Reskilling Workforces: South Korea
Some challenges companies are facing to reskill employees in South Korea include the population not being able to keep up with the rapid expansion of automation, the costs involved in reskilling and readapting the workplace to accommodate older employees, and the heavy reliance on temporary workers, especially among SMEs.
1. Rapid Expansion of Automation and RPA
- Over the last few decades, the South Korean government made numerous successful investments, aiming to establish the country as a technology hub. The government invested in industrialization, provided support for a few large firms, known as chaebols, and made significant investments in STEM education and applied R&D.
- It is the most automated country in the world, with 631 robots per 10,000 employees, eight times the global average. The country has high rates of STEM graduates (32%) and ranks fourth in number of patents filed. Labour force quality is considered “one of the most important drivers in Korea’s economic and industrial success.”
- However, this focus “left its workforce somewhat unprepared for the challenges of the global value chain (GVC) upgrading in the future.” Despite its strong focus on higher education, the country tends not to place importance on lifelong training initiatives required to adapt to automation and other digital technologies.
- The emphasis on STEM left other fields with limited development. Furthermore, the dominance of chaebols associated with low labor flexibility prevents “knowledge flows into SMEs, thus retaining the benefits of GVC participation for a select few.”
- South Korea ranks 27 out of 140 in terms of digital skills among the population. Research suggests that a “growing share of adults will need reskilling at all ages to cope with longer working lives.”
- South Koreans are aware of this problem. Around 70% of workers surveyed by the Boston Consulting Group feel that “their jobs will be greatly affected by technology changes or globalization.” Another study discovered that, in fact, 43% of the South Korean workforce faces a significant risk of automation. Looking closely at the different groups, older workers are even more exposed, with 63% exposed to automation and unemployment.
- There is a significant disparity between the young employees adapted to Industry 4.0 requirements and the ageing workforce, which happens to be the largest in the OECD area. Only 10% of South Korean employees over 50 have the digital problem-solving skills needed for today’s market.
- South Koreans not being as proactive as other countries to pursue learning opportunities. They are aware of the impact and are somewhat willing to spend time learning but stand somewhere in between “proactive adapters” and “hesitators.” Considering that South Korea is the country with the highest adoption of RPA, the population should probably be leading the pursuit of learning opportunities instead of falling in the middle of the pack.
- After its digital transformation, the Industrial Bank of Korea created a system in which workers were allowed to switch to a new desired job. The system determines if the conversion is appropriate through education and training. Workers’ interest in digital-related education increased due to the program.
2. Reskiling Older Workers is Expensive
- Many older workers are finding “increasingly challenging” to cope with the market’s transformations. Given that estimates show that 31% of South Korea’s population will be over 65 by 2040 (versus 12.97% in 2015), reskilling and retaining senior employees will be a necessity in the future. Training could help “mitigate the negative effect of an aging workforce on productivity as workers continuously upgrade their skills in response to rapid technological progress.”
- However, companies in South Korea usually prefer to replace these workers. A study analyzed the profile of South Koreans receiving job-related education and discovered that they tend to be younger males. About 49% of those aged 26-35 participated in vocational training, while that number drops to 18.3% for those in the over 50 group.
- A survey with 220 manufacturing companies in Seoul found that 72% said that it is difficult to adjust the workforce to retain older employees and 60% said that maintaining older employees increases labor costs.
- Furthermore, leading companies in the country tend to have a mandatory retirement age, usually around 55, as they prefer to hire new employees than to retrain older ones, who are left to feel pressured and “shamed into quitting by fears of having become a burden, earning more than younger workers waiting to rise up the ranks.”
- Koreans tend to remain with the same employer until retirement. If these employers are not providing reskilling and training opportunities, these workers are likely to lack skills necessary to re-enter the workforce. As expected, there seems to be a feeling among these older workers that there will be no place for them in the market, apart from low-wage positions, such as janitors, and are not motivated to engage in learning opportunities.
- The Korean government has a training program for senior civil servants called Senior Executive Program, which comprises nine grades. Sixty-percent of the program is devoted to personal development and 40% to work-related development.
3. Temporary Workers
- Research suggests that South Korea needs a large-scale reskilling or upskilling, especially geared toward “mid-career professionals and other workers. Technical upskilling needs to be complemented by either acquiring or sharpening soft skills and competencies demanded by the changing nature of the work ecosystem.”
