[Grandpa Saw It!] Part 2: Japan's Path to Earning <Market-Shaping Power>!?

Let's review the report compiled by OWLS as a project commissioned by the Ministry of Economy, Trade and Industry (hereinafter referred to as the OWLS Report) together.

The OWLS Report outlines the path for the future of the Japanese people.

This is the second part. The first part would be appreciated if you could read it before joining us.

✅ Definition of Market-Shaping Power!?

The OWLS Report defines market-shaping power as follows: 👇

1) Agenda Conception Power
This is described as consisting of the following three elements.

① Identification of Materiality
First, let's identify the important issues among social challenges that are significant to our company and where we can contribute to solving them.

② Identification of Rule Formation
Next, we identify what kind of rules are necessary to solve social issues and what kind of rules are needed for solutions to have sustainable market value.

③ Conception of an Ecosystem for Realization
Finally, we identify how our company can contribute to solving social issues, who we should partner with, and who we should approach.

2) Social Issue Solving Power
The capabilities and assets for solving social issues are organized into four elements: ① project promotion structure, ② value chain, ③ technology/ideas, and ④ experience/know-how.

A perspective that goes beyond individual companies, such as collaboration between private enterprises and the social sector, is required, unlike in the past.

3) Rule-Forming Power
There is a description like the one below 👇.

Tesla became a company with a market capitalization exceeding Toyota's because it was good at "gathering empathetic allies," and in developing the original draft of rules and building consensus, it linked with climate change issues to capture the hearts of governments in various countries and form rules such as banning the sale of new gasoline-powered cars in the 2030s.

✅ A perspective lacking not only in companies but also in government!?

This rule-forming power was a perspective that was lacking not only in Japanese companies but also in the government.

For example, the collection of recyclable waste!

You all probably think that Japan is doing a good job. After all, the sorting is quite detailed and troublesome.

It is true that we have progressed from the post-war state of indiscriminate waste dumping to the creation of the 'Cleaning Act,' which evolved into the 'Waste Management and Public Cleansing Act,' and furthermore, laws have been established aimed at creating a circular society that reuses items rather than discarding them. ('Basic Environment Act' → 'Basic Act for Establishing a Sound Material-Cycle Society')

However, unfortunately, within the system of separating and collecting waste for recycling from general household trash,there is no perspective of 'standardization', and since the task is simply dumped onto each local government, even the method of separate collection for 'paper' varies from one municipality to another.

This is because the law states that 'each local government can decide its own method.' In other words, because central government ministries cannot determine and instruct the methods, things end up fragmented.

The fact that there is no command center (no law) to direct such fundamental 'standardization' remains, and it relies on the diligence and seriousness of the citizens, based on the idea that 'citizens will sort their trash properly.' This is the exact same logic as the encouragement of hand washing, gargling, and wearing masks.

The 'Bill on the Promotion of Resource Circulation for Plastics' was approved by the Cabinet on March 9, 2021, passed by the House of Representatives on May 25, passed by the House of Councillors on June 4, and promulgated on June 11.

However, if it is enforced as it is, we will not be able to escape from a system that relies on the self-help efforts of local governments and the sorting efforts of residents.

I do not think that will lead to market formation that we can be proud of globally.

✅ There are models, you know!?

The OWLS report presented the case of Daikin.

Daikin's case is an example of passive rule formation, but the case of the German company below is one where they actively participated in rule formation.

This is a case where they promoted rule formation linked to the goal of SDG Target 3.6, 'halving the number of global deaths from road traffic accidents' (solving social issues). 👇

During the post-war reconstruction period, if we made 'good products at low prices,' the deep-pocketed United States would buy them, and the virtues of Japan—being serious and excellent at miniaturization technology—were accepted overseas, which gave birth to global companies like TOYOTA, HONDA, and SONY.

Actually, SONY is a rare company in Japan that not only excelled in miniaturization technology but was also able to exert influence on global rule formation. The founders, Masaru Ibuka and Akio Morita, especially Mr. Morita, engaged in rule formation in the United States many times.

For example, they forced the state of California in the U.S. to correct an unfair tax system called unitary taxation. Also,in the 'Betamax case' regarding home VTRs, they won in the U.S. Supreme Court.

At the time, U.S. copyright law did not have clear descriptions corresponding to new technologies like home VTRs, andunlike Japan, it did not have a provision for 'exceptions for private reproduction (reproduction for personal enjoyment does not constitute copyright infringement),' so Sony was sued for copyright infringement.

I think it required considerable resolve to stand up and face this lawsuit.

The reason you are all able to embed music videos on note like this now is because when basic technology shifted from analog to digital and digital audio emerged, there was rule-making where the hardware industry and software industry jointly promoted a common standard for DAT (Digital Audio Tape), and the catalyst for that was Mr. Morita winning the Betamax lawsuit.

Mr. Morita did not devote himself to rule-making for the sake of his own company's (SONY) profits.

In the late 60s, as TVs became widespread in Japan and fun programs increased, the common people's demand (social issue) to improve the situation where one could not watch one of two programs they wanted to see at the same time was the same for the American public, and Grandpa thinks that the victory was the result of Mr. Morita's coined term 'time-shift (being able to watch TV programs without being bound by time)' resonating with the American public.

Japan's heroic tales of having influence on rule-making in such a world are all from before 1985, and after the 1985 Plaza Accord, it leaned toward individual optimization, thinking only 'as long as I'm fine,' and was left behind in global rule-making.

In the modern era, I have high hopes for SoftBank's Mr. Son, but Grandpa is hoping that a second or third Mr. Morita will emerge from Generation Z.

Hoping that such an era will come into view in 2022,
Go for it, Gen Z!

Thank you for reading until the end.

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