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A focus on giving back to society, while providing sound business solutions, keeps IBM ahead

Interview - January 10, 2016

The use of technology to accelerate the realization of both smarter companies and societies forms the very backbone of the IBM ethos. As IBM passes 100 years of creating innovative products and processes for its clients and business partners, we speak with President of IBM Japan Paul Yonamine about a variety of topics, such as the deepening relationship between the US and Japan to insights into doing business in both nations and IBM’s strategic positioning in Japan. He explains how IBM is considered a Japanese company in Japan and why he’s bullish about Japan’s future.

 

PAUL YONAMINE, PRESIDENT OF IBM JAPAN
PAUL YONAMINE | PRESIDENT OF IBM JAPAN

How would you assess Japan’s current business environment with regards to the level of competitiveness and general ease of doing business, and which areas do you feel require more improvement?

The Japan-US relationship goes back to the MacArthur era after the war, so it is one of the most important relationships in the world. We’ve had hills and valleys at times, but the visits of our Prime Minister to the US and more particularly to Silicon Valley (in April 2015) were very well received. It is the first time in a long time that we enjoy such long-term political stability, with an economically minded leader, and a role model where you can actually fail and come back and succeed. It is important that companies in Japan see more this risk-and-failure model, so they can pick up on innovation.

When talking about innovation, I need to stress that there are bricks and mortar or foundational issues that Japan is excellent at. Take the bullet train – it arrives on time it is safe and efficient – or the manufacturing area, where Japan excels. In many fields you can see that Japan is second to none in the world. Not everything is Uber or Airbnb –  that is still a small portion of the world economy. A lot of fundamentals that we rely on today are still manufactured in Japan by Japanese companies.

On top of all that you have the innovation layer. The whole world is being dragged in a spiral of innovation and Japan can’t be left behind. Yet let’s get the priorities straight – first is the foundational layer, second is driving the innovation. In Japan we have to make our workforce more agile, we have to make them enforce trial and error, and make them understand that failure is not failure if you are learning from it.

Corporate Japan needs more tax incentives, and this is something perhaps the Prime Minister could work on, to further promote innovation in Japan. Japanese companies are having record profits, yet tax incentives would enable them to set aside a percentage of their budget for R&D or IT for instance to allow them to become more innovative; as of now every yen is accountable and doesn’t allow for innovation really. Japan’s workforce and work culture have worked for many years and that is still important, but on top of that we need to embrace agility, innovative thinking, take more risk of failure, etc.

 

Using your insight and experience of both Japanese and American business and culture, in which ways do you think Japan can better create awareness and understanding of the market to potential investors?

This is a two-way street and many foreigners need to do their homework to understand this market and how business is done here. It is pretty obvious that if you come to Japan to do business, you should know more about this country before you come here. You would be surprised; I’ve been working in this market for 37 years, and I’m still surprised to see so many foreigners coming here and not having done their homework. As much as we’ve seen a lot of progress with the internet, blurring culture and borders, Japan remains an island country with specific culture and practices. Changing that requires a lot of relationship building, a lot of communication. Compared to foreigners, Japanese are not as extraverted and as communicative. They are somehow reserved. This goes back to education and their fear of failure; Japanese don’t like to take risks, even in relationships.

One thing I’d like to see and change in the education system would be for students to embrace more communication skills. Even before learning more English, they should learn to be more communicative. As we head towards the Olympics, we’ll get more and more visitors to Japan and we’ll have more opportunities to engage and build relationships with the outside world.

Fundamentally there is no difference, everybody wants to success and to do good work. Japan is no different to any other country in the world in that regard, but that is more the process to the end that may differ, and that may be changed through better communication.

 

How would you rate IBM’s contribution to Japan’s socioeconomic development today?

On a macro basis, we are making large investments in the field of accessibility technology. We are currently working with Ms. Chieko Asakawa, who is an IBM Fellow, optically challenged and who is very well known for coming up with some tremendous technologies for the blind, and to help with the handicapped. We hope to expand the use of such technology to help also the elderly; and especially in view of the 2020 Olympics and Paralympics, we hope that we can make a big difference there.

