers
visiting Japan

Public health is one of the many value
criteria in leisure and accommodation
facilities● The focuses are on out-of-theordinary experiences, low prices,convenience of transportation, etc.

Industrial structure changes
and future themes

Demand has declined significantly inside andoutside of the country. The decline in
inbound demand is particularly
remarkable, and recovery is expected totake a long time
● WBF Hotels & Resorts, which operates
hotels, filed with the Osaka District Court
for the application of the Civil
Rehabilitation Act on April 27, 2020
● “ Overseas economic losses are
particularly severe, and inbounddemand will be depressed for a while. ”-Person in charge of marketing at
a hotel company

Utilizing technology to encourage
domestic demand● Increasing matching accuracy between
travellers and tourism resources topromote new tourism consumption

Securing public health is becoming a key
value criterion in leisure and travel● “ Some resorts where social distance canbe maintained naturally have not lostreservations. ”-Person in charge of corporate
planning at a travel agency

Shift to service design based on criteria
giving more consideration to the hygienic
value.
● Preparation of a variety of services tomaintain social distancing such as room
meals, etc.
● Standards and certifications toindicate hygiene conditions may also
be effective

Source: The Japan Tourism Agency “Survey on Consumption of Foreign Visitors to Japan,” “Statistical
Survey of Accommodation and Travel,” Asahi Shimbun article dated April 27, 2020, DI interview.
(Image) Adobe Stock...

While domestic demand was flat, growth
was driven by increasing inbounddemand● The number of foreign visitors toJapan has been increasing year by
year and exceeded 30 million in2018+

Changes and Challenges Underway...

Traditional challenges and initiatives

Advanced matching12

(A) CHANGES AND CHALLENGES IN INDUSTRIES (5/5): PUBLIC HEALTH
Regulations on personal information protection may be eased, and public health value will be enhanced
Traditional challenges and initiatives
The hygienic value was recognized onlyin specific sectors such as food
● The Food Sanitation Act wasamended in 2018
● Food sanitation management in linewith global standards was sought inpreparation for the Tokyo Olympics
Public opinion climate giving precedence
to personal information protection overpublic health● The GDPR* took force, requiring
personal consent to obtain cookies+

Changes and Challenges Underway

Industrial structure changes
and future themes

Securing public health becomes a major
issue in all products/services● Temperature measurement at companies,
schools, transportation facilities, etc.
● The Ministry of the Environment willsubsidize the cost of installing highperformance ventilation systems at
restaurants, etc.

Public health value will be built in a wide
variety of products/services● Singapore introduced a certification
system to indicate the cleanliness ofhotels and retail stores● UK Universities are developing
sanitary certifications for suppliers
and products

The value of securing public health andpersonal information protection should bebalanced● In South Korea, China, and Taiwan,
thorough surveillance may havecontributed to preventing the spread of
infection● The French government asked Apple tolift Bluetooth restrictions on iPhones

New services and systems that makebetter use of personal information may
be launched● The US government, which had taken acautious stance on the use of personal
information, also had consultations
with Google and Facebook aiming at
utilizing location information

Customers’
eyes

Retail +HygieneRetail +HygieneFood +

HygieneFood+

HygieneHotel +

HygieneHotel +

Hygiene+Hygiene+HygieneTransportation

Customers’
eyesTransportation*
An abbreviation for General Data Protection Regulation. It took force in 2018, and IP addresses, cookies, etc., are regarded as personal information.
Source: Bloomberg article dated April 21, 2020, AFP article dated March 19, 2020, MIT Technology Review article dated April 1, 2020, Jiji.com article dated April 25, 2020,
Cointelegraph article dated April 21, 2020, the Ministry of Health, Labour and Welfare website, the Singapore Government website, DI interview and analysis.
(Image) The Singapore Government website, Adobe Stock

SG CLEAN
The Singapore government's sanitation certification
system (started in February 2020)13

