IT's Role in Japan's Economic Malaise

by John Boyd

One such questioning luminary is Andy Grove, chairman of semiconductor giant, Intel. In a recent visit to Japan, Grove pointed out that the world is now well on the way to creating a global network (including the Internet and intranets) of a billion connected computers.

This dynamic connectedness is moving beyond creating new jobs and businesses that never existed before: It is generating an entirely new cyber economy based on electronic commerce, electronic banking, and "screen-to-screen business." But Grove warned that organizations and countries not investing sufficiently in the IT infrastructure necessary to be a part of all this, risked "becoming isolated islands in an otherwise connected universe."

Using statistics from market researcher Dataquest, Grove noted that in 1997 the U.S. spent 4% of its Gross Development Product (GDP) on IT. The U.K. and Australia ranked second, investing 3% of their respective GDPs, and Germany was not far behind. As for Japan, it trailed Malaysia and Korea, investing just 2% of its GDP on IT. Grove suggested that Japan's IT parsimony was hardly the result of its ongoing economic downturn.

"The roots of its underspending go back to the '80s," he said. Among the different factors contributing to Japan's relative lack of IT interest, was, he thought, the country's outstanding success in manufacturing, which struck awe in other nations in past decades. This may have "distracted management from the importance of information technology," Grove concluded.

Certain psychological and cultural obstacles also come into play. Take, for example, Japan's pronounced keyboard phobia. It is partly the result of a virtual absence of the typewriter in Japanese education and business history, making the jump from pen to keyboard particularly daunting. To compound matters, Japanese language adds an extra layer of complexity to inputting, because of the kana-kanji conversion routine that must be endured when drumming on a Japanese keyboard. Sure, the situation has been changing in Japan in the '90s. But taking everything into consideration, it shouldn't surprise if investing in IT isn't a priority -- fiscal '97 PC shipments were down 5% over the previous year, according to the Japan Electronic Industry Development Association -- during the current economic climate.

Daniel Burstein, an economist, author, guru, and advisor to IT companies like Sony, Sun Microsystems and Microsoft, is even more pointed about the importance of IT to the economy. Speaking at the Yomiuri Shimbun's Multimedia Forum in Tokyo this May, Burstein chided Japan as being too complacent about utilizing IT to bring changes to its economy. Encouraging the digital revolution that is taking place in industries and businesses around the world "was one of the most important things [Japan] could do to get out of the stagnation, recession and dead economic growth, and to restore Japan's leadership in Asia and the world," declared Burstein. He stressed there is "a virtuous interaction" between the ongoing digital revolution and the cyber economy that can be seen evolving in the U.S. and elsewhere. But for Japan to fully participate, he said it needed to take some risks, needed to implement real changes and deregulations, needed to commit itself to economic development based on this revolution. So far, so good.

When he went on to urge Japan to erase some of the very elements that have helped it become the power it is today -- life-time employment and equitable pay scales -- and to create U.S.-style flexible labor pools and venture capital systems, his prescription suddenly appeared worse than the ailment. It would be folly for the group-minded Japanese to try to ape the individualistic style of the U.S. system. Rather than throwing the Japanese baby out with the admittedly dirty bathwater, major corporations here will ultimately do better modifying such principles as lifetime employment. In this way the Japanese could continue to reap the benefits of worker loyalty, a good return on invesments in personnel, and a sense of shared identity.

Adopting IT more vigorously to actively participate in the new cyber economy doesn't mean Japan must give up its uniqueness. Japanese corporations need to find a way of implementing IT so that it complements and amplifies their strengths. And only the Japanese know best how to do that.

Despite the above, John says IT doesn't seem to be helping change his economic malaise, so if you have any suggestions, send them to boyd@gol.com.

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