Putting the Salaryman Online:
How E-business is Changing the Face of Commerce in Japan

- by Kevin Osborn -

The Internet, cybermalls, e-mail, e-commerce, workflow, notes. There is a sometimes-confusing array of technologies that come under the label of "e-business." To a growing number of Japanese business people, however, the key implication of the technology is becoming clear; the power of electronic networks can fundamentally change the way you run a business. "Connectivity is what e-business is all about," says Gerri Elliott, asia pacific general manager for the distribution sector with IBM. "Using Internet and network technologies to connect companies to their employees, suppliers, partners and customers is the key to e-business." The rapid growth of the Internet is certainly driving the escalating adoption of e-business technology. Although it took about 30 years for 50 million people to own TV sets, it has only taken five years for over 70 million people to get access to the Internet. Industry experts estimate that a least one new person goes online every four seconds. No company can ignore the implications of this change. The Economy Looks for a Boost Here in Japan, the concept of e-business is rapidly gaining currency. Go anywhere in Akihabara, Tokyo's electronic district, and the Internet is on everyone's lips. However, the super-capabilities of the Internet and other networks are only just beginning to be applied to business processes. One of the factors driving the adoption of e-business in Japan is the economic downturn. "In the current recession, consumers are questioning whether they want or can afford to keep spending, and it's getting harder to convince them to do so," explains Katsutoshi Maeda, vice president of Homac Corporation, a leading home center retailer in Japan's northern island of Hokkaido. "Although our customer base was increasing because of our expansion, consumers were actually spending less per person, less on luxuries and more on cheaper, essential items. We have to be more efficient to survive." Homac responded by improving the handling of sales data from their chain of stores with a Point of Sales (POS) and data warehouse solution from IBM to target the products that consumers are demanding. A company can start e-business with something as basic as using e-mail inside a department to improve communication. This can be extended to the whole company with an intranet and workgroups to improve collaboration and data sharing. The next step might be to set up an extranet to connect to suppliers for global sourcing, and to partners for closer cooperation on joint projects. Finally, by linking a company's own networks to the World Wide Web through an Internet site, it is possible to reach consumers and attract potential employees. Internet capability can then be integrated with a forecasting module to process customer order and supplier delivery data, allowing a company to match demand for its products and services with the supply of resources and raw materials. "We see e-business as a matter of business practice rather than technology," explains Elliott. "At whatever level a company adopts e-business, be it basic e-mail, an internal workflow system, or the Internet, it will raise communication to a new level of convenience and efficiency, and enable business transactions to be conducted faster and at lower cost." How Now E-Business and E-Commerce? For many businesses and consumers in Japan and elsewhere, the term e-business is synonymous with e-commerce and Internet sales. The development of new technologies, including virtual malls and secure payment systems such as Secure Electronic Transaction, (SET), has led to san explosion of online shopping sites, like the successful book and CD sites Amazon.com and CDNow. Although these developments have grabbed the headlines, it is important to differentiate e-business from e-commerce - the buying and selling of goods over the Internet using a credit card or smart card. Basically, e-commerce is where e-business services meet the consumer via the Internet, and it's a vital part of e-business. However, e-commerce is only a means to facilitate one end of the e-business supply chain. In the longer term, the Internet is going to redefine not just sales to the consumers, but every element of the supply chain that links a business to its suppliers and customers. In every industry there are now clear signs that the Internet is opening up new opportunities. Websites, e-business and direct sales can enable any firm in any industry to establish individual links with customers. Traditional relationships, particularly those that rely on middlemen, may be at a disadvantage. Airlines, for example, are re-engineering their distribution by selling air tickets directly to customers over the Internet. Customers can pay by credit card and collect the ticket at the airport. There is no need to pay commission to an intermediary travel agent, or pay for the printing and distribution of a ticket. Japan Airlines (JAL) estimates that some 2-3% of bookings made with the airline are now made online. Japan Air Systems (JAS) and All Nippon Airways (ANA) report similar figures. As airlines reinvent their distribution model using e-business, travel agents are responding in kind. The Japan Travel Bureau (JTB), the world's largest travel agency, has put its own services online through self-service kiosks in convenience stores. With PC penetration lower in Japan than in the USA, convenience stores are one of the places where Japanese consumers can access the Internet. Osami Tomita, general manager of JTB's Multimedia & Electronic Commerce Division, says that future JTB plans for the kiosk system include attractive last-minute discount rates on flights and tours with vacant seats. "Using timely information on seat availability, for example, a kiosk customer could purchase tickets in the morning, at a significant discount, for a flight leaving the same evening. Such a service would benefit both customers and the airline industry," says Tomita. JTB is offering value to customers who prefer convenience to going to a physical travel agent. According to Tomita, JTB may start expanding the service to kiosk installations in family restaurants, fast food chains and gas stations. Across a range of industries, online challenges to traditional means of doing business are being met by online responses to defend market share. "In-store terminals are a demonstration of how the established boundaries between different sorts of retailers are breaking down under the impact of e-business," says Makoto Tazaki, manager responsible for store solutions at IBM Japan. "The core value of a convenience store is its location close to a customer's home or office. Now a customer can book a holiday as easily as he could pick up a carton of milk. This amounts to a revolution in the retail business model." Implementing in Japan The delivery of e-business services over online public kiosks is one of the ways in which e-business is developing differently in Japan compared to elsewhere in the world. There has also been a profound difference in the speed of adoption of online business, with Japan only now beginning to catch up with the USA and Europe. Differences in business culture go much of the way to explain this. There is a strong tradition of face-to-face relationships in Japanese business, and consumers have long put a premium on personal service. In contrast, geographical distances in the USA have made conducting business and shopping by phone, fax or catalog the norm. The business accessories of today's salaryman are a sign of how this is beginning to change. A few years ago a Japanese businessman would have gone to his client equipped with nothing more than a paper proposal and a box of business cards. Today, you are more likely to see him, and increasingly her, carrying a mobile phone to call the office and check e-mail, a Personal Digital Assistant (PDA), and a laptop for presentations. The young salarymen and women now entering the workforce are part of the first networked generation, and they are beginning to apply in their professional lives the skills they have learned surfing the net and sending e-mails to classmates. As consumers they are as likely to shop online as go to a department store. Elliott expects the increased global competition brought about by the advent of the Internet and e-business to have a profound impact on Japanese business. "As the borderless Internet intensifies competition all over the world, Japanese businesses will have to both match the online offerings of their foreign competitors, and invest in e-business to make themselves more efficient and competitive." This fact is now understood by many of the younger generation of Japanese business people. But it remains to be seen how fast their elders will catch on. Perhaps the age of e-business will have really arrived when you can plug in your laptop at the nineteenth hole of a Japanese golf course to access e-mail. For more info on e-travel, see our January '99 issue. Back to the table of contents