A Conversation on Digital Transformation in Japan

A Conversation on Digital Transformation in Japan

A little late out the door, but for anyone who missed the podcast version, here’s the transcript of the Wahl+Case podcast episode, “How to B2B: Digital Transformation Trends in Japan | How DX Started + How You Can Join In,” that I co-host with Bryan Rios, marketing specialist at Wahl+Case. 

We talk about the weather, the realization that my entire career has had to do with getting people and institutions away from their reliance on paper, and how Bryan didn’t own a pen when he first came to Japan. Also…

  • Isn't all tech part of DX?

  • Where is the line as to what can be branded as "Digital Transformation"?

  • What are the areas that need the most attention?

  • What solutions would have the most benefit to Japanese society?

  • What challenges/advantages are there for DX in Japan?

Listen to the full conversation with Bryan here. 


Subscribe to the Wahl+Case podcast for upcoming episodes where Bryan and myself will discuss, in-depth, how to B2B in Japan!

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Show notes: 

[Note: This transcript has been slightly edited for clarity.]


BRYAN RIOS: Welcome back to “How to B2B” with your hosts, Bryan Rios and Fuminori Gunji. Fuminori, how are you doing today?

FUMINORI GUNJI: Pretty good. Pretty good. I’m very happy that it’s stopped raining in Tokyo. Sorry, I’m always talking about the weather.

RIOS: [laughs] I think that’s a good place to start. It’s so hot today. I’m sweating at 9AM. Now it’s 10 but… Today we wanted to talk about Digital Transformation. It’s become a really big trend in Japan, and I think that our audience has some questions that I thought would be good to pose to you to get your thoughts and ideas around the subject.

If you want to start with a little bit of your background with Digital Transformation and then we can get into these questions.

GUNJI: I came to Tokyo in 2008, shortly before the Lehman Brothers Shock. Back then I worked at a consultancy firm, heavily focused on new business development for big domestic companies. Which was mostly IT business projects. Since then I’ve worked at Softbank, and at startups, and now I’m a startup CEO.

For the past 10 years, I’ve always worked in the field of B2B, IT, and new business development. So this whole DX discussion sounds very buzzy-buzzy to me. Because, of course, IT solutions and software have been around for a long time and now it’s a buzzy word that’s trending and everyone’s using it. But a lot of the discussions are not really fundamentally new. That’s my impression so far about DX.

RIOS: That’s a great place to start, which leads us into our first question where, isn’t essentially all tech part of digital transformation? We work with enterprise tech, consumer tech, fin-tech, and I feel like, especially those 3 sectors, all of that feeds into DX or digital transformation. What are your thoughts around that?

GUNJI: Where is the line to draw on what is digital transformation and isn’t all tech DX—is a really good question. The short answer is yes and no. The truth is, of course, yes. [laughs] But the reality is—because this whole DX word—I don’t know who came up with this “digital transformation” and calling it DX in Japan, I have a suspicion it’s coming from the Ministry of Economy, Trade, and Industry.

One thing that has been discussed in the past decade in Japan is that the adoption rate of cloud software is lagging behind all other advanced countries (by GDP size). It’s certainly behind European countries, but also a lot of Asian countries because we all know that China, Singapore, all these countries have done a great job in leaping forward technologically speaking, and Japan is really behind. My suspicion is that the METI said, “Damn, we gotta do something about this, let’s make a buzzy word. Let’s make Nikkei write about it a lot, so that even the SME’s in the rural areas hear about it because it’s really time to adopt cloud software solutions, so let’s make DX a buzzy word.”

This was before COVID. That’s my impression. And then they started to do this IT subsidy. IT hojokin. I’m sure the people in this industry have heard of this before. What they did is, they said, “If you buy the software/IT service, then we will subsidize the purchase to a certain extent, depending on what kind of software it is." And so, there are certain conditions in order to get the subsidy funding, what kind of software you can buy. What counts as “IT software adoption” and what is just a tool, maybe, it’s just random, just political, it has nothing to do with what it means technically.

RIOS: Really. That’s super interesting. I didn’t even know that was happening.

