The future of physical and digital services: Conversation between Japan Post Holdings & Rakuten CEOs
In early 2021, Rakuten and Japan Post made industry headlines with an announcement that the two companies would partner up on a number of initiatives ranging from logistics to digital transformation. As a company with more than 150 years of history, Japan Post’s choice of partner – a comparative upstart of the internet age – sparked considerable excitement.
Hiroya Masuda has led Japan Post Holdings since early 2020. The new CEO had previously served in the public sector, as governor of Japan’s northern Iwate Prefecture and later as Japan’s Minister for Internal Affairs and Communications.
“Accessible via smartphone 24/7, 365 days a year. No limits on time…Starting there, we should be able to move a lot of the work of the physical post offices into the digital sphere. Then we can focus on the things that regional areas really need us for.”
Hiroya Masuda, CEO, Japan Post Holdings
Last October, Masuda joined Rakuten CEO Mickey Mikitani at Rakuten’s annual Optimism conference for a revealing discussion on what happens when the physical and the digital collide.
Getting with the times: Japan Post’s digital transformation
“Our companies are completely different,” Masuda admitted. “But two companies with such different strengths and weaknesses coming together like this is what causes a chemical reaction.”
Japan Post’s most obvious strength lies in its physical presence: It maintains a network of over 24,000 post offices serving every corner of Japan. But Masuda’s desire for a ‘chemical reaction’ stemmed from a realization that a physical network alone would not lead the company into the future.
“We are a company with a very strong physical presence. But the age of the internet is here. Everything is connected now.”
It’s here that Rakuten’s digital expertise could prove vital: “The biggest factor in choosing to partner with Rakuten was the Rakuten Ecosystem,” he said. “We felt there was a lot of potential in the strongly digital nature of Rakuten’s many services.”
“As our society goes through this digital transformation, it’s really meaningful that two companies from opposite ends of the digital spectrum are coming together like this.”
Mickey Mikitani, Chairman and CEO, Rakuten Group, Inc.
In addition to postal services, Japan’s post offices also provide banking and insurance services, crucial to the day-to-day lives of the locals who depend on them. Yet Masuda revealed an ambition to break free from the 9-to-5 constraints of the post office’s physical branches.
“The services we provide are services that should be possible to use in the middle of the night, with your smartphone, even. There’s no reason that shouldn’t be possible.”
For this, Masuda wants to create a ‘digital post office network.’
“Accessible via smartphone 24/7, 365 days a year. No limits on time,” he said. “Starting there, we should be able to move a lot of the work of the physical post offices into the digital sphere. Then we can focus on the things that regional areas really need us for.”
A digital company looks to rural Japan
“When internet shopping took off at the beginning of the 2000s, it was really concentrated in inner-city areas,” Mikitani recalled. “But now, internet shopping has become an incredibly convenient way for people in rural areas to shop.”
Mikitani foresees that rural demand for logistics services will grow even further into the future. Partnering with Japan Post will be the most efficient option for meeting that demand, which Mikitani believes will be further accelerated by the digital revolution.
“Physical distance is no longer an issue for many people. Moving at the speed of light, there’s hardly a difference between here, 100km and 500km. You can already move to the countryside and live in a more spacious house and have a more fulfilling life,” he suggested. “As more people do this, the demand for logistics services will increase. When that happens, JP’s physical network of post offices covering the entire country will be an enormous asset.”
“In the future, logistics will only continue to improve as we adopt technologies like drones and robot deliveries…there is even more potential for growth in Japan’s rural areas… so I think that it’s even more important to invest in new technology in rural areas than metropolitan ones.”
Hiroya Masuda
“Living outside the city isn’t so convenient right now,” Masuda reflected. “But in the future, logistics will only continue to improve as we adopt technologies like drones and robot deliveries. If you think about it from this angle, there is even more potential for growth in Japan’s rural areas… so I think that it’s even more important to invest in new technology in rural areas than metropolitan ones.”
Bridging the digital divide
Masuda lamented his generation’s aversion to modern digital technology but expressed optimism about how technology is becoming more and more user-friendly: “The first PCs, for example, were incredibly complicated. But fast forward to today, and we can do everything on tablets. Before long, everything will be voice-controlled.”
“25 years ago, setting up an internet connection was a Herculean task. You’d be typing in commands, wiring up analog routers…” Mikitani reminisced. “But young people today don’t even have to think about that. Even older people are using social media to send photos or hold video calls with their grandchildren… You could never have imagined that ten years ago.”
Mikitani believes that Rakuten’s partnership with Japan Post represents something bigger for Japan’s digital journey.
“As our society goes through this digital transformation, it’s really meaningful that two companies from opposite ends of the digital spectrum are coming together like this.”
Masuda agreed: “This combination of strengths isn’t something that exists anywhere else in the world.”
Courage and commitment to embrace the future
“In order to decide what action to take now, you need to work backwards from the future,” Mikitani told Masuda. “Think about telemedicine. This is something that Japan has never been particularly proactive about, but in 30 years, it could well be that most doctors are AI doctors. Maybe it’ll only take 10 years.”
To successfully move forward, people from all facets of society need to face these realities.
“Don’t just think about what’s happening now. Approach everything from the perspective of how the future will look. If we don’t do this, our future could end up being a dark one.” Mikitani warned. “Everyone, citizens, public servants, politicians and entrepreneurs, should all be looking ahead and planning the way to a bright future.”
To view the full session from Rakuten Optimism 2021, click here.
