Fujitsu: Putting co-creation at the top of customers’ digital agendas
Photography: Yasu Nakaoka
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Fujitsu: Putting co-creation at the top of customers’ digital agendas

Kenny MacIver & Minoru Okijima – May 2017

ICT company’s top executives and customers use its annual conference in Tokyo to outline how strategic technology partnerships are vital to successful digital transformation.  

The march of digital has become a catalyst for a new type of relationship between organizations and their IT suppliers. As advanced technologies such as AI, big data analytics and IoT have presented opportunities to craft new business models, products and services, executives right across the C-suite have realized that their organization’s future success depends on coupling their business acumen and vision with the expertise of trusted digital partners.

That is a new management mindset that was all too evident at Fujitsu Forum 2017 in Tokyo this month, where an array of executives — from multinationals, mid-sized companies, government organizations and start-ups — lined up to articulate that the old way of thinking about IT companies as arms-length suppliers was neither viable nor desirable in a fast-digitizing world.

Hosted by Fujitsu president Tatsuya Tanaka, the 20,000 attendees at the conference and exhibition heard how this new era of business-IT co-creation was already delivering industry-changing results.
Co-creation in action

Among scores of examples of co-creation partnerships showcased at the event, Tanaka cited one of 10 business collaborations that are helping Fujitsu seize the opportunity to digitally transform agriculture. In the city of Iwata in Japan’s Shizuoka prefecture, the company has joined forces with Masuda Seed Co and financial services group ORIX to form Smart Agriculture IWATA (SAC IWATA), with the direct support of the city’s government.

Takeshi Sudo, president of SAC IWATA, described how the company was using the Fujitsu Akisai agricultural industry cloud service and advanced analytics technologies to co-create new business models encompassing the entire food and agriculture value chain (from seedlings to production, processing, shipping, and sales). “Since April 2016 we have used farming ICT to obtain highly stable vegetable production and very high quality. Now, to manage out next challenges we are looking at the application of AI to smart agriculture, using Fujitsu Human Centric AI Zinrai [deep learning platform].”

Hidemi Masuda, executive director of Masuda Seed Co, and Tatsuya Tanaka, president of Fujitsu

That sense of dramatic change was echoed by Hidemi Masuda, executive director of Masuda Seed Co. “At SAC IWATA we are looking into the new industrialization of farming, centered around new breeds of vegetables and new business models.” The seed specialist has already developed a highly rated spinach-like kale, with ICT allowing it to quickly establish stable production, plan for large-scale cultivation, refine breeds and share all relevant know-how.
Broadening the digital ecosystem

Fujitsu’s focus on co-creation also extends to the formation of industry partnerships. “The market has become extremely complex,” said Tanaka. “No longer can any single enterprise embrace and encompass an entire market, which means we have to collaborate with numerous others — companies, industry groups, academia, government agencies — so we enlarge our ecosystem.

In an area like AI, the company will aggressively pursue its own R&D centered on its Human Centric AI Zinrai platform, he said. But it will also partner with AI startups and other specialists. “We want to establish deep, trusted collaborations with key technology partners so we can jointly innovate,” he said.
AI everywhere

AI was certainly an agenda-topping subject during the two-day event. “The application of AI technologies will dramatically change the world — and ICT systems — around us,” Tanaka said. “It is no longer about the automation of systems; it’s about the technology and services that derive from AI.” At the exhibition, Fujitsu was demonstrating more than 30 services that are using its Zinrai capability, including initiatives by Kawasaki Geological Engineering Co, which has employed AI-enabled image recognition to accelerate the detection of potential road collapse sites by 90%, and by Nomura Securities to identify errors within massive transaction volumes. Fujitsu has also co-developed a high-performance dedicated AI processor, the Deep Learning Unit, with research institute RIKEN that will ship next year. And, within its own operations, the company has also deployed 40 AI projects, in areas as diverse as call centers, manufacturing and security operations.

Fujitsu Forum17

Tanaka believes that within a matter of years AI will start to be pervasive. “AI will be naturally embedded in everything we do. It will be a prerequisite to everything we have,” he said.

Expressing a personal opinion, he argued that despite the fact that the application of AI will inevitably involve the automation of some jobs, it has much more to offer people in terms of the creation of benefits that will be commonly appreciated by everyone. “I am not naïve enough to think that AI will not replace some of the work that is currently done by humans, but I believe that the intrinsic talent of people means that as AI advances so will mankind.”
Transformation agenda

With such potential upheaval on the horizon, it is not surprising to see that business leaders are intently focused on digital transformation. A recent 15-country survey by Fujitsu found that 68% of organizations currently have digital transformation programs in implementation, trial or under consideration, Hiroyuki Sakai, CMO and head of global marketing, revealed in his keynote. When it comes to engaging with technology vendors, such companies rate a partner’s capability to understand their business and industry as the primary consideration (44%,) followed by expertise in areas such as IoT and AI (37%) and their track record on collaborative projects (37%).