GUNJI: We can talk about that later. And this existed when I was working at Softbank Robotics selling the humanoid robot, as well. Back then, we tried to make use of that subsidy to tell our potential customers, “Now you can get it for even cheaper with this subsidy, and we will help you get the subsidy in order to buy Pepper.”

But for those who might be getting excited right now, I’m just warning you, it’s a pain in the bottom to apply for it. Furthermore, when you apply for subsidy stuff, you have to report, I think, on a quarterly basis. When you adopt IT or software, the whole purpose of this is increasing productivity—that’s the whole point of tech, so you have to report in what ways your productivity improved at the company. And you have to measure certain KPIs and you have to report it on a regular basis because now that you accepted money from the government, you have to prove to them you put it to good use.

And the way IT vendors and customers work in Japan is such that the customer will say, “Oh, this is such a pain in the bottom! Hey, IT vendor, can you do this for me?” So now you have to do the reporting for all the customers who used the subsidy to buy your product. We had a whole team at Softbank of 20 to 30 people just doing that one thing.

RIOS: As far as DX, you mentioned it’s kind of political and it doesn’t have much to do with the actual software. What kind of makes the cut for that subsidy? Are there guidelines somewhere? 

FUMINORI:  There are guidelines, but it recently changed, so I don’t want to say something wrong. What you can do is, if you google “IT hojo.jp” you can go to the website which has all these pamphlets and PDFs that describe what type of IT software would be eligible for what kind of subsidy, and there are 4-5 categories.

Having said that—that it’s a buzzy political movement, to get Japan off the ground in terms of digitization— it’s positive for all IT vendors because the government is getting behind it. And that’s almost 5 or 6 years ago since they started giving out these subsidies. Meanwhile, the government itself was never digitized.

They just really recently started doing it, including the Tokyo Metropolitan government with this new digital agency that they have—and even the METI is saying “We’re doing DX at METI now.” [And I’m like] Now? You’ve been telling everyone to do since 10 years ago and now you’re doing it yourself. Ok.

But you know, things are picking up. And it’s a good time to sell cloud software in Japan in general.

RIOS: I love that you said METI probably just came up with DX and made it a buzzy term because I didn’t realize—so my first experience working with tech, and software at all, was when I came to Japan. And I heard the term DX quite a bit throughout my whole career in IT, and it took me a little bit to catch on “Oh what is DX” must be digital transformation, but then someone told me that they don’t use that term overseas. No one says DX in the US. And I had thought that it was a global term that was brought here. But I think that it’s been pretty effective. It’s branded really well. I’m fully bought into it.

GUNJI: Good PR.

RIOS: You touched on this a little bit, how the government hasn’t really adopted some of these technologies. From your perspective, what would you say are the areas that need the most attention? Like, would you say that’s in the public sector? Or is it things that are happening in the private sector? Small businesses? What is your feeling there?

GUNJI: Answering what areas need the most attention is—the easy answer is everything. The thing with digital transformation on a societal level, the way I see it, is you can only digitize as far as the weakest link. 

You can build all the software to digitize, let’s talk about legal stuff, you can do all that, but if there’s still a law that requires a hanko or if the municipality that has to accept these legal documents is not handling digitized documents, then at the end of the day, there’s always some point where you have to revert to paper. And that’s only as far as you can get. Right?

Only if everyone pulls along and says, “Yes we accept PDFs with digitized hanko on it,” only then can you say the whole workflow, 100 percent, can be done online—unless you’re there, you’re still kind of stuck, and that 1 thing that still needs to be printed out, that messes up the whole productivity. So the easy answer is everything, because you can only get as far as the weakest link.

What I can speak about in terms of what actually gets the most attention, that’s an easy answer because you just have to look at the past. That usually just follows the logic of urgency and importance. So let’s talk about what has happened since COVID in Japan.

In 2019, in January, there were the first cases reported in Japan, and in February some of the first companies said, You know what we gotta do remote work. I think GMO was one of the first big companies that said we will shift to remote work. We did that at MakeLeaps as well, in February.

