Jan. 08, 2020
Every year, Nomura Research Institute (NRI) publishes its “IT Navigator”, which issues an outlook of the IT market and provides insight into future business model possibilities. This year’s IT navigator begins with an introduction on 5G services, which saw full-scale commercialization starting in spring 2020 and are increasingly expected to expand into related markets, and covers market scale predictions up to 2025 in six chapters including entries on ICT Media and xTech. In this paper, we introduce the latest trends and future prospects of areas of particular interest.
The Growing Potential for 5G and the Perspective of Defensive DX That is Desired - Yoichiro Miyake, ICT Media & Service Industry Consulting Department Manager
With this version of IT Navigator, we have concisely put together all of our market trend forecasts, focusing on how 5G will affect the Japanese market. A great many companies are pinning their hopes on 5G as the infrastructure that will empower them to develop new businesses in the DX (Digital Transformation) era.
Meanwhile, companies must also find ways to address new challenges unique to the digital era, such as the handling of personal information and relationships with GAFA and other platformers. The government has even created a Digital Market Competition Council, which is charged with developing rules under antimonopoly laws including for data valuations, deliberating on the Digital Platformer Transaction Transparency Bill, and discussing a revision etc. of the Personal Information Protection Act.
While consumers enjoy the convenience that DX offers, they are also wary about their data being obtained. Unless companies fully consider consumers’ thoughts and concerns regarding personal information, they will risk losing people’s trust, and figuring out how to build relationships of trust with consumers is the most crucial point in promoting DX.
The Main Battleground for Round II of International Competition in the Digital Era is Smart Factories - Shunichi Kita, Partner Consulting Division
I think it’s extremely significant that 5G is taking off now, at a time when DX is rapidly expanding in society, industry, and daily life. The 5G era involves the networking of many things that previously were unconnected—that is to say, the full-scale maturation of IoT. Although 5G’s potential is expected to be on full display starting in 2023, in the interim, its use in factories and warehouses, large-scale commercial facilities, stadiums, and other closed spaces will be proceeding apace, with its scope of use growing exponentially and taking on new dimensions.
The first act of international competition in the digital era ended with the overwhelming victory of GAFA. In terms of devices the smartphone was front and center, and the analytical results of the big data involved were used for advertising and recommendations. The second round of this international competition will be a war in which data, obtained from sensors fixed to drones, automobiles, and everywhere else, is drawn up without restrictions over 5G networks and then used to create value.
The main battleground of this war is expected to be smart factories*, first and foremost. For example, the use of AI to analyze 4K images of experienced engineers working in factories and provide feedback, and more generally the leveraging of our on-the-ground capabilities—one of Japan’s strengths—will be the key to achieving victory in this second round.
Sports-as-Content Joins the Smartphone Screen War - Kensaku Namera, ICT Media & Service Industry Consulting Department
The Japan Sports Agency and the Ministry of Economy, Trade and Industry (METI) have announced that starting with the Tokyo Olympics, they will be collaborating in a public-private effort to revitalize the Japanese sports industry by 2025. To this end, it will be vital to leverage ICT in reshaping business models. Sports organizations must demonstrate their ingenuity in different ways, for instance by taking information (aside from the actual games) that could never before be seen and turning it into “content”, and then delivering that content to sports fans, all for the purpose of growing their fan base and cultivating new core viewers.
In addition, at large stadiums it will be possible to leverage the characteristics of 5G technology to provide high-value-added services using vast amounts of information and high-quality imagery.
Sports will arguably be one type of content that is enjoyed via smartphones, both inside and outside stadiums. Further, the “smartphone first” trend in the sports market will give options to smartphone users, and it will be necessary to develop new content as something that users will feel is worth spending their money and time on. Going forward, all of the content that can be consumed on a smartphone screen will be competing with sports. If the sports industry doesn’t win this competition being waged on smartphone screens, it could be one type of content destined to disappear.
Companies That Spare No Pains to Achieve Reforms Will Be the Winners in the Retail Industry - Ryo Yano, ICT Media & Service Industry Consulting Department
Up to now, the retail industry has become more highly specialized as retailers have compartmentalized into separate business types. However, in addition to the pursuit of and expansion into growth areas by various business types that are resulting in erasure of borders between business types, the dramatic growth of EC is leading convenience stores, which have continued to grow over the years, as well as drug stores, which have boosted their business results by increasing their selection of goods, to transition beyond the growth stage and reach maturity.
In recent years, retailers have been pursuing digitalization while capitalizing on their brick-and-mortar stores as points of direct customer contact, but IT platformers have begun seizing points of contact with their customers and information and making inroads into the retail domain.
For retailers to cope with this trend, they first must organize and integrate their in-house data and construct the foundation for DX strategies. Then they need to partner with platformers while refining their own strengths, convert those strengths into platform businesses that are unique to retailers, and make other major reforms.
Succeeding in these DX efforts will require retailers to establish functions that laterally tie their sales divisions, EC divisions, merchandise divisions, and other function-specific organizations together, as well as to appoint talented personnel who represent the next generation as DX leaders. It is precisely those companies that spare no pains to achieve such reforms that can be expected to emerge the winners in the retail industry.
AdTech Expands Applications from Online Ad Technology to Sales Promotions and Product Planning/Development - Yue Nakahara, ICT Media & Service Industry Consulting Department
Advertising spending in Japan overall amounts to 6.5 trillion yen, with internet ad fees accounting for 1.4 trillion yen of that total. While the growth of overall advertising expenses is leveling off, the online ad market is still seeing significant growth, and NRI projects that it will likely continue to grow by around 5% annually going forward.
Up until now, the main purpose of online ads has been to get people to visit your company website or to directly “guide” them toward purchasing your services. However, a major trend we are seeing is the rise of ad placement designed to make consumers more aware of your actual services and to change their attitudes.
Going forward, data obtained in real settings, from television, and other non-internet environments and data acquired over the net will likely become more integrated, making it possible to deliver optimized ads to target viewers, and to coherently measure the effectiveness of individual ads including in terms of store traffic and purchases. In fact, Google, which was one of the first to implement a “location information × advertising” strategy, has already made strides in improving its technical precision and making its ad menu more robust, while LINE is using location information obtained through Beacon terminals installed in cities to explore new ways to provide ad menus. In addition, Matsumotokiyoshi, a major Japanese drugstore chain, has linked its own data to Google ads so as to measure and predict not only in-store traffic but also product purchases, effectively using that data to achieve sophisticated targeting; it serves as one example of entries into this market by players other than traditional platformers that we have started seeing.
Thus, having so far been used as a conventional online ad tool, AdTech is increasingly coming into more widespread use for sales promotions as well as merchandise planning and development. In terms of digital marketing overall, the use of AdTech needs to be reconsidered from a new perspective.
- * Smart factories: advanced factories embodying the Industry 4.0 concept proposed by the German government.
