The White Paper on Information and Communications is a warning to business managers

This year’s White Paper on Information and Communications has been released. Once again, I was part of its Editorial Committee.

The growth of ICT is expected to push up the real GDP to 33.1 trillion JPY by 2020.
The White Paper focused on IoT, big data, and AI this year. The outline can be read here. There are a number of points that I would like to bring up from it.

One of this year’s challenges was analyzing ICT consumer surplus.
MIT Sloan’s McAfee and Brynjolfsson’s “The Second Machine Age” points out that one of the limitations of GDP is that production and industrial value cannot be used to measure the value of ICT, bringing us to the question of how to measure the consumer surplus created by products and services.

This is a problem that I have been aware of  for some time, and I have yet to see anyone succeed at creating an index for it. There was a firm resolve to tackle the issue in this year’s White Paper.

The outline states, “ICT brings about values to the company side and the consumer side. While the values brought to the company side can be ultimately identified as GDP growth, a part of the values brought to the consumer side cannot be identified through existing statistics,” and analyzes (i) consumer surplus, (ii) time saving, and (iii) information assets (user reviews, etc.)

For (i) consumer surplus (the difference between the price a consumer is willing to pay and the price he/she actually pays), the example of music/video distributions was taken, showing that users gained a monthly surplus of about 150 – 200 JPY. This adds up to an annual surplus of 109.7 billion JPY.

For (ii) time saving, the example of internet shopping was taken, showing that users saved about 40 minutes to 1 hour per set of purchases.

For (iii) information assets (user reviews), the example of internet shopping was taken, showing that more than 80% of users had the experience of deciding on which product to purchase by reading user reviews.

While I cannot help but feel that the actual consumer surplus is larger than what was reported, I would like to give credit to the White Paper for facing the issue. A deeper, more accurate analysis will serve as a great contribution to the world.

Meanwhile, the White Paper has a critical attitude towards the company side’s response.

The ICT investments made by Japanese companies are revealed to be “defensive ICT investments,” made for the purpose of increasing operational efficiency and cost reduction.

Analysts state that by making “offensive ICT investments” to “improve products and services with ICT,” and “reform business models through the practical use of ICT,” American companies have taken the lead with ICT products and services.

Not only is the ICT investment/GDP of Japanese companies low compared to that of American and British companies, it decreases even further during recessions, while studies show that the figure increases for American and British companies in the same situation. It believe that one of the reasons why the competitive power of Japanese companies has failed to increase in the past 10 years is because business managers undermine ICT.

There is also an analysis on the use of IoT.

In Japan, the IoT progress index, which comprehensibly represents the status of operational efficiency improvement, etc. by using IoT, is low. While the figures the Japan that achieved for its communications infrastructure are higher than ever, its IoT progress index remains lower than that of the US, China, Germany, and the UK. This means that the problem lies on the use side, not the supply side. This too is a problem caused by business management.

Japan’s IoT-driven market expansion is also predicted to be relatively low compared to other countries. While the overall IoT rate of adoption for other countries is expected to double or triple between 2015 and 2020, Japan’s IoT rate of adoption is low, and the gap between it and other countries may increase in the future.

There is also an analysis on AI.

In regards to the future penetration of AI, many Japan workplaces responded to a survey by saying, “I will not make any particular response of preparations.” Meanwhile, many US respondents answered that they will respond/prepare by continuing their current work with the position of using AI through actions such as learning knowledge and skills of AI.

However, this can be interpreted in an alternate way.
Compared to the US, Japanese workers show less resistance to both introducing AI into the workplace and working alongside AI. This may indicate that the spread of AI into Japanese workplaces may happen smoother than in other countries.