(B) CHANGES AND CHALLENGES IN ORGANIZATIONS (1/3): R&D
Shift from in-house R&D to investment-type external partnerships such as CVCs
Traditional challenges and initiatives
A development style aiming for hit
products starting with in-house R&D● Assumptions of narrowing down andconcentrating on themes+

As a result, the R&D investment
efficiency of Japanese companies islower than those of other countries● Unable to keep up with diversified
customer preferences
Trends in R&D
expenditure*(Trillion yen)
13
12
11
10
9
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

(times)80

The diversification of scenarios further
accelerated, and it became more difficult tofollow them in-house● “ Consumption trends changed andbecame difficult to forecast due tobehavioural changes caused by
COVID-19. ”● “ As the future is uncertain, multiple
businesses need to be nurtured
simultaneously. ”-Consumer goods manufacturers
and others

Industrial structure changes
and future themes

Shifting from in-house R&D toinvestment-type external partnerships● In-house production can be achievedfor promising companies from a
broader range of investment targets
Specifically, companies may increase
utilization of CVC investments● “ Consideration of sharing research
items through the CVC utilization is on
the agenda. ”-Consumer goods industry● “ The number of inquiries related to theestablishment and utilization of CVCs
has increased several times in the pastmonth. ”-Person in charge of establishing CVCs

<Increased indoor related consumption>

In addition, “avoidance of three Cs” stagnatesUK
traditional R&D activities.
60
France● “ It is a difficult situation because theGermany
development activities cannot be
40
US
conducted at home due to confidentiality. ”
Japan
20-Chemical/auto manufacturers and others
1999 2001 2003 2005 2007 2009 2011 2013 2015
(Year)

R&D expenditure in private companies (total personnel expenses, raw material costs, lease payments and other expenditures)
Value added by companies and R&D investment 5 years ago (calculated based on purchasing power parity) are calculated using the ratio of the backward 5-year moving average.
(Investment efficiency in 2010 = value added in 2006-2010 / R&D investment in 2001-2005)
Source: The Ministry of Internal Affairs and Communications “Scientific and Technological Research,” the Ministry of Economy, Trade and Industry website, DI interview and analysis.
(Image) HiVi May 2020 issue

Investment

Manufacturer

R&D investment
efficiency**
*
**

(FY)

Changes and Challenges Underway

CVC
In-house production
can be achieved forpromising companies.

CompanyA
Company
B
CompanyC
CompanyC14

(B) CHANGES AND CHALLENGES IN ORGANIZATIONS (2/3):
CORPORATE HUMAN RESOURCE FUNCTIONS
Individuals becoming less traceable accelerating and performance-based evaluation and cost rationalization
Traditional challenges and initiatives
Many companies have surplus staff due
to insufficient identification andvisualization of internal tasks andperformance.
● “ Personnel expenses can be reduced
by about 20% by identifying tasks,
prioritizing them, and using
outsourcing. ”-Business innovation consultant
In addition, since performance cannot be
evaluated clearly, the personnel
department conducts evaluation taking
into account effort and attitude.
● Even in companies that claim to be
performance-based, compassion may betaken into consideration.*
Task AThe boundary
between jobs andperformance isambiguousandEfforts Superiors
human
are
resources
visiblepersonnel*+

Changes and Challenges Underway
With the shift to telecommuting, theprogress of tasks has become unclear, and it
has become necessary to drasticallyreview evaluation methods.
● “ The overall evaluation score
decreased by 10% on average
because evaluators cannot see how
employees are working and do not feelcompassion. Evaluation standards need
to be reviewed. ”-Human resources personnel
in major service industries● “ As digitalization advances, theidentification of tasks and performance
will progress, and personnel
evaluation will be segmented. ”-Business innovation consultant
Task AThe boundary
between jobs andperformance isambiguousSuperiors
Efforts and
human
are
resources
invisible personnel

In the 2005 survey by the Japan Management Association, a questionnaire was conducted on companies that claim to be performance-based to evaluate the ideal andactual evaluation system on a five-point scale. The gap between the ideal and actual of “evaluation not considering compassion” was the 3rd largest among 17 items. In
the average of a five-point scale, while “agree somewhat” (4.3 points on average) was the ideal, “neither agree nor disagree” (3.3 points on average) was the actual.
The item with the largest gap was “realization of the right people in the right places,” followed by “implementation of demotion.”
Source: The Japan Management Association “Survey Results of Questionnaires on Performance-based Evaluation,” DI interview and analysis.

