How Japan can win in the ongoing AI war

Can Japan compete in the global battle for dominance in artificial intelligence and robotics that is under way? A long-standing strength in AI research gives the United States an advantage that is reinforced by the deep bench of AI talent at its numerous universities and tech giants like Apple, Amazon, Facebook, Google and Microsoft.

China’s government incentives and growing leadership in the mobile economy has led to a data advantage — its e-commerce giants like Tencent, Alibaba, Baidu and DiDi have an unparalleled view into the minutiae of everyday economic activities across hundreds of millions of consumers, data that feeds into increasingly sophisticated deep learning systems that power AI-native applications ranging from news filtering to medical diagnostics.

Japan does not have to be left behind as the U.S. and China race ahead of the rest of the world. But building dominance in this new generation of technologies will require change and planning. The nation must leverage its unique economic and technological strengths, simultaneously catalyzing important changes in regulatory policy and innovation culture, while kindling a feeling of optimism about global success among the youth.

Japan has among the tightest labor markets globally, with unemployment rates that hover around 2 percent. An aging population and low fertility rates suggest that this situation will persist. But this constraint could eventually confer a huge advantage in the era of automation. Societal pushback on labor automation in the U.S. and China that stems from fears of mass technological unemployment will slow the adoption of AI and robots. This will not be the case in Japan.

The country must capitalize on this advantage, aggressively expanding progress made in health care automation into other domains. As labor automation expands, the nation’s technological advantage will grow. A larger domestic market will spur innovation, and furthermore, data generated from actual implementation will continually improve the learning systems of Japanese AI and robots in workplace settings. These automation capital investments may also raise productivity growth rates, potentially breaking the growth impasse Japan has experienced over the last decade.

The deployment of workplace automation can be expedited by leveraging Japan’s strength and global leadership in industrial robotics. A number of the sector’s global leaders — from industry pioneers like Denso and Kawasaki to Mitsubishi Electric, Yamaha and Fanuc — are Japanese. Proactive government policy that is aimed at maintaining this global leadership while expanding international markets is well advised.

In contrast, Japan’s global leadership in automobiles has not translated into a comparable advantage in the emerging world of self-driving cars, where General Motors, Ford and Google’s Waymo have a significant technological lead over Toyota and Honda.

Government support where Japan has already established technological leadership, like in 3D mapping, should continue. Closer ties between autonomous driving innovators like TierIV and the auto giants should be encouraged.

Most saliently, a critical input to the AI in self-driving cars is data obtained by deploying fully autonomous vehicles on the road. Japanese companies face a disadvantage on this front relative to their U.S. and Chinese counterparts because of more stringent laws about unmanned vehicles. A selective loosening of Japanese regulations could therefore help. Expanding the deployment of current innovations like the self-driving airport bus could further narrow the growing data gap.

This data gap is far more salient in the consumer sector. In the mid-2000s, Japanese consumers played a pioneering role in the adoption and use of early smartphone-like services offered by NTT Docomo and others.

However, Japan’s adoption of the subsequent generation of online-to-offline and platform services has lagged many other parts of the world, most notably that of China. This lag is a barrier to AI leadership because consumer use of these services yields data that is central to training the next generation of AI-based systems.

Granted, many factors have contributed to this lag. Unlike China and India, Japan has had a vibrant homegrown mass-market consumer culture for at least a generation, and new models of consumption may thus be adopted more gradually. Regulatory barriers have perhaps slowed the adoption of services like Uber and Doordash.

Many platform-based services have an alternative model of brand accountability wherein the brand shares quality responsibility with unbranded individual providers. This may lead to a guarantee of quality and corporate accountability lower than what Japanese consumers are accustomed to.

It may be hard for Japan to catch up on this generation of smartphone apps. A good alternative national strategy would be to ensure that the country leads in developing and using the next generation of consumer services based on 5G technology. Aggressive government action to facilitate the rapid rollout of 5G infrastructure will go a long way in helping the country establish dominance.

Innovation contests and government capital to spur the hi-tech entrepreneurship necessary to develop and integrate augmented reality and other applications into Japanese consumer life could further catalyze leadership.

However, this next generation of innovation will rely less on centralized industrial conglomerates and more on decentralized platform-based and entrepreneur-fueled models. Recent Japanese startup successes ranging from the Globis-funded Mercari marketplace to the AI innovator Cinnamon are inspiring, but these still remain few and far between compared to the U.S. and China.

Business culture in Japan must evolve in a manner that is more conducive to entrepreneurship. Central to vibrant entrepreneurial ecosystems is an acceptance of failure as a part of the innovation process. Indeed, U.S. venture capitalists see having failed as an entrepreneur in the past as a positive sign of future success.

Japan dominated the world stage for many 20th century industrial technologies, from consumer electronics and automobiles to shipbuilding and industrial robotics. It is now time to reshape the conversation about the country’s 21st century technologies, away from interesting yet culturally niche technologies like those of a robotic Buddhist priest or systems for feeding fish, and toward a narrative of global leadership.

The Japanese youth need to regain their optimism about their country’s future technological ascendancy. Smart government policy, the evolution of business culture and active embracing of workplace automation could each play a role in paving the path to potential pre-eminence.

Arun Sundararajan is the Harold Price professor of entrepreneurship and professor of technology, operations and statistics at NYU Stern School of Business.