Table Speech


Generation-Specific Ideas Determine Industrial Competitiveness

March 18, 2015

Professor Ken Senoh
BRPresident & Chairman,
The Industry-Academia Collaboration Initiative (NPO)


 Today let me raise some questions in my speech. My first question is “how many jobs will be replaced by the time current elementary school children reach the age for employment?” 100% means all the jobs will be gone and 0% means there will be no change. A survey conducted by Professor Cathy Davidson in developed countries came up with the figure of 65%. Cyber security specialists, mobile device application developers, social media managers, stem cell researchers and robotics engineers are glamorous jobs today but who could have foreseen such changes?

 Around the Meiji Restoration, 95% of the Japanese work force was engaged in agriculture, forestry and fisheries. Today, the ratio has dropped to less than 10%. Jobs have kept changing over the course of time, and we are now entering the era of great transition once again. We must develop human resources with intelligence, physical strength, vitality and stamina to adapt to the changing times. The industrial ecosystem is transforming with increasing speed, with the IT industry in the driver’s seat. How can industries cope with such transformation?Today let me raise some questions in my speech. My first question is “how many jobs will be replaced by the time current elementary school children reach the age for employment?” 100% means all the jobs will be gone and 0% means there will be no change. A survey conducted by Professor Cathy Davidson in developed countries came up with the figure of 65%. Cyber security specialists, mobile device application developers, social media managers, stem cell researchers and robotics engineers are glamorous jobs today but who could have foreseen such changes?

 Around the Meiji Restoration, 95% of the Japanese work force was engaged in agriculture, forestry and fisheries. Today, the ratio has dropped to less than 10%. Jobs have kept changing over the course of time, and we are now entering the era of great transition once again. We must develop human resources with intelligence, physical strength, vitality and stamina to adapt to the changing times. The industrial ecosystem is transforming with increasing speed, with the IT industry in the driver’s seat. How can industries cope with such transformation?

 This brings me to my second question “should the Japanese economy, industries and businesses ‘grow’ or ‘develop’?” Growth is a quantitative expansion of the existing model, so economic growth means the current industries will expand in quantity with no structural changes. Development, on the other hand, is a discontinuous shift to a new model. I have long called for the Japanese industries and businesses to develop, rather than to grow, but unfortunately I received little reaction. We must also note that “growth” and “development” are intertwined, so business managers with multiple operations should be capable of assessing which operation to grow and which one to develop.

 Now, how can we enhance development through innovation? All industries develop through the three stages of “I”s: Imitation, Improvement and Innovation. Industries in Japan sprang up by imitating the Great Powers of the West in the Meiji period. In the reconstruction phase after World War II, we introduced foreign technologies by license agreements and made improvements that brought glorious economic development of the 1970s and 80s to our textile, steel, electronics, computer and automobile industries. When the economic bubble burst, Japan came to a standstill, while winners of the West promoted innovation by creating new models.

 I must say the term innovation is misused in two ways in Japan. First, it is used synonymously with improvement. Economists use strange expressions like “incremental innovation” and “radical innovation,” but I must say the former should be replaced by improvement. Secondly, innovation is often mixed up with invention. Strength in technology is vital for invention and invention guaranteed industrial competitiveness up to the 1970s and 80s. Today, innovation is based on an epoch-making new value that replaces the existing ones. In other words, innovation means to break down and to reconstruct the current industrial ecosystem.

 It is widely known that Joseph Schumpeter got the idea of innovation from the productivity system of Ford Motor Company. Now, let me raise my next question “according to a market research in the US, when Ford set out for mass production, did American people really want a car?” Their answer was no, and they wished for a “powerful horse.” This proves that people cannot imagine what innovation can bring new to their life, as they identify their “needs” only from what has been made available for them. Market research can identify only improvement needs. When I asked business executives to rephrase the term “needs,” 95% of the answers were either “demand,” “request” or “desire.” To me, needs means “shortage” or “deficiency,” things that are “necessary.”

 Another lesson we can learn from the market research result is that we cannot get a new model by making improvements to the existing one. However hard we try, we cannot turn horses into cars by improvement or reform. Likewise, we cannot turn music records into CDs, or cathode-ray tubes into semiconductors. New models are brought from outside, so if we want to survive, we must transform ourselves.

 Nagaoka was once a world famous manufacturer of record stylus, exporting 1 million units per month. However, CDs became very popular and the company decided to suspend the operation in just five years. Today, they re-started manufacturing industrial machinery components, including precise polishing apparatus. They also manufacture record stylus for classic phonograph fans.

 If innovation takes place in the upper level of industry, the lower level is destined to die out. This is why we need to foresee the next-generation industrial ecosystem. I am deeply concerned that the Japanese companies focus on competing with their rivals in the same industry and fail to have a wider perspective and to take a holistic approach in identifying the key steps to be made.