Industrial structure changes
and future themes

Rationalization of personnel expenses
may be promoted based on performancebased evaluation and task segmentation.
● Utilizing outsourcing and humanresources with low personnel expenses
in low-importance and simple tasks.
There are signs that human resource
strategies, including the utilization ofseniors, will be called into question from theperspectives of social issues and personnel
costs.
● “ As a result of a review of tasks due to
COVID-19, discussions have begun on
the utilization of senior ex-employees. ”-Major consumer goods manufacturers
Task segmentation

Task A-1

Task A-2

Task A-3

Task of highimportance

Task of low
importance=> Utilizationof seniors, etc.

Task that canbe outsourced=> To beoutsourced
15

(B) CHANGES AND CHALLENGES IN ORGANIZATIONS (3/3):
CORPORATE SALES FUNCTIONSShift from sales depending on “relationship-building” to expression quality and organizational power
Traditional challenges and initiatives
Salespeople visit customers several
times by themselves, and use gestures
and actual products to win contracts.
● 1 salesperson deals with 1 customer in
53% of companies.
● Great value in “meeting anyway” suchas frequent visits and businessentertainment.
Accordingly, relatively few resources are
devoted to developing sales materials.
● “ Visualization of materials is also
incomplete because it can beovercome by communication skills. ”-Sales representative of a major
consumer goods manufacturer+

Changes and Challenges Underway
As sales move online, new sales skills havebecome important for value appeal.
● As the shift to online sales progressed,
sales tools such as bellFace rose rapidly.
● Mitsubishi Estate Residence fully
introduced online customer service andbusiness negotiations in central Tokyo.
● On the other hand, the success rate ofbusiness negotiations has dropped
by several tens of percent in online
sales.
– “ They cannot communicate well
due to a decline in the quality ofthe explanation and theunderstanding of customers. ”-CEO of a corporate video
production company

Industrial structure changes
and future themes
Redevelopment of sales materials andcollaboration within the organization to
win online deals will be promoted.
● “ The depth of relationships that can bebuilt individually is limited, and thestrategy of building shallow but
broad relationships by the entire
department has proven effective. ”-Business innovation consultant
Visualization of sales including video, VR
and AR will become an important theme.
● Ricoh has already developed a virtual
property introduction system for thereal estate industry in Japan.

?

Source: The Department of Research on the Staffing Industry, Institute of Social Science, The University of Tokyo “Research on the Work andDevelopment of Sales Personnel,” Nikkei xTREND article dated April 23, 2020, Weekly Housing dated April 27, 2020, Diamond
Online article dated April 23, 2020, Ricoh press release dated October 1, 2019, DI interview and analysis.
(Image) PR TIMES article dated June 7, 2019, Adobe Stock

16

(C) EMERGING GAME CHANGE (1/3): “CASHLESS PAYMENTS AND INTERNET BANKING”
AND “FACTORY AUTOMATION”(i) Softening consumer sentiment:
Cashless payments and internet banking(ii) Economic equilibrium shift:
Factory automation

Current
progress of
discussions

The spread of cashless payments remained at a
gradual pace, hampered by consumer concerns● Both cashless payments and internet banking wereslow in spreading due to consumer concerns overthe leakage of personal information● The main benefits are to corporations, such as
reduced cash handling costs and the acquisition of
behavioural data through payment histories