- The country has one of the highest rates of temporary employment in the OECD. As of 2017, regular workers accounted for 50.2% of the workforce, non-regular workers for 24.4%, and non-wage workers such as self-employed for 25.4%.
- Moreover, 87.2% of South Korean employees work for companies with less than 250 employees, a significantly higher share than other developed countries. These companies may not have the resources to invest in reskilling their employees, which could explain why South Korea has the highest worker turnover rate in the OECD. The lack of resources associated with low labor mobility means that they are often struggling to find suitable employees.
- SMEs are turning to temporary workers to address these challenges. They are also hiring temporary workers to become more adaptable to new work challenges at a lower cost, as they can replace them easily. Kim Dong-wook, director at the Korea Employers’ Association, explains, “Shedding staff is really difficult even if there are real laggards, unless the company is on the verge of going under. So companies prefer hiring contract workers, who are paid less and are easier to sack.”
- However, the country was already facing a labor shortage and a skill mismatch problem in last few years, and the pandemic made it worse. COVID-19 is pushing the percentage of temporary workers even higher, with many full-time employees being forced into contract jobs as the pandemic resulted in massive layoffs. These workers “are likely to endure long-term hardship due to mismatches between their deteriorating skill sets and the (potentially harder-to-fill) available jobs.”
- Studies have shown that temporary workers are not as likely as permanent workers to go through reskilling and training programs in South Korea. These are more likely to report that they are not learning new skills or only learning skills that are specific to their current job.
- Since they are not associated with an employer for an extended period, it is difficult for temporary workers to find “institutional support to build up the skills and expertise that could continue to make them in demand in a quickly changing labour market.”
- According to the OECD, they are “particularly exposed to the risks of skills losses, both because they are precluded from the possibility to fully apply their skills at work and due to more limited opportunities of access to formal training or other forms of on-the-job learning. The combination of these two factors makes it more difficult for them to qualify for better jobs.”
- At the same time, the companies that depend on these workers the most, SMEs, do not have the resource to provide learning opportunities, cannot compete with chaebols for skilled employees, and are not receiving the same type of government support.
- Some companies are addressing the situation by embarking in partnerships with universities and learning centers to provide lifelong learning support to employees and retrain their own employees instead of hiring new temporary workers.
Reskilling Workforces: Singapore
Some challenges that companies in Singapore face regarding reskilling the workforce include continuous technology disruption, an increase in training budget, and the unwillingness to reskill among the older employees. According to a survey, 93% of the Singapore employers said it is hard to train “staff on new technology.” Around 78% of employees in Singapore are ready to reskill.
1. Technology Adoption/Disruption
- A majority of Singapore manufacturing businesses still use outdated equipment in running operations, which requires the company to hire older employees who are familiar with the equipment. The aging workforce is not open to changes that come with new technologies implemented to improve production.
- With every new technological disruption, the existing workforce faces rejection, failure, incompetence, a “lack of knowledge.” Organizations have to partner with other institutions to offer reskilling services to the current workforce. Some technologies, like the AI-based, are implemented in Singapore to replace human labor.
- Singapore’s challenge is to identify the appropriate grants and technical scheme for the continuous reskilling of workers to enable employees to deal with the ever-changing technologies.
- The Singapore WDA (Workforce Development Agency) entered into partnerships with the “Advanced Re-manufacturing and Technology Centre,” “Singapore Polytechnic,” Institute of “High Performance Computing,” and UNIVAC to provide reskilling services to the people of Singapore.
- Some skills that the employees had to learn to match the current technology needs include advanced manufacturing masterclasses, optical engineering, smart manufacturing systems, and automation operating skills, among others.
- Some reskilling courses are conducted online, and employees don’t have to leave the office as part of the CET (continuing education and training) and AM (advanced manufacturing) strategy. The initiatives were developed to boost talent attraction, retention, and skill development.
- Employers in Singapore have difficulty in adopting new technologies according to study. Some barriers for this include the belief that the technology is unproven, the complexity involved in integrating new technology with existing processes and systems, and the whole process of putting employees through courses, online lessons, and seminars.
2. Unwillingness To Reskill
- Companies in Singapore are facing a challenge of employees who are not willing to reskill or upskill. The majority of the workforce unwilling to reskill and upskill is the older population.