There’s sort of a pattern in how the attention has shifted, at least among the progressive companies, so in 2019 when COVID first hit, it was the progressive companies that said we need to do something about this. They were like “Oh, shit, we need to find out how we communicate with each other without being together in the office.” Back then, we wanted to really aggressively do sales because of course we saw the market opportunity in the sense that now that everyone has to work remotely, as a cloud software, there’s a good chance to sell. Back then, a lot of feedback from the customers was “no, we need to first figure out how to talk to each other. The priority for spending IT budget is now placed on online conferencing tools and chat tools.” So it was all about Zoom, Microsoft Teams, Slack, Chatwork, that got all the attention back then. And then in 2019, fall, winterish, it started to shift.

RIOS: Do you mean 2020?

GUNJI: Shit. Sorry, you’re right.

RIOS: I thought that was what you meant, but I just wanted to make sure.

GUNJI: This whole COVID thing has been so long.

RIOS: Time has no meaning now. [laughs]

GUNJI: Totally. Sorry. 2020. So in the fall of 2020, it started to shift, at least among the most progressive cohorts. So the most progressive cohort was like "Now that we’ve figured out how to communicate with each other online without coming to the office together, now that we have checked that box, how do we actually get our jobs done without coming to the office?" And so then the attention shifted to tools for operational stuff. Which has quite a big variety. Pretty broad, for example replacing old groupware with something more remote friendly or remote capable, like Google workspace, MS teams.

And then the logic of urgency and importance still applies, meaning the stuff that cannot wait. Such as invoicing, interestingly, HR-admin solutions, payroll, or expenses. In many companies, when employees pay something that is work-related, employees keep the receipt, and at the end of the month, they go to the accounting team and say, “Here are my receipts” and then they put in that info—and so the solutions for automating expense management for example, where you just take a smartphone and take a picture of the receipt and put it online, etc., and everything gets done. So these solutions started to get more attention.

So there’s a lot of parallel worlds happening. There’s this progressive cohort—progressive in terms of they weren’t progressive before, but now it’s really hit them and they are now reacting. And then there are the companies that have already been using these IT solutions, especially bigger companies. For them the discussion is not so much how they deal with COVID, or remote work, it’s more about how to get more visibility into operational progress or KPI progress. So that’s more like sales DX, marketing DX, HR DX. HR in terms of performance and motivation management, which is something I think Wahl + Case do, too, with Attuned. So that type of stuff is a different DX story that’s happening separate from the COVID pressure, how do we cope with remote-work pressure—that’s also happening at the same time.

What is DX all about? Some of the tech solutions have just been rebranded to say “This is DX” but it has always been [around]. The other DX topic/theme is DX to cope with remote work or the new style of working. The latter, “how do we cope with COVID” is about “how do we get our workflow done without relying on paperwork.”

Because paperwork basically ties you to the office. Paperwork is equal to a shackle to the office. So how do we break off these shackles, how do we get away from hardcopy dependent workflows? That’s the other remote-work-COVID-DX story.

RIOS: It’s funny you bring that up because I remember when I was in the US, I never had to use a pen or write for my whole career! We all worked from home and we were all submitting things, via Google, just sharing Google sheets and Google slides. It was really straightforward.

And then when I came to Japan, so much of what I was doing in the beginning, as far as paperwork even, just like registering for the company onboarding even that stuff was digital in the US, and here so much writing! I didn’t own a pen and people thought I was joking. I don’t carry a pen with me. I don’t own a pen. I don’t even know the last time I wrote anything.

It’s funny to see that shift now. Things like health check records here aren’t digital. You get them in the mail. But all of that stuff was available online in the States. It’s still shocking to me how much paper I have to keep in my house, in my desk. It’s shocking. I’m looking forward to the day when I can say I don’t need a pen in Japan.

GUNJI: Every time you have to fill out a form in Japan—it’s like, wait—I have to fill this out by hand!?

RIOS: Especially kanji! How do people do this?

