It’s being said that the long-lasting era of industrial capitalism will soon yield to the age of “digital capitalism”. How will this be fundamentally different from what’s come before, and how will companies and those who work for them be forced to change their ways of thinking? The specific details of this shift are set to be debated during the panel discussion at the “NRI Dream Up The Future Forum 2018”, entitled “What Business Strategies Should Japanese Companies Adopt in the Digital Transformation Era?” In this feature, NRI member and discussion panelist Shohei Ishiwata introduces the three major changes that digital capitalism will bring about.
From “owning” to “using”, and finally “utility”
The advance of digitalization is expected to bring significant changes to how capitalism works. We at NRI believe that society will soon shift from industrial capitalism—which has been ongoing since the Industrial Revolution—towards “digital capitalism”, and that this change will necessitate a “digital transformation” that will alter the ways in which society and business operate.
In the first place, what exactly is digital capitalism? NRI’s Shohei Ishiwata, a consultant in the ICT sector who has supported digital reforms in various industries, contends that the essence of digital capitalism lies in “the change from ‘things’ to ‘services’, as well as from ‘owning’ to ‘using’, and then ultimately to “utility’”. He describes this transition in the following way.
“Under the current paradigm,” Ishiwata says, “companies are concerned with how to streamline their production and sales, in order to produce large volumes of physical commodities and sell them to consumers who then become the owners. Industrial capitalism was built upon this way of thinking. By contrast, digital capitalism is focused on efficiently creating an environment in which consumers can be comfortable with and feel satisfied using your products, and can know their value and their worth.”
But what does this mean in specific terms? To find out, let’s use the example of automobiles, which are symbolic of industrial capitalism.
“A major purpose for consumers to own a car is to get around. It’s about going where you want, when you want, for your own purposes. Up to now, having your own car has been the most convenient means of going places, but if we think purely in terms of getting somewhere, there are so many options other than a personal vehicle, like taxis, rental cars, and more recently, services like car sharing or Uber. In the future, advances in EV (electronic vehicles) might well increase the number of convenient options we have, such as personal mobility devices. If so, consumers will find that rather than owing their own vehicles, it’s more important to be able to travel quickly or to enjoy the ride when they have to get somewhere—in other words, to satisfy their mobility needs in any given moment. This means that physical commodities will become merely “parts” for selling pleasant experiences, and companies will find it more important to make their business about providing services to consumers.”
Subscriptions as a new platform model
It would seem that in the age of digital capitalism, the way companies do business will change dramatically. Ishiwata has the following to say about the key points of this approach, using cars again as an example.
“Instead of being concerned with selling cars as physical commodities to consumers,” he says, “car companies need to think about what kind of value consumers are looking to get from or during their travels, and then provide the optimal means for them to do so at the ideal time. For instance, do they want to go somewhere to avoid getting wet when it suddenly starts raining, or do they want to create lasting memories with their family? And is the car they have now going to fulfill that need? This shift from ‘owning’ to ‘using’, and then ultimately to ‘utility’, will force companies to reassess their conventional business approach of selling products, and to redefine what customer needs they’re addressing and what it is they’re providing. I think that continuously repeating this cycle is something that companies will need to do.”
“Meanwhile, given the flood of information out there and people’s ever-changing needs, consumers will have a hard time deciding what the ideal combination of transportation means is. Going forward, companies will need to adopt business models that allow them to be platforms that can customize these combinations of needs and services, while at the same time enabling them to remain constantly in contact with consumers. One way of doing this could be the subscription model that’s showing up in all sorts of fields these days.”
For workers, it’s not specialized skills but rather the ability to constantly adapt that will matter
One characteristic of digital capitalism is how things change in an ever-evolving manner. In the first place, the essence of digital technology is its ability to easily combine various things together and quickly adjust them. “Services and business alike can be changed rapidly, and they will change. It will become the norm for our society to be in a state of continuous change,” says Ishiwata.
In such a society, we too will be required to significantly change our way of thinking. Ishiwata offers one last comment on the mental attitude workers will need in the era of digital capitalism.
“Traditionally, professional life has involved three stages: first you learn specialized knowledge and skills at school, then you find an occupation and put your expertise to use, and finally after a certain number of years you retire. However, with digital capitalism, the pace of change is so rapid that you have to constantly keep on learning. That’s because your expertise will very quickly lose its usefulness.”
It is expected that corporate hiring will shift away from a focus on expertise and skills towards a demand for talented persons who can keep adapting in line with a company’s vision.
How should companies and businesses change in the era of digital capitalism? And what will become of the platforms that play such a central role in business? These substantial themes will be treated during our panel discussion, “What Business Strategies Should Japanese Companies Adopt in the Digital Transformation Era?”, at our “NRI Dream Up The Future Forum 2018” event.
Massage from Japanese Chief News Anchor, Maoko Kotani, moderator of NRI Dream up the future Forum 2018
Digital technologies have been becoming indispensable for us and changing our daily lives and businesses. NRI Dream up the future Forum has been proposing future images with digital technologies under the theme of "Near future created by digital" especially "The future of Japan changed by digital" in 2017 and "The future of industries changed by digital" in 2018. At the 2018' forum, NRI's consultants will introduce interesting and suggestive cases of digital transformation in global businesses based on their expertise in analitics, transportation, manufacturing, and real estate.
Nomura Research Institute, Ltd.
Corporate Communications Department
Oct. 11, 2017