- For example, Mr. Rahman, aged 62, a cleaner at Tampines Hub, refused to reskill and operate cleaning equipment. Instead, he prefers to stick to mopping the premises. When asked if he was willing to handle technology at his job, he raised a concern of having to learn new skills of polishing, stating that he is “already old” and would prefer not to use machines.
- Employees are concerned that reskilling and upgrading to using machines/technology means that they will replace the human workforce. Hun Peck Kien, aged 69 years, from Nick Cleaning Services in Singapore, stated that technology isn’t beneficial.
- The older workforce is not open to reskilling. Working with machines will cause pressure on the old. According to Ms. Faith Wong, the ISS’ Director of People and Culture, companies need to identify role models to encourage reluctant workers to pinpoint their fears and address them.
- Employees who reject technology are reassigned and redeployed to other jobs that don’t require advanced skills.
3. Increased Training Budget
- About 73% of Singapore employers have had to improve training budgets for the reskilling of their workforce. The percentage is high compared to the recorded 66% across the Asia-Pacific and 63% globally.
- According to Cisco’s research, 92% of companies in Singapore have difficulty recruiting talent who have the required IT skills because of the high costs of hiring.
- Employers believe that the “human capital” determines business success rates besides technology being a significant driver for business transformation in Singapore. According to Mr. Imbert-Bouchard, business leaders in Singapore need to invest heavily in reskilling and upskilling the existing workforce, recruiting new talents, and “prioritizing change management.”
- Employers are concerned that the cost and effort of implementing new technologies outweigh the benefits.
- Technological disruptions will continue to impact Southeast Asia’s workforce, creating new demand for workers and promoting growth.
- According to a study by Cisco and Oxford, 6.6 million jobs will become obsolete by 2028 in the Southeast Asia area. The countries in the region will need 28 million fewer employees to give the same output in production as is today. The study also determined that 41% of Southeast Asia employees do not have IT-related skills that will be required in the next ten years.
- The WEF (World Economic Forum) pledged to reskill and upskill 20 million employees with the necessary digital skills by the end of 2020.
- Singapore launched a program called SkillsFuture Credit, which is a government-funded initiative to reskill. Skills Development Levy and SkillsFuture Jubilee Fund are also reskilling Singapore programs funded through unions and donations from employers. These initiatives allow Singapore nationals aged 25 years and above to earn $370 annually to cover reskilling costs.
- Singapore is among the top countries with a high rate of the older workforce of 55 years to 64 years. According to a survey by “Tripartite Alliance for Fair and Progressive Employment Practices,” about 70% of employers were willing to restructure job scopes to accommodate the old.
- Companies in Singapore are employing three strategies, which involve redeploying displaced workers, creating new jobs, and upskilling employees to keep the citizens employed.
- Through the Skills Package initiative and SGUnited jobs, the Singapore government provides jobs, reskilling, and training for individuals affected by Covid-19. The Singapore business industry is currently running five other programs to train and redeploy over 1,700 employees affected by the Covid-19 pandemic to new functions.
- Singapore’s government is currently focused on providing targeted skill programs rather than a broad-based curriculum in learning institutions, as general studies no longer fit the business needs. WSG launched over 100 profession conversion programs to prepare people for new jobs in the current economy.
Reskilling Workforces: Japan
An aging workforce, lack of interest from the workforce, and gender parity are some primary challenges that companies face in Japan when it comes to reskilling workforces.
1. An Aging Workforce
- Japan’s aging workforce is one of the primary challenges that companies face when it comes to reskilling workforces. Studies indicate that over 27% of Japan’s population is over 65 years, with a birth rate of 1.43. Another research indicates that Japan risks facing a shortage of 6.44 million on the job market by 2030; Tokyo alone will be less 1.33 million workers. An aging workforce has continued to pose a challenge in creating an inclusive approach and reskilling initiatives.
- The employment of the elderly population in Japan has continued to hinder reskilling in workplaces, especially because the country’s aging population has progressed faster than other developed economies. In 2016, the ratio of employees in Japan stood at 65-69 age bracket, surging from 35.7% in 2015 to 44% in 2016. Further, an overwhelming number of older people are rehired as part-time or irregular staff, making it even harder to reskill them.