GUNJI: Recently, for example, we are about to move apartments, and I had to do the paperwork of changing the residency because we are switching the wards, and it kind of goes back to what I mentioned before about what needs attention—everything—because, for example, the government has done this My Number card thing, that manages all your personal information. It’s kind of like your social security number in a way, in terms of what it can do. That stores all the information about me. But somehow when I move residencies, they can’t do that online. I still have to write my freakin’ address on this sheet of paper. “Well, my address is in your computer! Why do I have to handwrite this thing because you need this form!” Why? Because this workflow is not digitized yet. The other workflow is digitized—it’s handling the same information but they are not connected.

RIOS: So that’s the weakest link. I totally see what you’re saying.

GUNJI: It’s still everywhere in Japan, and everything needs attention. So even though I know I need to be patient, I’m really glad and happy that they have created this Digital Agency. And another guy who is doing great work is—he’s well known in Japan, but probably not well-known in the foreigner community in Japan—is Miyasaka-san.

RIOS: I think it’s been brought up before. We had a talk with Evan Burkosky, he’s a country manager of Dynamic Yield, a really interesting guy. I just had a talk with him about DX, which will be coming out soon. So I think he had mentioned him. But please continue.

GUNJI: So that guy is heading the Tokyo Metropolitan Government’s digital transformation, and they’re calling it Shin Tosei. Tosei is short for the metro government, and Shin is new. It’s sort of an homage to Shin Godzilla. I’m pretty sure it has to be. Because otherwise we wouldn’t use shin in katakana form, which is great that they do that.

RIOS: That movie was kind of commenting on Japan’s lack of digital transformation because of all the government bureaucracy. So that’s so funny.

GUNJI: It’s super funny. And the great thing is that the CSO of Yahoo! Japan who is called Ataka-san wrote this book called Shin Nihon. And the bottom line was, if Japan doesn’t change, then it’s going to be chin Nihon. And chin is kanji pronunciation for drowning.

RIOS: It’s a play on words.

GUNJI: Yeah, he’s a genius guy. But that’s another story. Anyway, Miyasaka-san used to be the CEO of Yahoo! Japan. Back then, at Softbank, when we were talking about who could succeed Masayoshi Sonat Softbank. And there were rumors about how Masayoshi-san really likes Miyasaka-san. Maybe that guy could be the future CEO of Softbank. That’s the kind of guy he is. He was also known for turning things around at Yahoo! Japan when they were sort of almost regarded as “yeah, Yahoo! Japan is kind of done. Yahoo! News was a one-hit wonder, which was great impact for Japan’s Internet startup community, but that’s about it.”

But he really turned things around and Yahoo! is really strong in Japan again. But he quit that job to join the Tokyo Metro government to head its digital transformation. He not only quit his job, he brought in his whole team from Yahoo! so that sounds really promising, right? So he’s taking this very company/startup mind approach. Let’s listen to the customers and ask them how we should change. Like how a company tries to sell products to customers, he’s like “the residents of Tokyo are our customers. Let’s think about it that way. Let’s listen to them. Let’s put out a lot more information to these people. Inform them about what we do, what we intend to do. Let’s put out more press releases about what’s going on inside. Let’s talk about progress.”

So I’m super impressed. To do that inside of the Japanese government—I thought that was impossible. So it’s like wow. I really respect and admire that guy.

RIOS: That kind of perfectly leads us into the next question I wanted to ask you, which is something that has come up in talks with other DX experts as well: What solutions do you think would have the most benefit to society in Japan?

GUNJI: That’s a really good question. The starting point will have to be that any solution that helps Japan to get rid of paperwork. That’s the biggest enemy because that’s the hard-stop for any digitization. The starting point has to be everything can be done without hardcopy paper. That’s the starting point. So every solution that enables us to get rid of paperwork, that’s what Japan needs. And when that is done—that means the information that was stored on paper is digitally available. Then you can connect these data with other data. Then you can analyze and what not, and put it on cloud, everything builds on that. That’s the super basic minimal infrastructure you need—get away from paperwork. That’s my take on it. And it’s also my personal story in a way.

