The government quickly established policies for remote work and encouraged members of the Keidanren (Japan’s primary business association) to accelerate adoption of these guidelines to serve as an example to the broader business community. By July 2020, the goal was to be at 50% of Keidanren members, with a push to get to 70% by September. According to Nikkei, despite a decline of 1.2% in capital investments, digital transformation spend is forecasted to increase by 15.8% YoY with stalwarts such as NTT, Fujitsu, 7-Eleven, and Kubota leading the way, with digital transformation being a core part of their broader corporate strategy.
The first phase of this shift focused primarily on upgrading hardware, basic remote management infrastructure, and enabling remote meetings through collaboration tools like Zoom and Microsoft Teams. Video-based meetings with customers and partners became acceptable, if not the norm, almost overnight. A staggering 61% of online video meeting usage in Japan was precipitated by the pandemic, according the JD Power.
The rate of adoption/acceptance of this magnitude is not unheard of but it is rare. For example, Japan was slow to adopt corporate email in the early 90’s. The 1995 Great Hanshin Earthquake, which necessitated real-time and one-to-many communication amongst businesses, forced a drastic acceleration in both technology adoption as well as business customs. When necessary, Japan adapts quickly.
Following the first phase, the next wave of modernization is in the digitization of business processes. Enablement of e-signatures is one prominent example. As remote work took hold in the Spring, the custom of paper agreements and company chops (signatures) became a glaring problem, leading to bottlenecks and necessitating employees to commute. To solve this, the Japanese government established guidelines in June to accelerate adoption, paving the way. According to ITR, e-signature usage has increased 71.2% YoY. Anecdotally, Bengo4.com, a SaaS provider of the popular Cloud Sign product, has seen its stock price increase 2x since March.
Finally, several prominent Japanese companies have announced changes to their performance management systems, emphasizing individual accountability based on measurable results. Traditionally performance has been measured via time in the office and perceived activity. Remote work has forced managers to approach the subject with a pragmatism and focus on merit as opposed to facetime. While the immediate benefits are clear, this will have large positive implications including higher productivity, work-life balance, gender equality and perhaps greater economic mobility for employees who are in the first half of their careers.
Where do we go from here?
We can expect continued efforts by Japanese enterprises to modernize their technology infrastructure, digitize their core business processes, and enable new modes of work. Traditional business practices and customs will also continue their evolution, resulting in increased flexibility and openness to change.
This will all take place within a society that has not been as critically impacted by Covid-19 as other similarly developed countries. Social cohesion and a sense of broader purpose remain strong amongst the Japanese people. Additionally, incoming Prime Minister Suga appears intent on accelerating Japan’s Digital Transformation, creating a new Digital Ministry, citing the importance of investing in tech. In short, Japan continues to be a stable environment that can yield significant business returns for foreign companies willing to make the commitment and adjust their strategies to meet the market opportunity.