- Studies indicate that by 2030, Japan is forecast to become the first ultra-aged nation globally, with workers above 65 years accounting for over 28% of the country’s population. More aged employees are staying on the jobs longer, and while they apply their years of experience, it has become difficult to reskill these employees, which poses a challenge to both the employer and workers. The aging workforce members in Japan are concentrated in jobs where half of the tasks require technical knowledge and savviness. Even though they are skillful with insight developed over long productive careers, this demographic is less productive and less technically savvy, making it harder for organizations to reskill or leverage older employees’ attributes.
2. Lack of Interest from Workforce
- Indifference from the workforce can complicate the reskilling process. However, the lack of interest comes from the risk of job displacement from technological changes made during the reskilling process. Given how the labor market is currently segmented, the burden of job displacement and the skills gap is likely to affect people with little or no technological knowledge.
- While workers continue to show disinterest in reskilling in Japan, employers understand that it is in their best financial interest to motivate employees to embrace the reskilling revolution. Companies that are proactive in retraining in a non-traditional manner will stay afloat in their respective industries. However, reports indicate that reskilling put at least 25% of the workforce at risk, even considering indirect societal benefits.
- Most people in the workforce believe that Japan’s current economic trends may affect their jobs, hence the fear of reskilling and training, especially due to new technologies. Even those who participate in reskilling do so for learning and for fear of losing their livelihoods should they fail to comply. People’s profession and expertise also determine their level of interest in reskilling. Freelance employees and self-employed people are more likely to be motivated to reskill compared to conventionally employed workers.
3. Gender Parity
- Gender parity is yet another challenge that affects Japan’s reskilling workforces. According to research, Japan ranks 110 out of 149 countries in the 2018 Global Gender Gap Report. Lack of proactive measures from the government to increase female labor participation, especially in the highest-growth occupations, has a ripple effect in reskilling its workforce. The only way to overcome this challenge is by focusing on inclusive reskilling, which can go a long way in aligning Japan’s commitment to Society 5.0, and a human-centered approach to economic advancement. In this new decade, Japan is tasked with inclusivity, adaptability, and gender parity, or else fail at combating challenges such as reskilling its workforce in the future.
- Japan has continuously attempted to encourage more parity between men and women in the workforce, but the efforts have not been successful as the gap is still widening. As a result, Japan has continued to face challenges in the workforce, especially as far as reskilling is concerned. Based on the current ranking, Japan’s gender gap is the largest in developed economies. Policymakers have continued to be urged to include more women in reskilling, upskilling, and education opportunities, to encourage and empower more women to take up the fastest-growing roles in the new economy. Studies show that empowering and including more women in the workforce could add $550 billion to Japan’s GDP.
- More than three decades since Japan passed the Law on Equal Opportunities for Employment of Women and Men, there are still socio-cultural norms and beliefs in gender roles that continue to affect education and the job market alike. Gender parity in Japan exists across educational attainment, where women prefer to stick to social sciences as opposed to engineering and natural sciences, mainly due to social norms. As a result, women miss out on influential job positions, which affects the overall workforce even in terms of reskilling.
Digital Transformations: South Korea
LG Uplus and POSCO are some South Korean industries that are working through a digital transformation.
- With Huawei equipment’s help, LG Uplus has managed to transform and run the 5G network digitally. South Korea continues to detach from the Chinese firm as it develops its network while looking to partner with Samsung, which is considered one of the world’s leading 5G equipment giants. The South Korean government signed the Digital New Deal with the hopes that it will continue to encourage more industries to undergo a digital transformation. In its proposed third supplementary budget, the South Korean government would spend $41 million to construct a 5G infrastructure and cloud computing for the government and the industrial convergence between 5G and AI, which cost an additional $541 million.
- In September 2020, LG U+ announced that it would also enroll its in-house members in cloud platform professional training to complete the company-wide digital transformation. Part of the company’s digital transformation includes accelerating DX in all areas of service development, quality management, and overall operations and using cloud platforms in various fields related to media, big data, and AI. Further, the company plans to produce over 100 professionals who are objectively certified and selected by supporting cloud certification acquisition for employees who want to hone their digital expertise.
