AI is coming, ready or not: Mickey Mikitani at Harvard Business School

“If you don’t use AI, whether you’re a small company or a big one, it is going to be very difficult to survive. Your competition is going to be 20-30% more efficient. Sooner or later, you will be in a very difficult position.”

Rakuten CEO Mickey Mikitani recently returned to Harvard Business School to chat with HBS professor and Rakuten Group board member Dr. Tsedal Neeley for the Leading with AI conference. The conversation delved into Rakuten’s transformation into an AI company, Mikitani’s advice for business leaders getting into the AI space, and his own thoughts on the AI revolution.

Data, talent and empowerment: Rakuten’s AI strategy

In front of a packed audience hosted by Harvard Business School and Digital Data Design Institute at Harvard, Mikitani outlined Rakuten’s pioneering strategy of connecting data streams across its diverse portfolio of businesses spanning e-commerce, finance, travel, telecommunications and more. Now, Rakuten is putting its powerful data to use in another ambitious initiative: AI-nization.

Neeley has written extensively about Rakuten’s bold undertaking to globalize the company through another initiative called Englishnization, which began in 2010. Being an English-speaking organization has allowed Rakuten to attract AI talent from around the world, and Mikitani argued that Rakuten can offer a very hands-on experience.

“Some people want to come to us and use AI to build a better shopping experience,” he said. “They can have more tangible results. This is like their playground, and making a playground to attract talent is very important.”

On the business side, AI-nization has a core Triple 20 objective: achieve 20% greater operational efficiency internally within Rakuten; 20% better marketing efficiency; and empower hundreds of thousands of business clients with tools that boost their productivity by 20%.

“It’s very important to allow these smaller players to utilize AI tools,” Mikitani stressed. “Many small mom-and-pop shops don’t know how to use it.” 

This synergizes with Rakuten’s founding philosophy: “I designed the Rakuten marketplace so that I could help small- to medium-sized merchants, not destroy them. So we would like to use AI to empower them.”

Don’t forget the human

While AI excels at common tasks, Mikitani highlighted how it can struggle with the creativity required for truly disruptive innovation.

“Of course it’s a prediction model based on the data. So if no one has ever done it [then the data isn’t there],” he pointed out. “If you asked AI 27 years ago, Should I start an internet marketplace? It would probably say no. Should I start this crazy new mobile company in Japan? It would probably say no.”

This is a major limitation of AI: “It will give you the most likely right answer based on massively available data,” Mikitani argued. “Generative AI will give you a good batting average, but it won’t give you a totally different idea.”

Mikitani cited the creativity of TikTok content as something AI alone couldn’t replicate. “If TikTok was all generated by AI, people may not get so intrigued or interested. There’s a human factor in it.”

In the end, AI must be used to empower humans to be human. “My approach is to utilize AI to become more unique, not to create a robot that can replace humans. It’s always the co-pilot,” he told the HBS crowd. “People who produce a product – we need to respect them, empower them, rather than basically abusing data to destroy their business. That’s the concept driving Rakuten.”

AI is coming, ready or not

Under AI-nization, Mikitani has made AI education a top priority for Rakuten employees. “60-70% of the content we’re sharing in our Monday morning all-hands meeting is about AI.”

Mikitani advocates Neeley’s 30% rule, where employees don’t need to be experts, but should understand the fundamentals of a technology in order to apply it.

“They don’t need to become engineers, but they do need to think about how to use it. For most employees this is much more important,” he remarked. “It’s better to understand how it works. It’s not a magic box, it’s an algorithm. Of course, you can use a calculator to figure out 9×9, but you should really know how to solve that problem. So, I think this basic education for your entire staff is very important.”

For leaders looking to accelerate their own AI strategies, Mikitani offered some words of advice.

“Whether it is good or bad, whether you like it or not, AI is coming and progressing… You have to do it,” he urged. “Get buy-in from your employees of all levels. This will be as fundamental as calculators, Excel or PowerPoint.”