Fujitsu’s Sakai
Hiroyuki Sakai, CMO and head of global marketing, Fujitsu

Underpinning that technology expertise at Fujitsu is the company’s digital business platform, MetaArc. It enables companies to deploy IoT, AI, Platform-as-a-Service, mobile and more so that they can swiftly build new applications that enable digital transformation, while supporting transition of core systems to the cloud, says Sakai. MetaArc is already in use in Japan and across Europe, with deployment in Singapore, Australia and the US due over the next few quarters.
A sector at a crossroads

Financial technology was also in the  spotlight at Fujitsu Forum. Speaking about the challenges of creating next-generation business services in an age of digital transformation, Daisuke Yamada, managing executive officer and chief digital innovation officer of Mizuho Bank and Mizuho Financial Group, sounded a warning to his peers in financial services IT. “The euphoria surrounding the term ‘fintech’ may have waned,” he said, “but the rise of new financial services business models, enabled by such elemental technologies as cloud and big data, are disruptive to traditional players in the industry.”

“Is it a threat or an opportunity? My answer would be ‘neither,’” Yamada told the Fujitsu Forum audience. “Fintech is more a natural consequence of technological development — just as when people naturally moved from the horse and carriage to automobiles: users just naturally accept the convenience of new technologies.”

To help lead Mizuho Bank’s response to disruptive innovation, Yamada was appointed as its chief digital innovation officer in April. But his mission for creating next-generation business models is not limited to fintech — it also includes other areas of technological high impact such as IoT. The financial services giant plans to forge a series of new joint ventures; in the next few months it will be getting together with an insurance company, a trading group and a local bank, with the resulting operations run separately from the bank. “This way, we can be more flexible and creative,” said Yamada.
Continuing in that vein, the company is looking to pursue areas such as crowdfunding, social lending, blockchain-based financial transaction clearance, biometric authentication [of customer IDs], microfinance and digital money. “Anything is possible. It’s time to break the mould and discover a new world,” Yamada highlighted. Indeed, Fujitsu has been trialling the application of blockchain technology with Mizuho Bank to cut time it takes to verify cross-border securities transactions. The result:  transactions that use to take three days until settlement could be completed in a single day.
Vision of disruption

In fact, blockchain technology will have one of the most profound impacts on business and society, according to guest keynote speaker Don Tapscott. The best-selling business author, strategist and management school lecturer outlined how many types of digital technology are sounding the death knell of the industrial age. “Today there are some big developments within technology that are enabling a whole new way of thinking about the role of institutions like banks, the media, educational establishments, automotive companies, and so on,” he said. “All of them are at various stages of stalling or even failing.”

“In the fourth industrial revolution, all of these institutions need to be rebuilt around the co-creation and co-innovation of the future. It may seem heresy to say so but you don’t want to be customer-focused; you want to co-create with your customer. You don’t want to be customer-centric; you want to co-innovate with your customer, engage them and build a very different future,” he said.

“We are entering a fourth industrial era when technology infuses itself in everything and everybody, when technology becomes part of the physical world, when technology enters our bodies, reality becomes virtual, and robots become human-like,” he said.

Fujitsu’s Sakai
Don Tapscott, CEO of The Tapscott Group

But there is one other standaout technology that will be a foundation for this new age: the underlying technology of crypto-currencies, blockchain, Tapscott said. “Blockchain represents nothing less than the second era of the internet, as it moves it from an internet of information to an internet of value,” said Tapscott.

During the past 40 years, the world has had a mechanism (the internet) for displaying and moving information, he pointed out. But when it comes to things that really matter in an economy — assets such as money, stocks, contracts, IP, art, music, votes, etc — that is not that trustowrthy or efficient. In order to establish trust on the movement of such assets we have continued to rely on third-party institutions as transaction brokers. The distributed ledger mechanism of blockchains removes the need for such intermediaries, Tapscott explained: “For the first time in human history people and organizations can trust each other to do peer-to-peer business, to exchange, buy and sell, manage things of value, not just information. (For more, see I-CIO’s in-depth video interview series with Don Tapscott.)

The upshot is that technologies such as blockchain will enable and underpin co-creation. “Blockchains will dramatically reduce traditional transaction costs and, in turn, lead to a profound change in the deep structure and architecture of the firm. This idea of co-creation is not just a slogan. We are moving to a new model of distributed value creation, in which we are going to be able to co-innovate value with people outside our current boundaries and with assets that are distributed globally.”

First published May 2017
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