- LG Uplus is collaborating with Ericsson to roll out IoT and 5G development and narrowband LTE. The LG-Ericsson memorandum of understanding is meant to run all through 2020 as the two companies develop robust platforms to support 5G and IoT. The four areas of development that will be highly prioritized are; IoT infrastructure, including narrowband LTE; software-defined networking (SDN) and network function virtualization (NFV) at the core of 5G networks ready; global content delivery networks (CDNs), and IoT-Advanced technologies.
- POSCO is one of the lighthouse factories in South Korea that has continued to make strides towards digital transformation by proactively adopting Fourth Industrial Revolution technologies that include the Internet of Things (IoT), Artificial Intelligence (AI) big data. In 2019, POSCO became the first-ever South Korean lighthouse to be selected out of the 26 lighthouse factories. POSCO received high scores and accolades for its digital transformation, particularly for utilizing AI technology to build a smart factory platform while integrating applications such as a smart blast furnace.
- Lighthouse factories represent a wide range of industries that demonstrate leadership in digital transformation. In the recent past, POSCO has been at the forefront of laying the groundwork for the smart factory as part and digital transformation in the South Korean lighthouse industry. POSCO’s dedication to the smart factory has boosted the country’s global recognition in digital transformation. Due diligence and documentation review by WEF, POSCO has shown its dedication in embracing and proactively participating in digital transformation from the initial submission of application, due diligence, and documentation review.
- In 2019, POSCO renewed its commitment and dedication to boosting competitiveness by proactively expanding its units while seeking new growth through digital transformation to expand its opportunities beyond steel units. By integrating anode producing POSCO Chemtech and cathode making POSCO ESM, the company will launch artificial graphite that will help solidify its market dominance and digital transformation in South Korea.
Digital Transformations: Singapore
Two industry segments in Singapore that have been challenged to digitize due largely to COVID-19 include food hawkers and malls or department stores. Both industry segments have traditionally been reliant on foot traffic and in-person sales, and also have been reluctant to adopt new technologies. Due to the Circuit Breaker lockdown in Singapore, both areas have needed to adopt technology and online platforms to continue operations and keep sales through the pandemic; both are in early adoption stages and slowly incorporating technologies and making changes to online platforms. Hawkers are increasingly adopting online ordering and delivery platforms, as well as being incentivized by the government to adopt the contactless payment service, Unified e-payment Solution. Shopping malls and department stores are becoming new additions to online e-commerce platforms and are building their own virtual mall shopping platforms, intending to bring customers back to physical stores through the use of e-vouchers.
Food — Hawkers
- Food hawkers are a significant traditional part of Singapore food culture, and have traditionally been reluctant to adopt technology.
- Food hawker businesses are typically a one-person business, with the hawker (owner) doing everything on their own, including being the chef, taking orders, and taking payments.
- Recently (pre-COVID) some hawkers had been slowly adapting to using social media and messaging apps to take orders.
- Due to COVID-19 regulations and social distancing restrictions, hawkers have needed to incorporate more digital technology to receive orders, and also needed to find ways to manage the logistics of taking payments and fulfilling orders.
- Several companies have emerged to help hawkers cope with new digital and logistical needs to continue to operate their businesses, including HawkerFoodDelivery.com. This service provides an online ordering and delivery service to hawkers, with no commissions or fees, only delivery fees.
- The global pandemic has greatly increased the willingness of hawkers to adopt technologies to fill revenue gaps, by using digital services to manage ordering, payment processing, and delivery logistics.
- Peter Seow, co-founder of HawkerFoodDelivery.com, believes that to “digitise the hawker mindset” is the biggest challenge for this industry, since hawkers are used to operating on their own from their physical location. Seow indicates the pandemic and stay at home orders have forced hawkers to adopt technology, and he believes that as people choose to stay at home, that use of digital services may continue beyond the current pandemic. Seow also indicates that an importance for increased adoption is educating hawkers, especially the older generation, that new digital platforms have become much more user-friendly and easy to interact with.
- Another digital effort to help hawkers continue business during COVID started as a Facebook group called Hawkers United — Dabao 2020, also called the Virtual Hawker Center by Business Insider. The group’s goal was to support hawkers who continued to operate during the Circuit Breaker, and it appears to continue to help promote and boost sales at present. Hawkers or customers can post on the platform to generate sales or attention for the business.