It is difficult to make a big shift to factory
automation from the perspectives of stable employment
and costs● Large initial investment for automation is abottleneck● “ Mechanization of professional skills is a difficult
issue, and it is also difficult to allocate personnel
after implementation. ”-Machinery manufacturer

What ishappeningnow

Touchless payment may spread rapidly because
consumers have found new value in “touchless” withthe aim of preventing infection● Avoiding infection through paper money andconversations with clerks● In a consumer survey, 57% said their awareness of
paper money, coins, and ATM operations haschanged● The number of new internet banking users at MUFG
Bank in March 2020 increased approximately 3
times from the same month of the previous year

There are signs of accelerated automation as cost
assumptions for machinery and workers change.
● Labor unions are strongly opposed to the restart ofplants, and the cost of human-related processes isrising, such as by setting intervals between workers.
● “ The risks of human-related production arerecognized, and the number of human-related
processes is expected to be reduced. There is also
the possibility of expanding into areas where
robots have not been used in the past. ”-Machine tools manufacturer

Source: Fuji News Network article dated April 22, 2020, Kanmu, Inc. “Awareness Survey of Changes in Money-related Hygiene and Behaviour,” in April
2020, Nihon Keizai Shimbun articles dated February 14, April 18 and April 25, 2020, DI interview and analysis.
(Image) Adobe Stock17

(C) EMERGING GAME CHANGE (2/3): “VOD DISTRIBUTION OF NEW MOVIES” AND“REMOTE MAINTENANCE”(iii) Changes in industry practices: VOD*
distribution of new movies
Current progress Filmmakers and distributors usually delay VOD distributionof new movies from their theatrical release inof discussions consideration of entertainment companies● They were hesitant to distribute movies through VOD

because it would decrease revenue per customer andcould lead to ill-planned price cuts
● It is also considered taboo in the industry because it
may lead to a conflict with movie theater companies,
which still account for 70% of revenues
Following the close of theaters, Universal Pictures
What isdistributed the movie “Trolls” early through VOD,
happening now achieved profitability, and showed an intention tocontinue such practices● Although the box-office revenue was about 70% that ofthe previous movie, the distributor’s share by the VOD
distribution was about 1.5 times larger than the boxoffice revenue, making revenues almost the same level● Although this is a temporary measure, the company
expressed that it is considering distributing movies
through VOD at the same time as their theatricalrelease.
Warner Brothers, a major distributor,
will follow suit in May(iii) Changes in industry practices: Remote
maintenanceIn machinery and electrical equipment manufacturers,
maintenance is usually conducted by in-houseengineers visiting onsite● “ Maintenance of equipment requires the presenceof in-house engineers, who listen to customers’
concerns which leads to business. ”● “ Maintenance personnel may be on a business trip
for half a month. ”-Machinery manufacturer
These manufacturers reduced time and costs byconducting maintenance through remote guidancefor customers in areas where they cannot visit, andshowed an intention to continue to do so● DISCO, a major semiconductor equipment
manufacturer, achieved time and cost savings bysending a video explaining repair procedures to aplant in Wuhan, China● “ Approaches have to be changed so that
construction and maintenance can be conductedby robots or remote handling. ”-President Sawada of NTT*
Abbreviation for Video on Demand
Source: Zaikei Shimbun article dated May 1, 2020, Nihon Keizai Shimbun articles dated March 21, 2020 and May 12, 2020, NHK article dated May 11, 2020, DI interview
and analysis.
(Image) Adobe Stock, Movie.com

18

(C) EMERGING GAME CHANGE (3/3): “COOPERATION IN PROVIDING PERSONAL
DATA” AND “ONLINE MEDICAL EXAMINATION”(iv) Regulatory reform:
Cooperation in providing personal data(iv) Regulatory reform:
Online medical examination

Current progressof discussions

Many are cautious about providing personal data
● In Europe in particular, due to the GDPR, negative
opinions prevail over the provision of personal data
– “90% in the EU expressed concerns thatmobile apps collect personal data without
consent.”