RIOS: I don’t know if you have an idea of why, but it almost seems like there is a general acceptance, my wife, specifically, she is so used to the system, she doesn’t feel like it’s slow. For me, when I moved here, you have to go to the city office for everything. Anything you need, you have to go to the city office. Get a copy of it. Fill it out there. Or bring it home. Fill it out. Go back, take it there. I don’t even know what the equivalent would be in California. I never talked to the local government ever in the States. So obviously this is my Western take on living in Japan, but I do think there’s a reluctance, where, even when we were talking about the My Number card, how that was being connected to bank accounts, and now people are almost suspicious of it. “Oh the government wants to know how much I have in my bank account.” So it’s almost like there’s pushback at every small step. And it’s not just from the bureaucracy. It seems like it’s coming from the public. I don’t know if you have an answer to this, or if this is coming out of the blue, where do you think this is coming from? Is this something you have experienced as well?

GUNJI: Honestly, I don’t think it’s an emotional thing about being suspicious. That’s one of the many misconceptions about Japan is that people are conservative or suspicious about technology because that’s not the case. When they adopt it, they adopt it. The real issue here—which is also a strength, but every strength can also be a weakness—is the level of endurance with painful work or mundane work—they can endure more than, I don’t know, maybe any other people on earth. They are just ok with it. They just do it. It’s sort of a mixture between being fatalistic about it. Giving up on potential improvement, but also they just do it and don’t complain.

RIOS: It’s like shoganai. It’s fine. There’s nothing we can really change about it.

GUNJI: Yeah, it’s part of life. Whatever.

RIOS: I’m sure there are things like that in the States—probably oil changes, where it’s going to be half a day, that’s just how it goes.

GUNJI: Every country has that kind of thing, of course. But it’s just more than any other country. The percentage of people who complain about inefficiencies or who really get angry about inefficiencies is just less in Japan. And that’s why it’s not really resistance, it’s just that they’re ok with it. “I’ll just do the overtime work. And get the paperwork done. And write it by hand. And…”

RIOS: Carry a pen. [laughs]

GUNJI: They just endure the pain. They numb the pain. Or get used to the pain. Which is also a strength, again. Especially, you notice that when a crisis hits, like COVID or with 3/11 (earthquakie/tsunami), when they had to shut down electricity everywhere. And people were like “It sucks.” But you know, you don’t see riots in Japan. They’re just like, “OK, I’ll handle it. I’ll deal with it. That’s part of my new life now. And I’ll march on. Just keep on marching.” 

RIOS: Let’s circle back. You feel like getting rid of paperwork is the big stopper. You mentioned that if everything else is running smoothly and we have digital processes for everything, all momentum gets halted if you have to print it out and then send it in.

So that’s number 1. Are there any other things you feel would be a big benefit to society that could kind of help the most, where you see the most attention being needed?

GUNJI: It’s really just paper because it shows up everywhere. And if I were to mention another thing next to paper it would be, what do we do about the problem of lacking enough programmers and software engineers.

RIOS: That’s fair.

GUNJI: Or more IT literate people. But basically software engineers. The problem is, I noticed this especially when I was working at Softbank Robotics, and we launched the first humanoid robot called Pepper, because we were the first ones in the industry to bring a humanoid robot as a service for B2B or B2C, we had to create the whole ecosystem from scratch. We needed app developers. We needed people to write content. It was not just, here’s the hardware device with the OS… [The challenge] was similar to the iPhone. The iPhone itself was not enough. You had to create this whole app developer community and the app store and everything from scratch.

So I did that for 2 years, developing B2B business in Japan. And then another 2 years helping, mostly the US branch, but also other Asian countries, with overseas expansion. And what I noticed was, in Japan, when we were doing enterprise sales to banks, Mizuho, Nestle, we were the ones who were in charge of finding an app developer to build a customized app for their company.

There was always a third party involved. And when we went to the US, the big difference was, most companies had a strong IT department. It would be like, “I have an idea. I want to have it this way.” Of course, some parts were outsourced, for more specialized work, like content creators, or whatever, but there was a strong IT department and a head of IT who said, “I have a vision, I have an idea. I want to get this done. This is how we want to use Pepper. And we have our team, and we want to integrate this data, or whatever data he can retrieve from the field to our internal system…” So they have that backbone. In Japan, the client side is just providing the people from the operational side, and then there was a system integrator and an app developer. So on the client side, only a very few people understood what that means to bring in something like Pepper for the data flow in the company. They didn’t know. They can’t design it. They don’t even have opinions about it because they didn’t have this internal IT expertise or perspective. They don’t know what kind of impact that will have on their organization or operations so they just say, “Whatever you say is the best and as long as I can get my part done, I’m happy.”