- In an effort to maintain public safety and incentivize hawkers to accept digital payments, Enterprise Singapore and the Infocomm Media Development Authority are partnering with the Housing and Development Board, JTC Corporation, and National Environment Agency to help hawkers adopt the Unified e-payment Solution. This contactless payment solution consists of a unique SGQR label that hawkers can post on their stall. To incentivize hawkers to adopt the technology and to help cover costs, “existing Unified e-Payment Solution users and new sign-ups who adopt the solution by 31 Dec 2020 can look forward to an E-Payment Bonus of up to $1,500 ($300 per month, over a period of five months).” To qualify for the bonus, hawkers must have at least 20 transactions of $1 or more for each previous month, beginning June 2020 through May 2021.
- The government has acknowledged that hawkers and seniors are some of the most challenging groups in society to adopt digital technology. In an effort to help speed adoption, the Minister of Communications and Information, S. Iswaran, said the SG Digital Office has deployed 200 digital envoys to encourage stallholders in hawker centers and wet markets to adopt the SGQR payment solution.
- As of August 14, 2020, 5,400 hawkers (of 18,000 stallholders) have adopted the new unified e-payment solution, indicating good progress towards large-scale adoption of the contactless payment solution. According to Ted Tan, Deputy Chief Executive Officer of Enterprise Singapore, “The COVID-19 situation has significantly accelerated digital transformation in enterprises, regardless of size. The adoption of e-payment is an important first step towards digitalisation for food services businesses, including hawker centers, coffee shops and canteens, in our heartlands and industrial estates. We urge all stallholders to embrace e-payment which will enable them to operate more efficiently and safely, minimizing physical contact with their customers during this period and for the long term.”
Retail — Shopping Malls and Department Stores
- Due to shut-downs during COVID-19, retailers globally have been forced to close and look at online sales channels. Post-COVID lockdown, it appears that digital sales and online retail channels are now a necessity for retailers. Ray Chou, head of the Singapore-based logistics company Ninja Van, believes companies that have no online presence risk alienating their customers.
- Challenges for retailers during the pandemic, both large and small, consisted of keeping up with order demand from consumers, and meeting new demands of logistics and delivery. Online e-commerce and logistics platforms are working to address these challenges; during the Circuit Breaker, Ninja Van “aimed to offer better support to its clients such as providing timely updates on changes to its operations, in response to new government restrictions, as well as avenues for its shipping customers and marketplace platforms to obtain quick resolutions of issues.”
- Department stores are joining the growing list of individual retailers to adapt to online e-commerce platforms, which include Lazada, Tokopedia, Zalora, and Shopee. Historically and during the pandemic, department stores and malls have been slow to adapt to online platforms. Lazada indicates added eight times more sellers from January to May this year than in the previous year, with department stores being a significant new addition.
- For the first time in its 26-year history, department store BGH Singapore launched an e-commerce store in June. The online platform includes over 170 local and international brands.
- The shopping mall Marina Square became the first shopping mall on the Lazada platform in July 2020, creating a virtual mall on the Lazada app. So far, over 30 tenants have been onboarded, with the app offering e-vouchers to redeem in stores. The hopes are to bring customers back to stores and also shop other tenants at the mall.
- CapitaLand, a Singapore real estate group, launched its own app for its shopping malls in June 2020, called eCapitaMall. The group hopes to boost sales for its mall tenants with the app due to COVID-19 restrictions. In Singapore, CapitaLand operates 18 malls, with over 2,000 stores. With the app, customers can either browse online before purchasing in store, or browse in store and then purchase online, with the option to deliver to their homes or pick up items in the stores. According to retail managing director Chris Chong, “The circuit breaker has brought to the fore the importance of an omnichannel, 24 by 7 strategy for Singapore’s retailers… We want to help our retailers reach out to more consumers and online business opportunities.”
- Colliers, a global commercial real estate services organization, expects that malls will increasingly offer “Click-and-Collect” options through online platforms; while this is something other retailers have done for a while, malls have been slow to adopt this strategy. Additionally, Colliers anticipates that shopping malls will need to diversify and could become locations for the “last-mile delivery system” in e-commerce by dedicating space for warehousing and product pick-up; malls could become local fulfillment, distribution, and pick-up centers for e-commerce platforms.
Digital Transformations: Japan
Some examples of industries in Japan that are working through a digital transformation include the financial services industry, the beauty industry, and the apparel industry. Some examples of what certain companies under these industries are doing were presented below to show the digital transformation progress in these sectors.