What ishappeningnow

Online medical care has been deregulated in a phasedmanner as medical associations have taken a cautious
stance on potential inequalities among clinics● While it has been covered by insurance from 2018, it
has not become widely adopted mainly because it is“only for revisiting patients” and “types of medical careare limited.”● “There were no benefits of promoting its use since it
was not effective in attracting new patients andmedical fees were low.”

The government manages data centrally to track anddisseminate infection routes● In South Korea, the government obtains anddiscloses information from infected persons’smartphone GPS data, credit card purchases, andfrom surveillance cameras● They may be able to be applied to various services
such as disaster prevention, mobility and smart
cities by utilizing data in the future

Due to its widespread adoption in other countries and the
spread of in-hospital infections, it has been rapidly
deregulated and increasingly used
● “ Since it became available to new patients on April 13,
2020, the number of users has increased 2-3 times
over the previous month. ”-Medical practitioner in Tokyo● The system may be drastically redesigned in the
future, including telemedicine standards, treatment,
and medication methods

Source: WIRED article dated October 18, 2017, Mainichi Shimbun article dated April 16, 2020, and the Health, Labourand Welfare Ministry website, DI interview and analysis.
(Image) Adobe Stock

19

(REFERENCE) CALCULATION METHOD OF “THE SCALE OF EACH INDUSTRY AND
THE DEGREE OF IMPACT OF COVID-19” ON PAGE 4

Nominal GDP
Decline in market capitalization

Way ofthinking

The composition rate of GDP in each industry was extracted from the composition rate of GDP by economic activity (nominal) in “Annual
Estimates of National Accounts for FY2018” issued on December 26, 2019, by the National Accounts Department, Economic and Social
Research Institute of the Cabinet Office. The nominal GDP by economic activity was calculated by multiplying 548.4 trillion yen, the nominal
GDP (expenditure side) for FY2018, by each rate

Classification
methodWhile the classification was based on the “composition rate of GDP by economic activity (nominal)” mentioned above, DI partially revised theclassification when graphing● The manufacturing industry was divided into 4 categories: raw materials (steel, non-ferrous metals, glass and ceramics products, textile
products, metal products, petroleum and coal products, rubber products, chemicals, pulp and paper), transportation equipment,
electricity and machinery (machinery, electric appliances, precision equipment), and pharmaceuticals and foods (pharmaceuticals andfoods). Market capitalization as of March 31, 2020, was calculated, and the nominal GDP was divided proportionately according to themarket capitalization ratio. As the composition rate of mining was 0.1%, this figure was included in the raw materials and graphed● Industry names were changed: “professional, science and technology, business support services” → “business support services (humanresources, advertising, etc.),” “education” → “education and learning support,” “health, hygiene, social services” → “medical and nursing
care services.” “Wholesale and retail trade” was divided into “wholesale trade” and “retail trade” (See below for the composition of eachindustry)● “Public services” and “other services” in the “composition rate of GDP by economic activity (nominal)” were omitted in this graph

Way ofthinking

Aggregate market capitalization of listed companies in Japan registered in SPEEDA (approximately 3,800 companies) by industry classification
as of January 31, 2020, and March 31, 2020, was calculated, and the decline in market capitalization was calculated. (The industry classification
are as shown in the below “classification method.”)

