Although the argument in his book was actually made some 30 years ago now, its essence remains just as true even to this day, and I believe for instance that the philosophy behind the SECI model is even rooted in the foundation of Japanese-style services. As seen with our bullet trains that arrive and depart in three-minute intervals, our skilled craftsmen capable of precisely polishing surfaces at the nanoscale, our convenience stores that offer a wide variety of services, the attentive hospitality provided by inn and airport staff, and more, these uniquely Japanese high-quality services are achievable not only because of well-defined work processes, but also because a culture exists in which underlying ideas or philosophies on service seep down to the employee level, and improvements are made daily.

Although those Japanese-style services are highly lauded overseas, one doesn’t hear very much of examples where they have been put into practice. One possible reason for this is that the drive to create operations that involve such care and consideration, or to put them into action, isn’t typically present abroad. That is to say, there isn’t kind of culture in which processes for sharing tacit knowledge can be implemented into an organization.
There is one other reason that Japanese-style services don’t take root overseas. It’s the extremely simple reason that when Japanese-style services are taken abroad, they aren’t profitable. Japan’s service industry is often regarded as being not very productive. An international comparison in terms of per-hour labor productivity showed that Japan has sunk to 31^st place among the 38 OECD member states, but the root cause of this is thought to be that not enough compensation is being received in keeping with hours worked, or to put it another way, that too much time is ultimately being spent on labor that doesn’t generate value. Incidental labor in the logistics industry apart from the actual transport of things — e.g., cargo waiting times, loading and unloading — is arguably a classic example of that.
In addition, we can’t overlook the costs involved in training operators before they can provide these refined services, or the costs required to maintain them, for instance. Companies are only able to continue providing high-quality services by stacking up costs that are not visible to the naked eye, and at the expense of higher profitability or higher employee incomes.
Given all of this, a great number of services originating in Japan are considered to have none of the appeal that would lead them to be transplanted overseas, and so the circumstances are such that they can only be experienced in Japan. With the accelerating population decline clearly leading domestic personal consumption to shrink, at this rate Japan’s service industry will be unable to escape being dependent on domestic demand.

That said, I still believe there is a good chance that we can turn this around. And the trigger for that reversal will likely be the utilization of AI. If even these various, highly refined services that seemingly only Japan and only the Japanese have been able to provide could be assimilated and effectively implemented with the help of AI, then not only could we see Japan’s domestic labor productivity rise, but potentially these services could even be transplanted abroad as well.
One way this idea can sprout would be handing down of skills among craftsmen. Traditionally speaking, the classic method to acquiring advanced skills was to watch veteran craftsmen at work and “steal” their techniques. While this approach was effective at honing such skills further and at preventing technical leakage, it also involved problems such as the lack of scalability, and the tremendous amount of time it required. Conversely, in recent times, with the use of multimodal AI which can process various kinds of data including data measured by sensors, video footage captured by cameras, and so forth, it’s now becoming possible for techniques and processes to be visualized. Furthermore, combining this technology with VR or AR even makes it possible to provide real-time guidance on-site, while combining it with an LLM or RAG allows knowledge and experience to be supplemented. With the use of AI thus advancing the transformation of inherited processes, there’s a growing potential for applying the power of AI to externalize and reproduce the tacit knowledge previously contained in individuals or groups, and to thereby empower skilled apprentices throughout the world to become master craftsmen in a short period of time and at low cost.
This is only one possible example, and there are still other services in Japan that are high-quality but inefficient. If the use of AI progresses in the tacit knowledge domains found among such services, it will likely become possible to provide Japanese-style services at prices that would make them more readily accepted abroad. Moreover, if not just operations but also ancillary systems or even entire business models could be exported, then the service industry itself could potentially be positioned to support the Japanese economy as an industry that brings in foreign money.

AI technologies and their application scenarios are evolving and expanding with each passing day, to the point where they can be fully utilized as powerful support tools, if not as total substitutes. And as a company leading the digital technology industry, NRI is poised to continue supporting our clients on both the consulting and systems development fronts with an eye on the future development of the Japanese economy and the sustained growth of its service industry.