The fact is, there were things that they hadn’t thought about. And then trouble erupts, where someone says, I wanted to have the data in this system. But yeah, you didn’t set it up that way. So IT illiteracy in management comes along with lack of strong IT departments in all companies.

Like everyone knows, software is eating the world. Just like every company has a sales team, a marketing team, a legal team, every company should have someone in charge of IT. We don’t have that in Japan. Even companies that do have an IT department, if you go talk to them, you learn that “Oh, 2 years ago, I was actually in sales.”

Oooh, they put you as head of IT, but you have no IT background. The only job you have is to talk to vendors. That makes him the head of IT. So no understanding of IT history.

RIOS: Super interesting that you bring that up. This is a bit of a tangent. But it’s something I think is related, when I started recruiting in Japan, so I’m from Silicon Valley originally, and a lot of my friends are developers and they work for Apple or FB. They get paid really well compared to even the sales people or marketers. Developers in the US get paid really highly.

In Japan, when I started recruiting, I noticed that it’s almost the opposite. The business leaders are all these sales people who came up through that but that’s where the value is placed, on sales and marketing. It’s the exact opposite of the States. Now I think it’s starting to even out. We’ve definitely seen an increase, but I think that for a long time, that was the attitude [in Japan that developers] just make the product. We’re the ones doing the real work of selling it and they just make it. We just leave them alone and they do their thing.

I think a lot of that also comes from tech being developed overseas and then being sold in Japan. So obviously the biggest value there is in the person who can actually sell the product here and develop the customer base and then all of the development happens overseas anyway. But that’s just an interesting thing I noticed. And it’s funny you bring that up because it’s like a vicious cycle leading into the IT illiteracy.

GUNJI: Until recently becoming an IT engineer was just not a very sexy prospect. And because of that maybe, I don’t know where the chicken or egg thing starts, but it’s also true that it’s hard to find Japanese software developers who can think creatively and come up with solutions because they’re so used to the kind of job, or the vast majority of IT engineers in Japan is like, “I do what I’m told to do.” And so they say, “the business department has to define the specs and requirements and then we just develop it. And my job is done when it works just as the requirement says. I don’t care if it’s a great product or not—that’s the responsibility of the biz dev or marketing team. If you define the specs that way and customers don’t like it, that’s your fault not mine. You said you wanted that workflow. I did that for you. Here you go!”

And so you have this super toxic work environment internally if they have a dev team. The business team, without knowing the whole implications of IT data architecture or whatever, will say, “We want this, we want this, we want this.” And the IT dept says, OK fine. We’ll build that for you. Maybe they’re thinking. “Dumbass, that’s not going to work very well.” And then they’ll say, “Here you go.” Japan really cares about project management. And they really care about hitting the deadline.

So the IT department is like, "If you really care about this product you can’t get that done with this deadline. But ok. If that’s how you review my performance and effort. Here you have your shitty product on time. Are you happy now?" And of course no one is happy.

I’ve seen this so many times at various companies, as a consultant, but also I experienced that with the companies I worked with. One of them, I remember, we were trying to build a product and some of us really cared about making it a great product, a great software that customers would not just be OK with using, but would actually be like, “this solves the pain.” But there was also pressure from the management about shipping it on time. And so the IT dept. even though they were passionate about it, they were like, “just ship the shitty version and make sure we hit the deadline cuz not hitting the deadline will have greater negative implications for all of us—the whole team. We won’t be trusted and we might not get another shot at it.”

It’s not the startup ethos, where you can fix it later, "If you’re not embarrassed you’re not moving fast enough." I’m not talking about that kind of upside. No this is like really, really crap. Just making sure it checks the boxes on the requirement sheet on the surface, really surface level, but this is not a great product, not for those who sell it and who operate the software and not for those buying it. But that’s still a common mentality here. So that’s the other thing, the culture around IT here.

