Since 2017, Nomura Research Institute (NRI) has been holding an annual forum on the theme of "Digital Opening in the Near Future" to discuss the future of corporate management in Japan and around the world. In 2019, the final year of the forum, NRI’s President and CEO Shingo Konomoto delivered a keynote speech about "Proposals for Digitalization of Society and Industries" as a culmination of these efforts.
The findings of the studies conducted on "Digital Opening in the Near Future" were published in Digital Capitalism by Toyo Keizai Inc. Takeshi Mori, one of the co-authors of this book, presents the main topics of this speech.

Plans to make proposals across various fields, including socio-economic evaluation, organizations, and policies in the digital era

The keynote speech "Proposals for Digitalization of Society and Industries" consists of four important topics: "Socio-economic Indicators in the Digital Era," "National and Regional Welfare through Digitalization," "Data Assets Supporting the Digital Society," and "Corporate Response to the Digital Capitalist Era." Mori explains:
"As a culmination of the three-year-long forum, this speech will cover new indicators for the digital era including corporate management and national and local policies. I would like to suggest a course of action to deal with the changes in social and industrial structures because of digitalization, and ways to resolve the issues caused by that."

New Values in the Digital Era: Evaluation of Consumer Surplus and Digital Capital

The global GDP growth rate has been sluggish since the Lehman Brothers Bankruptcy. Nevertheless, the results of surveys conducted by various organizations around the world, including NRI, show that consumer satisfaction has gradually increased in many countries except for the United States. Mori believes that this is because "digital technology has made consumers feel that the quality of their lives has improved."

"Currently, the Consumer Surplus (the difference between the maximum amount consumers are willing to pay and the actual price they pay, or the perceived monetary gain) created by digital services has become quite large. A typical example is LINE, an app that can be used free of charge. This entails that consumers are now able to receive high-quality services for free or at incredibly low prices."

Mori cites “digital capital” as the cause of such consumer surplus.
"Digital capital here includes algorithms (procedures or formulae for computers to get work done) and data. For instance, in Google search, the added value for the average user is the keyword search algorithm, while that for advertisers (companies that advertise on Google) is the data on consumer interests.”
Mori emphasizes that with growing consumer surplus and digital capital in the economy, there is a need for new economic indicators.
"With the progress of the digital economy, the limitations of GDP as an economic indicator are becoming clearer. This is because people's satisfaction and well-being cannot be measured accurately in terms of GDP, which measures only material satisfaction. The current GDP of Japan is around 500 trillion JPY, but NRI believes that along with that, it is also necessary to reevaluate and estimate the value of consumer surplus and digital capital, which has not been taken into account so far."

Noteworthy concepts of ‘well-being’ and ‘digital social capital’

The concept of well-being is getting a lot of attention in the economic world since the release of the Stiglitz Report in 2009. This refers to a state of physical, mental, and social fulfillment. Economic factors such as GDP (income) and consumer surplus are only a part of it, while non-economic factors such as health, personal relationships, and freedom are also emphasized.

"Value addition through consumer surplus and digital capital is an important step, but not everything can be analyzed in monetary terms. Going forward, corporate management and national and local government policies will aim to include non-monetary factors to maximize the well-being of citizens. This will require an infrastructure that can also be called as "digital society."

What exactly is digital social capital for maximizing well-being?
"For example, Estonia, located in Northern Europe, is known as a digital nation as it is completely digitalized. Personal information, such as personal income, expenditure, and medical information, is secured on a platform called X-Road. It makes life very convenient for citizens as, for example, tax payments can be done within a very short time. It also provides control over personal data, including the ability to manage the data and block other people’s access. This kind of society can also be an example of digital social capital."

What is the strategy of Japanese companies toward DX?

In Japan, there is a growing trend to promote DX for the transformation of business models. From the end of 2018 to 2019, MIT (Massachusetts Institute of Technology) and NRI jointly conducted a fact-finding survey on the progress of DX in Japanese companies.

"According to MIT's George Westerman, a keynote speaker of the forum, companies need two aspects to promote DX: digital capabilities and leadership skills. He believes that it is important for a company to combine both of these aspects to attain the position of a “Digital Master” that promotes top-level DX."

Mori describes the highlights of the forum as follows:
"This will be the first time that the results of the fact-finding survey on DX in Japanese companies will be presented at this forum. We are also planning to introduce some examples of Japanese companies that NRI considers to be digital masters."

Digitalization transforms socio-economic systems and even our sense of values. In this keynote speech, I would like to discuss with all of you what the term ‘digital’ means to Japan and what kind of future we should create with it. I am looking forward to your active participation.