Japan Inc. adrift unless it rides the waves of technology

For Japan to generate steady, sustained economic growth, three factor inputs—capital, labor and technology—must be optimally deployed to lift aggregate levels of productivity.

As Japan’s infrastructure is as expansive and advanced as any in the world, the leeway for capital deployment is limited to two areas of infrastructure: health care, particularly for senior citizens, and tourism, particularly outside Tokyo and Osaka.

With Japan’s population aging and shrinking, achieving higher rates of labor productivity will not be easy. Of course, what Japan needs to do is to integrate more women and senior citizens into its labor force.

Similarly, allowing many more foreign workers with specialized skills into Japan would raise labor output, but the legal barriers to immigration remain higher in Japan than in almost anywhere else.

That leaves technology as a factor input of decisive importance. The pace of technological innovation is accelerating, and the scope of change is spreading relentlessly.

Every sector of the global economy is being transformed by big data analytics, artificial intelligence (AI), robotics, the Internet-of-Things (IoT), mobile devices and digital technology.

Japan’s bastions of strength in transportation, consumer durables, finance, health care and retail are in danger of being eroded. They could eventually be lost unless Japanese corporations act quickly to utilize state-of-the-art information technology (IT), particularly machine intelligence and advanced software platforms.

Japan stands at a crossroads. The nation will either ride the Hokusai-like waves of surging technology or drift far out to sea. To remain competitive in global markets, Japanese firms will have to transform themselves.

They need to use English as the lingua franca; cultivate a corporate culture of software innovation (not just hardware); search overseas for state-of-the-art technology; abandon the mindset of “not invented here;” become more willing to assume risks; make faster decisions; hire many more foreign engineers and technologists; become more mindful of shareholder interests; and be willing to overhaul or to replace the backbone of old information systems.

Riding the wave of the digital revolution will also require Japanese corporations to tap into the ferment of Silicon Valley. To date, Japan has made very limited inroads into the fertile soil of Silicon Valley. China and South Korea have established a broader, more fruitful base of operations.

To facilitate Japan’s connections with Silicon Valley, a small group of Japanese-Americans have organized a nonprofit entity called the Silicon Valley Japan Platform (SVJP). It is designed to assist Japanese companies, both large and small, in gaining direct access to the mainstream of Silicon Valley. The SVJP includes founders of successful start-ups and senior executives at iconic corporations like Apple, Google and Facebook.

There has never been an organization like the SVJP. Our motivation is not personal enrichment. Rather, it is the pursuit of a higher mission– namely, to honor our “issei” ancestors, who have had to endure untold sacrifices and hardships. The “issei” pioneers have instilled in us an abiding feeling of loyalty and love for both the United States, our birthplace, and Japan, our forefathers’ homeland.

The goal of the SVJP is simple: to help revitalize Japan’s sluggish economy and to strengthen U.S.-Japan relations by building bridges across the Pacific that link Silicon Valley and Japan. Building lasting bridges is what promises to reward SVJP volunteers with a long-term feeling of ultimate fulfillment.

Daniel Okimoto, a professor emeritus at Stanford University, co-chairs the Silicon Valley Japan Platform, an initiative of the U.S.-Japan Council.