RIOS: My next question was going to be about challenges, but maybe let’s flip that. So like, for you, from your perspective, what are the advantages for DX in Japan? From what you had said before, one of the things that came to my mind is that when that adoption happens, it happens. Once we get going with the processes, there’s almost no turning back, you hit escape velocity and there’s momentum. From your perspective are there any other advantages you would say Japan has when it comes to DX and maybe catching up or maybe even taking the lead.

GUNJI: Yeah, the thing you mentioned is one key thing because of collectivism in Japan, once you reach a tipping point, it’s done well and the adoption rate is high. So that’s the great thing about Japan in general. This is me seeing the glass half full, another great thing is there’s a lot of room for digitization in Japan. There’s huge opportunity. It’s a great market. You have all these relatively high speed Internet connections across Japan thanks to the infrastructure, so you have all the necessary hardware infrastructure in place. And the other great thing is because other countries such as the US are so advanced, all the solutions that we should need or have to think about, we already have the template from across the pond. It’s there. Just copy that shit.

All we need to do is fill the gap because the IT infrastructure is there. So all we need is the right people. And the money and funding directed in the right direction and it will be filled. The gap will be filled. It’s great. It just needs time.

Don’t think too hard about what direction or how to do it. Just look across the pond. There are tons of solutions. Get inspiration there.

RIOS: It’s funny you bring that up because it’s another thing I talked with Evan about: now, with this aging population and productivity has been slowing and the GDP is at risk, because of all those factors, it’s almost like, you can, in Japan, right now, we can create the blue print for the world, because this isn’t going to be just a Japan thing—there are other countries facing similar challenges.  So there’s a huge opportunity right now to bring some of those technologies and innovate here and then take those globally. It’s an optimist’s perspective but I think it’s really true.

One of the things we had talked about before the episode was trends and how to get on the DX trend, and I feel like we covered it pretty well. Is there anything else you’re seeing or anything you want to add to sum things up.

GUNJI: It doesn’t sum it up, but another thing that goes hand in hand with the DX thing is there’s a huge change in the labor market. Meaning with the adoption rate of digitization solutions, remote work becomes more doable, that means you can work with more freelancers and people who are not working close to the office or living close to the office. This is a whole nother topic, which maybe we can do a podcast on, but basically, this is going to digress a lot but then goes back to the topic, so give me some time.

Why do companies exist? Since the post-war period, it seems to be the default thing to work for a company. But, before that, I’m not a historian, so maybe I’m wrong, but before that, before the second world war, early 20 century and before, most people didn’t work in companies, they worked in family businesses and did their own thing. They were individual contributors, most of them. And the reason companies formed and became bigger and sort of the default way to work for many, was because in order to achive a certain size (scale) and internalize market transactions. If you had to find a designer and contract that designer and then find a marketer and contract that marketer, if you have to do all these things separately, then the communication cost and the transaction cost in general is fairly high. The benefit of having a big company, when you have it internalized, at least logically speaking, these transaction costs are low, it’s fast to find the right person to do it and you don’t need to create a new contract each time to say they are hired. You can just ask them “please do this” and they will do it.

But if you think of it from an economical perspective, each time you ask a colleague to do something, that’s a transaction. The price is invisible, it’s hidden but there. But if you’re an individual business owner, you would have to do everything on your own, and you would need to pay a price each time you asked someone else to do something. You have to find a person, that’s a time and cost, and then you have to contract and pay that person, which is another cost. So the benefit of having it all in a company is the reduction of transaction cost which also increases speed.

That’s why it makes sense to have big companies; there’s efficiency. Even though a lot of people think that big companies are inefficient, well think about how it would be if there was no big company and everything was through individual contractors. That would be inefficient. But what’s happening with DX and IT adoption rate increasing is like, the transaction cost of finding someone who isn’t in your company has never been cheaper than today. You can easily hire someone from across the globe, communicate on Slack, and get the job done and they don’t have to be in your city. They don’t have to work in the same company. All these cloud freelance sourcing websites, like CrowdWorks, or Upwork, or whatever, you can find someone that matches your criteria fairly easily. Of course, it takes time to find someone that matches you in terms of character and spirit and what not but that’s the same for the hiring process. But it’s fairly easy to find the people you need to get the job done.