Classification
methodEach industry was linked to the classification codes of the TSE’s 33 sectors as follows (The TSE’s 33 sectors are shown in parentheses for eachitem)
● Real estate [real estate], finance and insurance [securities and commodities futures, other financing business, banks, insurance],transportation and mail [marine transportation, air transportation, warehousing and harbor transportation, land transportation],construction [construction], manufacturing (raw materials) [iron and steel, nonferrous metals, glass and ceramics products, textiles andapparels, metal products, oil and coal products, rubber products, chemicals, pulp and paper, mining], manufacturing (transportationequipment) [transportation equipment], manufacturing (electricity and machinery) [machinery, electric appliances, precision
instruments], manufacturing (pharmaceuticals and foods) [pharmaceutical, foods], wholesale [wholesale trade], retail [retail trade],
agriculture, forestry and fisheries [fishery, agriculture & forestry], information and communication [information & communication],
electricity, gas and water [electric power and gas]
Since “services” are not subdivided in the TSE’s 33 sectors, the following 4 industries were subdivided from SPEEDA’s enterprise selection
classifications. (The SPEEDA’s classifications are shown in parentheses for each item.)– Accommodation and restaurant services [“restaurants and home meal replacements,” “travel and accommodation”], businesssupport services (human resources, advertising, etc.) [ “business support,” “human resources services,” “security services,”“advertising and events”], education and learning support [“education,” “school lunch”], medical and nursing care services[“medical welfare services”]
20

Table ofContents

1. Changes and Challenges Underway

2. Message from the Representative● For Young People and Young Companies

21

IMPACT OF COVID-19 (1)Real

Until now

From now on

Tightlycoupled society

Looselycoupled society

COVID19

VirtualLooselycoupled society

Tightlycoupled society

Industrial structure transformation that normally takes 10 to 20 years will
occur in the next 2 to 3 years
22

IMPACT OF COVID-19 (2)Encourage generational change in everything.

● Industries/Businesses● Managers● Politicians● Others

Big opportunity for young people and young companies

23

MESSAGE FROM THE REPRESENTATIVE (1/2): MESSAGE FOR INTERNAL USE IS RELEASEDI believe that COVID-19 could radically change the industrial structure. I do not mean what industries are going
down by how much, rather, I think that the generational change in industries will progress all at once because
people’s lifestyles and ways of thinking are changing. While COVID-19 is terrible, it may serve as activationenergy to promote generational change in industries.
The industries that used to be the main cast in industry may cease to be so from now on.
On the other hand, IT and communication equipment to promote staying at home, renovation to improve thehome environment, local real estate, improved audio facilities (for games, entertainment, and watching sports),
to say nothing of healthcare and other entertainment (on the internet), agriculture, agricultural logistics(agricultural EC) and, of course, IT services may rise to be the main cast or supporting cast. Increased
telecommuting should revitalize the pet industry. Tight coupling will become loose coupling throughout, and IT
and security connecting loose coupling will play an important role.
As more and more people are staying at home, the number of people who want to buy another dog isincreasing because their pet dogs are getting tired of them. People are frustrated by not being able to go to live
shows, and online live shows are starting to gain popularity. Instead of simply listening, there are more ways toenjoy them, such as watching online live shows and giving money while drinking and chatting with others via
Zoom. (This already takes place in the game world. PlexChat, which DI had invested in and exited theinvestment, was a tool for chatting with friends and waiting for instructions while playing games.)

24

MESSAGE FROM THE REPRESENTATIVE (2/2): MESSAGE FOR INTERNAL USE IS RELEASED
Although industrial transformation normally takes 10 to 20 years, I think that COVID-19 will force industrial
structure transformation in about 2 to 3 years.
Given these circumstances, sad news may continue for a while. It will hardly be surprising if a major company
sells its business (carries out a merger) or declines, or something alarming and terrible happens.

Not being surprised by what is going to happen, however, we need to be aware that the transition to the nextstage (which normally takes 10 years or more) is taking place in a very short period of time, and to think thatthe next growth period awaits after the transition.
After World War II, Japan’s industrial structure changed drastically, which was affected by the power of thecountry at that time.
We also have opportunities. Some managers and industries/businesses should take on challenges.
I have written a lot, but I am convinced that COVID-19 will promote generational changes in everything(industries/businesses, managers, politicians and others) and bring something new to the young generation. I
hope that you will do things with awareness that COVID-19 is a great opportunity for generational changes
while properly fearing it and preventing being infected by it.
Takayoshi Yamakawa, President and Representative Director of DI