State of Digital Transformation in Japan
- Several years ago, Japanese industries are considered to be exceptionally competitive because of their reputation as the purveyor of high-quality products and services.
- Since the year 2000 however, the industries in Japan have fallen on the wayside as they struggle to embrace digital transformation. This is in contrast to global companies that have already adopted high-profit systems.
- The primary reason for the sluggish development of digital transformation strategies in the country was attributed to the old “quality-as-a-differentiating factor” belief that these industries still hold. As a result, Japanese industries are still in the process of adopting digital transformation strategies to cope with the current business environment.
- The financial services sector in Japan is one of the industries in the country that is starting its digital transformation journey.
- The industry is now facing a new frontier as it is experiencing never-before-seen developments.
- Some of these changes include newly-deployed mandatory regulations, shifting customer preferences, and the rise of new Fintech players.
- Given these changes, the financial sector in Japan is starting to re-evaluate their business models and organizational setup.
- As digital transformation starts to progress in the country, financial firms are expected to build “cross-vertical ecosystems” as they build their new business models.
- As the dawn of digital innovations has paved the way for more network links and innovative diverse solutions, customers are now expecting more streamlined, easy, and personalized financial services. This preference is also expected to progress further into the future. The financial sector is then advised to embrace digital transformation to accelerate their operations and be more in-tune with their customers’ demands.
- In the blockchain arena, the Deloitte consulting company has been collaborating with the government of Japan and the finance industry to drive the adoption of Blockchain in private firms. One of their main initiatives is to establish a blockchain research team.
- The group will work with big banks to deploy social solutions that are powered by blockchain.
- The group will also help in the creation of a “rule formation strategy” to face the social infrastructure of the future.
- Digital technologies such as “robotics and cognitive automation (RCA)”, machine learning, and others are some of the enablers of Japan’s digital transformation. Due to the massive use of these technologies, firms are now evaluating the roles of their staff to include bionic-powered labor to bring down operating expenses and to enhance work-life balance.
- Digital transformation is also enabling the sharing economy as platforms have become the primary distribution channel for financial solutions. As the Japanese financial services industry starts to transform itself, platforms will be one of the solutions that can promote inter-company collaborations.
- One of the players in the financial industry is SOMPO Holdings.
- The insurance company kicked-off its initiative called “SOMPO Digital Lab.” The company engaged those with experience in digital transformation and big data to help in the project.
- Some of the ideas that came from the lab include the use of drones to capture pictures and videos to aid in damage investigation.
- The company is also starting to explore the use of wearable devices to gain more insights that can lead to the creation of new products or services.
- The beauty industry in Japan is also in the process of implementing their digital transformation strategies.
- As an example, Shisheido is starting to deploy various technologies as the company started to deploy its goal of transforming its product delivery into a beauty-as-service model.
- The company also aims to adapt to the changing needs of its consumers such as busy women who might not have time to purchase skincare products.
- The company just recently deployed one of its beauty solutions, Optune. The solution aims to remove the need to choose skincare products as its revolutionary way to transform its business model.
- Optune is the company’s pioneering subscription-based service.
- Users will need to pay 10,000 yen ($92) per month to be able to access a proprietary app containing an algorithm that can evaluate their “skin, environment, sleep data,” and other factors.
- The findings are then passed on to a special device that has five serum cartridges called “Optune Shots.” The machine will then automatically dispense the resulting formula once the users put their hand into the slot.
- The apparel sector is also another industry in Japan that is aiming to transform its business model with digital technology.
- Since 2016, the industry has been leveraging innovative technologies to prepare for the future.
- One of the areas that the sector is looking at is the ready-to-wear market. Companies in this sector are looking for digital solutions that can help transform their business in this space.
- As an example, Gunze is an apparel brand in Japan that is starting its digital transformation journey to incorporate IoT into its clothing products.
- The company is in the process of creating fibers that can capture biometrics.
- One of its IoT clothing products is an undergarment that is woven with these special fibers. Through the data captured by the fibers, movements, posture behaviors, and activity levels can be visualized.
- These intelligent fibers are now being tested as the company has started deploying them in its own sports club chains.
- The company hopes to find other applications for this innovation in the future that can result in new business models. Some of the ideas being looked at include the application in elderly support products and employee condition management.