Why Japan Offers A Perfect Storm For Advanced Analytics

Matt McDevitt — COO, QuantumBlack Japan

Advanced analytics is transforming economies around the world. From North America, through Europe and across to Asia, it seems as though all sectors are harnessing machine learning and AI to drive performance.

On the surface, Japan appears to be an outlier. While the country is famous for innovative forward-thinking in areas such as hardware manufacturing technology, Japan’s reputation in the digital space has not kept pace with other top tier economies. Data capture remains in its early stages — to put it simply, while Japan may be the world’s top exporter of robotic units, you will likely be requested to fax important documents and encounter flagship stores selling CDs.

In October, QuantumBlack launched its Tokyo office, marking our expansion into one of the world’s most intriguing data markets. Japan may face challenges, but the country’s unique mixture of socio-economic features makes it ideally suited to seizing the machine learning and AI opportunity. In fact, these distinct cultural characteristics could actually help Japan quickly become one of the worlds’ foremost analytics economies in the near future.

Achieving More With Less

Japan’s population is declining at a rapid rate. The country is set to lose the equivalent of a midsized city every year for the foreseeable future, and it is estimated that by 2050 the labor force will have fallen by 25%.

This sustained drop in population poses a critical challenge for Japanese businesses. How can a company thrive and innovate when it struggles to fill positions? Moreover, the Japanese economy derives the majority of its revenue from Japanese consumers and many home grown companies rely on the shrinking pool of Japanese customers, meaning they operate on steadily shrinking margins. This provides an enormous opportunity for advanced analytics. Harnessing data enables organizations to refine the way they work, how processes perform and the value that can be derived from the available assets — in other words, analytics lets you do more with less.

There are clear opportunities to address Japan’s shrinking labor market by applying AI. When job vacancies outnumber candidates, empowering employees with automation technology will help drive results that would normally be expected of a far larger workforce. Meanwhile, firms which are reliant on Japanese consumers can utilize analytics to maximise efficiency. Identifying areas to cut costs and driving continually improving performance will help Japanese brands deliver healthier margins, retain customers and fight off overseas competitor brands who have begun to make inroads in Japan’s once insular market.

Access To Talent

While Asia has broadly become a hotbed for AI and data expertise in recent years, with the likes of China and South Korea leading the way, Japan’s talent pool currently lags behind its neighbors. The struggle to attract and retain skilled analytics workers will be familiar to firms around the world, but in Japan the fight for tech talent is particularly challenging. Demand for AI engineers and data scientists is surging across industries, overwhelming supply. In 2018 Japan was unable to fill 220,000 tech vacancies and the Ministry of Economy, Trade and Industry estimates that more than 550,000 will go unfilled by 2030.

Steps are being taken to nurture the next generation of AI talent. Earlier this year the government announced that it would foster 250,000 AI experts a year as early as 2025 by requiring nearly all science and some humanities majors to learn data-related subjects in university. However, the wider private sector also has a role to play, and Japanese companies need to embrace advanced analytics if they’re offer incoming data experts an attractive corporate culture that makes them feel valued.

Along with the rest of the world, we are seeing Japanese companies redefining HR’s role and adopting employment strategies which incorporate new approaches to career paths, compensation, and performance evaluation. Analytics provides a solution here, as digital transformation can help companies develop targeted hiring strategies to help search for talent more efficiently, while AI offers opportunities to tailor and personalise employee engagement to support staff retention.

Innovation Independence

Whereas the world’s largest companies were once manufacturing-based (an area in which Japan excelled), modern business is dominated by data-driven tech firms such as Facebook, Google and Alibaba. Without adapting to the data economy as rapidly as its competitors, in recent years Japan has become more reliant on overseas vendors for data management, access and innovation.

Two decades ago, managing data pipelines would have been regarded as an additional service — but the rise of analytics means that those who control data control future innovation. Japan’s reliance on external parties means that data usage is controlled largely by external firms — and any creative use developed by Japanese firms must sit within the infrastructure set up by these external organizations limiting their ability to innovate quickly.

Japanese organizations have the opportunity to become innovators by putting data and analytics solutions at the centre of future transformation strategies. While there is no short term solution here, Japan has previously proven itself to be quick to adapt and adopt new technology when required, and the near future is promising — of the top 20 AI developers applying for international patents, 12 are Japanese. If the broader economy continues to adopt a more sophisticated approach to data, the future of Japan’s analytics industry is set to be prosperous.

At QuantumBlack, our modus operandi is guiding clients through challenging digital transformation, and one of the reasons that our Tokyo office has generated so much excitement throughout our organization is that Japan represents a perfect storm for advanced analytics to deliver growth. McKinsey calculations indicate that if Japan can successfully double its rate of productivity growth, focus on increasing value added as well as reducing costs, GDP could increase by more than 30% over the current trajectory by 2025 — putting around $1.4 trillion in GDP growth at stake in 2025 alone.

Specifically, QuantumBlack supports clients in two major ways. The first is making advanced analytics use cases come to life with a team of Domain Expertise, Data Science and Data Engineering to make significant business impact for organizations. The second is leading organizations through analytics transformation programes from beginning to end supporting the strategy, use case execution, capability building, data and technology platform development.

Japan’s history is marked by rapid, world-leading spikes in growth and innovation. The Meiji Restoration of the 1800s marked the country’s transition from a feudal society into an industrial powerhouse within two decades, while Japan’s post-Second World War ‘miracle’ recovery saw it become the world’s second largest economy. We firmly believe that Japan now stands on the precipice of another restoration. Driven by the country’s unique characteristics, we are confident that in the coming years Japan will become a hyper competitive global leader in analytics, transforming a global disruption into a national opportunity.