Thanks to IT.

And having a lot of digital solutions that can take over workflow makes that even easier. It’s not just about communication tools, it’s about having that as a software and then it’s like, “I’ll just make an account for you. I’ll create an ID and password for you, and then please do this, using this software, and then I can see everything you’re doing on the software.” We don’t even need to communicate, you don’t even need to report to me, I’ll see when that job is done on the software. That’s the beauty of DX, it enables for more individualistic ways of living because you can work with any company from anywhere and that changes the whole labor market dynamics a lot.

RIOS: I see 2 things there that are really interesting. You mentioned the global talent pool because now you can literally work with anyone. That’s so true. It’s across almost any service. Like yoga teachers. It’s really awesome to see that. One of the other things I was thinking about as you were mentioning this. We had a webinar at the end of last year about DX and how it affects women’s careers, there’s a point right now in every woman’s life in Japan, where they feel they have to make this decision—I don’t know if it’s every but—it seems there’s a pressure to make a decision to either go to family or career. Another continuation of that , kind of a tangent and a case for DX, because of the aging population there’s a heavy burden—I don’t know if I should say heavy—pressure to take care of your parents. And historically that could be a career-ruining moment, where people would need to go back to their country or their hometowns—I want to say inaka—and take care of their families. And they have to quit their jobs because they can’t go into the office. So having this ability to work remote and this huge factor of digital transformation really helps even remove that. With my family now, we go to Tochigi, which is where my wife is from, and I can work from there pretty comfortably. And that’s huge, we can help them out. Before it was tough and something we couldn’t do. So I think that everything you’re saying is really true. It’s a great trend and a step forward.

GUNJI: Another aspect of that is, other than giving birth, another career-ending event in a woman’s life is if the husband is being sent on an overseas assignment. Even if the woman had a very good career, most of the time, the wife would quit their job to take care of the kids, and they go together as a family. And that was the end. And those people, I’m not a dating expert, but usually the women who marry guys who end up getting sent on an overseas assignment, these are often very highly educated women, intelligent women.

And they don’t get a working visa if they go with their husband. But now they have a chance to get work in Japan, but online from overseas. And that’s great. They can bring all the skills and knowledge and experience that they had, and they can get paid well.

And depending on the situation at home, they can say, “I can only work 3 or 4 hours a day,” but it’s high quality 3 or 4 hours a day that you can get from these people. And that’s all thanks to IT in its broadest sense, the communication, digitization, software, and getting away from paper that enables that kind of stuff.

RIOS: Totally agree. I think that’s a bright spot in this. As we mentioned before, for Japanese society, it’s such a big step forward in this direction. I don’t know how people feel about it, if they feel like it's completely necessary, but from kind of a global perspective, it’s an awesome move.

That was great, anything else you want to add, maybe this is a good time to mention anything that’s going on with TokyoMate, anything you want to promote here.

GUNJI: TokyoMate is also about unshackling people from the office. One of the things we do is provide virtual mailbox, or cloud yuubin in Japan, a cloud mailbox. Which is you can forward your physical mail to TokyoMate or you can just use TokyoMate as your corporate address, your physical address and get all your physical mail there. And it gets scanned and you can check it out like it was your email. And then anything that requires actual action, like paying bills, our virtual assistants take care of it. So that’s how you really can be working from anywhere and seemingly have your proper office in Tokyo and do business with the Tokyo market and do it from anywhere. MakeLeaps was about digitizing invoicing workflow, so this theme of getting rid of paperwork is the thing that unshackles you from having to go to the office—so that’s the mission. That’s what we do. Our customers are growing, so we’re about to move to a new office in Azabu. It’s very exciting times.

RIOS: Nice. So reach out. We’ll link to TokyoMate in the show notes. And you guys will have a written article around this too.

GUNJI: Yes, we’ll do that.

RIOS: Perfect. That was great. Thank you so much, Fuminori. I’m looking forward to the next chat.

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