CURRENT ISSUES IN INNOVATION MANAGEMENT IN JAPAN BASED ON EMPIRICAL STUDIES ON SECTOR INNOVATION SYSTEMS
Professor Kumiko Miyazaki began the talk by pointing out that in the 21st century, developed economies are globally integrated and seek to be globally competitive. To achieve this goal, they need to foster an innovation system that provides a sustained flow of innovative technologies and processes. As for developing countries, they also need to apply technologies and knowledge from others to create jobs and economic growth. In this context, it is worth examining the technology policy of various countries. For this event, Professor Miyazaki presented her case studies on sectoral innovation systems in Japan.
She first identified several current issues in technology management and technology worldwide. Over the past few decades, rapid changes in technology management ranged from hardware oriented to hardware and systems oriented, from mass production to technological complex products and systems, from emphasis on production to innovation through research and development (R&D), from vertically integrated structure to networked structure, and from a closed model of innovation to open innovation. Other issues, such as the escalating costs of technology development, shorter product life cycles, and growing diversification of technological portfolios underlying the products, are also taking place. In this changing environment, Japanese firms may not be able to build competencies by themselves, but must rely more on external linkages. For example, Toyota and Mazda are going to jointly develop electronic vehicles (EVs). Canon is also planning to cooperate with IHI Aerospace and others to enter small satellite launch business.
Professor Miyazaki emphasized the growing importance of artificial intelligence (AI) among Japanese companies. For instance, Fujitsu has decided to withdraw from the mobile phone business and focus more on AI and the Internet of Things (IoT). In fact, Japan started basic research on AI in the 1950s and 1960s, and the interest in AI was furthered after Alpha Go won against the top Go player in recent years. She explained that developments in big data, deep learning, machine learning, and sensors have all enabled a boom in the AI industry. Currently, there are several projects on AI conducted by the Japanese public and private sectors. They want to apply AI to healthcare, virtual assistants, assembling (robots), and marketing and sales. While there are positive developments in AI in Japan, she showed that the number of Japanese academic papers in AI has relatively dropped as compared to other countries. Before the AI boom, between 1990 and 2012, Japan used to rank fourth in terms of the number of AI paper publications, following PRC, USA, and Taiwan. During the recent AI boom, between 2013 and 2016, Japan’s rank dropped to 14th, surpassed by other countries like India, Iran, England, Canada, and Germany. This could affect Japanese competitiveness in AI.
The development of “open innovation” was also highlighted by Professor Miyazaki. According to her, “open innovation” means that firms should make much greater use of external ideas and technologies in their own business, while letting their unused ideas to be utilized by other firms. She used the partnership of Uniqlo and Toray in 2006 as a successful example. Based on the idea of open innovation, this partnership changed the traditional model to a new one integrating the production of fabric and textile to the design, development, production, and distribution of the final clothing. Professor Miyazaki argued that in the old model, the components were not standardized but unique. However, it has evolved to the new model that interfaces between components are standardized. The new combinations of various components could lead to innovative products.
Professor Miyazaki also discussed national systems of innovation (NSI). According to Christopher Freeman, NSI is a network of institutions in the public and private sectors whose activities and interactions initiate, import, modify, and diffuse new technologies. The innovative performance of a country depends on how these actors – including private companies, universities, public research labs and others – relate to each other as elements of collective knowledge creation and use. Professor Miyazaki argued that one of the major challenges researchers face while analyzing NSI or sectoral systems of innovation (SSI) is how to build effective tools to identify the strengths and weaknesses to understand the internal dynamics of the innovation system. The concepts of NSI create a need for analysis at the system level, which could help identify the desired links and bottlenecks in the knowledge flows.
In fact, in Professor Miyazaki’s lab, several research activities are designed to address the issues faced by NSI and SSI. The areas include electronic vehicles, robotics, home energy management system (HEMS), and nanotechnology. In the case of robotics, she said that Japan produced around 80 per cent of global demand and held about 60% per cent of the world’s robot stock in the 1990s. The strong demand pull strategies, coupled with the supply push strategies of Japanese firms and government, led to an increase in demand and improved the technological capabilities of the robotic makers. She also pointed out that the Japanese approach of lowering barriers for the use of robots by the clear majority of industry – rather than leading edge adoption as seen in the UK, or massively supporting high-tech R&D as observed in the US – increased the diffusion rate in Japan. Moreover, Professor Miyazaki’s research shows that there has been an innovation trajectory shift in Japanese robotics industry. Over the past decades, the focus has changed from industrial robots to non-manufacturing robots – the former includes material handling, assembling, and welding, while the latter covers services, medical, education, and security. She contended that initially technology and market domains were given priority, but recently science domain is becoming relatively stronger and plays a significant role in this shift. She also emphasized that the robotic innovation trajectory for manufacturing is a streamlined trajectory, while the one for non-manufacturing is a complex trajectory.
Lastly, Professor Miyazaki touched upon her analysis on HEMS and home automation (HA), often called “smart houses”. Its main features include energy saving, energy storage, and services leading to better convenience and safety through automation. According to her, smart houses aim to offer an innovative integrated solution to provide a level of smartness that does not exist in ordinary houses. It could be done by linking various modules, components, technologies, and sensors. She presented her case studies on several main actors in this field, including Toshiba, NEC, SEKISUI HEIM, Ministry of Economy, Trade and Industry (METI), and Yokohama City. She listed several issues, and the major one seems to be the marketing strategy to sell HEMS related products: how to convince the home owners of the new value created by smart houses. Another main obstacle is the lack of understanding of the users’ needs or their potential needs, which would slow down the diffusion process of smart houses.
Professor Miyazaki concluded that the analysis of the innovation system at various levels helps identify and illustrate the current status and forecast future developments in a sector, which is useful for policy makers as well as corporate management. In a nutshell, she thinks that the Japanese system of innovation is undergoing many challenges, such as the change from closed innovation to open innovation, from streamlined innovation towards a complex innovation trajectory, and the declining science base that could have a negative impact on competitiveness, as highlighted in her presentation.
Summary prepared by Bo-jiun Jing