25

Contact:e-mail:info@dreamincubator.co.jp

Main phone number:+81-3-5532-3200

Responsible departments: Corporate Communication Team
After COVID-19 Research/Analysis Team
Website:https://www.dreamincubator.co.jp/

26

(REFERENCE) WAYS OF THINKING AND ACTING REQUIRED FOR BUSINESS CREATIONAFTER COVID-19
3 points (DI’s idea)

Toward changes in assumptions due tothe COVID-19 disaster and theconsequential reconfiguration of theworld,● we are required, more than ever,● to define our own questions, todraw up a big picture of the
future, value propositions andbusiness model hypotheses,(i): Designing
concepts

Assumptions such as legal systems, practices/common sensethat made up the conventional business environment are to bereset, and ideal industries and businesses are to be redrawn● Avoidance of the “three Cs,” decoupling between
countries/regions, a drastic decrease in demand willchange the various assumptions in society and businesses(ii): Designing
hooks and arecovery engine

The design of the hooks and recovery engine and a boldstep to initiatives serving as hooks are essential in thebusiness model● How can we attract clients, establish strong hooks togather clients, contacts and data, and connect them to therecovery engine in our businesses?

(iii): Establishing
relationships

Establishing relationships is necessary to realize the big idea
we drew up● It is necessary to create an ecosystem with various players(in-company, clients, companies, governments, universities
and public opinion) who can share the big picture and tobring various resources from outside, instead of seeking
our own interests or monopolizing the wealth● and to work with various players

so as to realize them

For details, please refer to the Company’s book “Business Producing Strategy to Create a 300 Billion Yen Businesses.”● We will also distribute business producing content on the DI website
27

(REFERENCE) BUSINESS PRODUCING BY DI
Business producing framework

Examples of business producing support
Conceptual design(Industry producing)

1. Designing concepts (start point)● Perspectives and ideas beyond theindustry boundary

2. Formulating strategy● Roadmap leading to realization basedon quick and thorough market analyses

Companies● In-company, clients, companies,

governments, universities and public
opinions

4. Setting rules● Framework for facilitating business“Green city concept”● Positioned as the top priority
industrial strategy of the METI atthat time×

Concept of global expansion ofenergy saving equipment (including
standardization and others)×

Industrial strategy for energy systems
centered on large storage batteries

3. Establishing relationships

DI

Strategy on exporting systems andinfrastructure● Identifying promising field,
strategySocial importance of infrastructure
maintenance and implications forcommercialization

activities and breaking industrial
conventional practices

Designing of the globalization modelfor the medical industry and theregenerative medicine strategy

5. Providing help inside/outside thecompany

Roadmap for industrialization ofpromising agriculture, forestry, andfisheries technologies● Project management

6. Delivering results (goal)

Business creation(Business producing)Community development in responseto the aging society● Model concept to achieve bothcompactness and industry
creation● Auto manufacturers● Real estate developers● Energy companies, heavy
electronics manufacturers, etc.
● Home electronics manufacturers

×● Heavy electrics manufacturers, IT
companies, power companies● Auto manufacturers, housing
manufacturers, etc.

×

● Trading companies, infrastructure
operators● Heavy electrics manufacturers, IT
companies, etc.

×● Infrastructure players● Affiliated manufacturers, etc.

×

● Pharmaceutical companies,
medical device manufacturers● Trading companies, IT companies,
financial institutions, etc.

×● Food companies, distribution
companies● Chemical manufacturers, material
manufacturers, etc.

×● Municipalities● Real estate developers● Auto manufacturers, energy
companies, etc.

28

DISCLAIMER

This material is intended only to provide information. The forward-looking
statements and views contained in this material are based on information
available at the time of preparation and do not guarantee their credibility or
accuracy.
The content in this material is subject to change without notice.
Please use this material at your own discretion after referencing theinformation obtained by other methods.

The Company will not be responsible for any damages arising from the use ofthis material.

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The Business Producing Company