Japan’s Tech Troubles

In the 1970s and ’80s, Japan was regarded as a producer of cutting-edge technology like the VHS video standard, the CD and Sony’s Walkman.

Behind the scenes at many of the country’s companies, however, information technology is sorely outdated, shouldering part of the blame for the country’s poor productivity.

While US companies have phased out the fax machine, the most high-tech piece of equipment on the Japanese Air Force One is its fax. Corporate IT departments install obsolete e-mail services like Cyboz, claiming they are less susceptible to cyber attacks. But the high-profile hacks of Sony Pictures and the national pension fund suggest otherwise. William Saito is the government’s top cybersecurity adviser. iNTOUCH’s Nick Narigon spoke with the Club Member about the role IT and cybersecurity will play in Japan’s economic future. Excerpts:

iNTOUCH: Why are the IT departments of Japan’s small- and medium-sized enterprises [SME] reluctant to adopt technology?

Saito: With traditional SMEs, there hasn’t been an incentive to. They were usually a subcontractor to a larger Japanese company and the method of communication was fax. The real question is why aren’t the larger companies using these tools? It’s not that they don’t have IT. It’s just that the IT literacy in the upper management, who are making the decision-making process, don’t see the value. That’s why year on year, the productivity measures in Japan are decreasing. Based on [Organization for Economic Cooperation and Development figures], the productivity of the United States is twice that of Japan, and a lot of that is attributable to ICT (information and communications technology).

iNTOUCH: Is there a productivity crisis in Japan?

Saito: I think that the disparity in productivity is increasing so much that I would not be surprised that if the government does not bail them out, many companies will be going out of business soon. There are two parts to this whole ICT issue. There is the internal communications and increasing productivity as a company and as a nation. The other issue is that products that they create here do not use ICT. If they don’t embrace ICT in their products, how are they going to connect to the Internet? If you look at when the Sonys came out and you had products like the Walkman, they changed the world. Japan dominated in the area where you had a physical manifestation, where you created, you sculpted the buttons, and it was a work of art. The transition happened when the industry converted to digital. Japan is a very good products country. It is a very good components country. But the value is the software, the ICT that ties these components together to make a platform to tie it to the Internet. They are missing that part.

iNTOUCH: Japanese IT departments hesitate to integrate modern technologies, such as Cloud computing, because they fear data theft and hacking. Is this a legitimate fear?

Saito: The Japanese implementation of ICT is absolutely screwed up. I have a [government] office e-mail address, but I don’t put it on business cards. Because of security, they can only read the e-mail from their desk, so what’s the point of e-mail? The Japanese warped sense of security is preventing them from using the latest ICT tools.

iNTOUCH: What led to the hacks we saw at Sony, for example?

Saito: There are really two types of organizations on the planet. Ones that have been hacked and ones that have been hacked, [but] they just don’t know it yet. You are going to get hacked. The Japanese, because of the perfectionist attitude, can’t believe that it happened to them, or they shove it under the rug and pretend it doesn’t exist. It is very dangerous. Managers have to stop blaming the IT folks, because they are just victims.

iNTOUCH: The government has pinpointed the 2020 Tokyo Olympics as a chance to upgrade Japan’s national security capabilities. What recommendations have you made to the prime minister and his team?

Saito: I want Japan to look past [the Olympics] and look at this as a driver, like the bullet train was for the 1964 Olympics. To do that, it involves cybersecurity. That’s actually a difficult thing, because the people who are doing cybersecurity don’t know the essence of the problem. Right now, Japanese security strategy is a whack-a-mole. Cybersecurity is seen as a burden, it is seen as a cost. There are many instances in security, where if you had done this right and you look at this problem holistically, it actually becomes an economic driver. It becomes a differentiator. It becomes a profit center. It becomes a competitive advantage. We could become competitive again by embracing this assumption.

iNTOUCH: Can you provide an example?

Saito: When I was a teenager, I noticed that the guy next door would tinker on his car. One day, there’s this thing invented called the car alarm. What do they do? They install this car alarm on the premise that it will increase the security. But it actually decreases the utility of the system. If you have a car alarm, you put it on a key chain. It’s one more thing you could lose. It’s one more thing that could malfunction. That is literally the state of cybersecurity around the world. It’s installing a car alarm. It increased cost. It decreased utility. And it made things harder to do. It’s like sending zip files with a password protection and then in the very next e-mail sending the password. So what happened? The car companies started integrating the car alarm into their cars. You buy any car today, it has a keyless entry. If you hit the key, the seat will move in position, it will change the radio stations, it will change the map information. It’s a feature, it’s a benefit, it’s a differentiator.

iNTOUCH: Can Japan become a leader in this industry?

Saito: I call this the cell phone in Africa scenario. In Africa, they could not have a Ma Bell telephone system because if you lay copper for the phone lines, people just dig them up and [sell the] copper. Their first exposure to telephones is the cell phone. Because of that…they are able to do stuff on their cell phones that would blow people away in Japan. So 94 percent of people in Africa don’t have bank accounts. How do they pay each other? They send infrared signals in SMS to each other, and they pay each other by cell phones. In Japan, when it comes to cybersecurity, it’s like the cell phone in Africa scenario. Clean sheet. It’s a huge opportunity.

Photo: Enrique Balducci