Even though we are socially minded, we are no NGO; we have financial responsibilities and shareholders that drive our actions, but the beauty of this is that both aspects can go hand in hand. IBM is very much focused on giving back to society, while also providing good business solutions.

In this regard, I see the combination of robotics and healthcare having a lot of traction in the future, to take care of the elderly. Robotics can surely help enhance the productivity and manufacturing environment, but robotics can also extend to lots of applications and provide great solutions, especially in regards to healthcare and elderly care. To give you an example, we started trials in October, 2015, with the Japan Post, to modify the iPad interface, to make it more accessible for the elderly and transform applications like facetime and cameras to make them more accessible, more comfortable and user-friendly for the elderly population. The plans are to roll out a million iPads for Japan’s elderly population from April 2016.

 

Can you explain IBM’s strategic positioning within Japan and the overall competitive advantages it is able to pass onto its clients?

Japan has always been technology-challenged, in the sense that they have always been late technology adopters. If you go back in time and look for example at enterprise resource planning (ERP), service-oriented or even cloud technology, Japan is always anytime two to five years behind the USA. Yet 99% of the time the technology lands here and gets utilized, and this is no different this time. That is a tremendous roadmap of success, and that’s why we have always managed to do relatively well in Japan.

Technology adaptation adoption is difficult because it requires a lot of business processes, reengineering; it takes a lot of transformational thinking in a company, and change is always difficult to implement, but that’s where IBM can play a really key role. We understand what’s sinking in on a global basis, what are the global best practices, and we can turn around and introduce these here, to our customers in Japan. We can show our customers the difficulties, the good aspects, the bad aspects, the successes, the failures, and work with them to customize it, to localize it. Over 99% of our employees are Japanese, but our workforce has the opportunity and the ability to be exposed to what works and doesn’t work on a global basis. We turn around and we customize it, we localize it for the Japanese market that we are well familiar with. That’s one of the key services that we provide.

IBM Japan currently has over 40% of the financial services IT spend in Japan. That’s not only because of our knowledge of best practices, but it also due to our Japanese workforce that understand the precision and meticulousness of this market. So we are the link and can offer the best of both worlds.

 

What type of culture are you trying to instill at IBM Japan?

Trying to integrate diverse cultures is a long road, and this may as well never happen. You can’t expect people to forget their national identities and to become one on a global basis. Senior executives and managers, in turn, need to really embrace multiculturalism to efficiently manage a Japanese business and an American business. When you are trying to drive results in a country, you need to understand the customers and practices and even some of the labor laws.

 

How do you view Japan’s enhanced globalization efforts?

I believe Japanese companies are now doing a lot better than they have ever done. There is a lot more substance now than even during the bubble days. Companies are now focused on governance code and return on equity, and they have cut costs for the last 20 years. The exchange rate went down by ¥70, and now is back up to ¥120, so generally corporate Japan is very strong today, and especially in their ability to manufacture is second to none.

Japan has been through so much turmoil these past 20 years, so they are poised to do great things on a global basis – especially in the fields or transport infrastructure, trains, or large-scale power generation projects.

There is no question that Japan has lost ground in the electronic area, but looking at it all holistically, there are several things that Japanese companies need to do to globalize more effectively. The first this would be migrating the business model from being a manufacturer to a solution provider – like Apple for example. Japanese companies need to move up to the data layer, analyze the data and see how to embed that in the new solution model. That makes it more attractive in the B2B but also B2C space. In this sphere average Japanese companies are still four to five years behind the US, but thanks to technology they can ramp up pretty quick, and I hope that they embrace more connection to Silicon Valley and make more strategic investment, and ramp up on that space in a year or two.

The second thing would be to become more communicative. Business isn’t always so formal. Look at Silicon Valley, lots of deals are made at parties or barbecues, so Japanese companies should embrace communication, and get to know the eco-system and the people that they want to work with and learn from.

If they could do these two things, which aren’t that difficult, then I think the sky would be the limit for Japan. I am Japanese American and I am a big fan of the potential of this country. 

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