With the popularization of the IoT (Internet of Things), the Internet is bringing revolutionary changes to society and industry. Everything in the real world will become connected to the Internet and enable information to be exchanged online. As a result of this, the various experiences of companies and people, including those had via non-digital products and human bodies, are becoming connected to the Internet to enable information to be exchanged.
Providing new value by changing things into services
We are said to now be in the fourth industrial revolution. With the popularization of IoT, everything is becoming connected to the Internet, and linking things with experiences is starting to generate new value, rather than merely exchanging information.
It is now becoming possible for user information to be unconsciously absorbed by devices, then have the results of analysis by AI (artificial intelligence), etc., returned to the devices to provide the user with new experiences. This is enabling things to be changed into services in various industries. A famous example is construction machinery manufacturer Komatsu accumulating and analyzing the operating status of its construction machinery based on sensor information, in order to provide predictive maintenance. This is how new value is starting to be provided by changing things into services in the fields of both B2B and B2C.
Clouds and crowds drawing attention due to the popularization of IoT
It is necessary to focus on both cloud computing and crowdfunding to understand these environmental changes. Cloud computing refers to the shift of IT infrastructure to the cloud, which promotes the shift of things to services. Environments that enable all computer functions to be used as long as you have a browser that can connect to the Internet are starting to take form. These environments enable services provided by servers on a network to be procured at any time by paying a usage fee according to how much of the service is required, without the need for the user to build their own IT infrastructure. Utilizing IoT will make it easy to create businesses for products and services where imagination is the only limit, and the shift of various things to services will further increase.
Crowdfunding is a method of raising funds from an unspecified number of people and organizations via the Internet. Crowdfunding started in the United States and with the establishment of the JOBS (Jumpstart Our Business Startups) Act in the United States in 2012, it has become easier to secure investment capital on the Internet, which has led to rapid market expansion. A large amount of investment capital is starting to flow from individual and institutional investors to mainly startups and medium to small-size businesses.
In Japan, recognition of the crowdfunding format has increased since projects to raise donations to help people after the Great East Japan Earthquake in 2011. Legal reform has gradually advanced since 2015, and it is now easier to gather investment money via the Internet for the purchase of physical assets such as real estate and unlisted stocks for new and growing companies. Of particular note is the reform to the Act on Specified Joint Real Estate Ventures cleared by the Diet in late May 2017 to double the real estate investment market by the year 2020, which lifted the ban on investment crowdfunding for real estate financial products via the Internet.
Up until now, real estate investment was limited to listed real estate financial products such as REITs (real estate investment trusts), but lifting the ban on crowdfunding will enable the flow of real estate investment capital that does not presuppose high growth or business continuity. Some specific examples of where this will come into play are enabling investors to invest in creating new regional industries to vitalize a region with short-term projects such as for restoring old Japanese-style houses and constructing new stadiums, or invest in passing on public assets such as art galleries, museums, or schools to the next generation while maintaining their importance to the community.
Surviving in the age of the digital revolution
The three major elements of management—people, things, and money—have become replaceable by cloud computing and crowdfunding, and no longer need to be owned on-site. It is now extremely important to be able to generate outstanding ideas based upon an understanding of the shift of things to services promoted by the digital revolution. Many major companies need to compete in the same arena as individuals that can create outstanding ideas. The time has come to review how we think about the shift of things to services promoted by the digital revolution.
NRI Research Paper Knowledge Creation and Integration September, 2017
Nomura Research Institute, Ltd.
Corporate Communications Department