The growing influence of individuals and startup businesses are transforming established systems in societies and industries. This is encouraging businesses to restructure, increasing choices for consumers, and enabling society to become more flexible.
The spread of the Internet has narrowed the formerly unbridgeable gap in the ability to distribute information between enterprise and consumers, employers and employees and large businesses and small-to-medium-sized businesses. The diffusion of social media has also increased an individual’s ability to spread information, giving rise to a considerable pressure on providers. In the manufacturing arena, lower prices made possible by mass production and uniform service can no longer meet diversifying consumer needs. This is causing a shift from mass production to high-mix, low-volume production and even to the personalization of products in accordance with consumer requests. In addition, significantly lower switching costs between providers and brands of products and services have strengthened the relative power of consumers. A recent trend is consumerization, where innovation occurs in consumer markets ahead of business markets, after which the innovation is imported to front-line businesses.
The reduction of the gap in the ability to access information between the national government and citizens has resulted in significant changes in politics, the economy and social life as a whole. Vox populi, which used to be oppressed, and sharp individual opinions now enjoy much greater exposure, excessively demanding their incorporation into policies. Since a reduction in the sense of belonging and a rise of populism are also being seen, in some cases, unexpected results are occurring in elections and referendums. Finding an equilibrium point is expected to take a little more time.
The on-demand economy, in which products and services are provided based on demand, continues to grow. In the United States over 40% of adults have used this type of service. The spread of smartphones and social media has enabled more effective matching of supply and demand, leading to more efficient use of idle assets.
Because consumers can now become providers, an increasing number of markets are in flux. While the sharing of cars and lodging facilities are generating resentment from the taxi and hotel industries, users unsatisfied with the inflexible service of the existing industries support new entrants not subject to regulations, causing existing business model disruption. This trend has even impacted the automobile industry, which has entered the business of sharing vehicles, despite the potential negative effect on sales volumes. In tandem with the expansion of service types, such as the home delivery of food and housekeeping service, the number of users is increasing. While a majority of users are currently young adults who are trend-conscious and knowledgeable in IT, the market for this type of business is expected to expand in the future.
An increasing number of workers, especially in advanced countries, are freelancing instead of belonging to a specific company or organization, thus propelling the diversification of individual work styles. In addition to digitization and mobilization, which has separated work from the workplace, expansion of the on-demand economy and crowdsourcing has paved the way for utilization of the abilities and resources of individuals. This is one of the key factors in increasing the number of full-time and part-time freelancers. In particular, more individuals with highly specialized skills have access to global markets and select a job regardless of location that takes advantage of their abilities. The United States has approximately 53 million freelancers, approximately one third of the workforce. This number is expected to grow above 50% of the workforce by 2020*3. Similar trends in the number of freelancers can be seen in Europe and Japan, with large companies increasingly hiring freelancers. Employers which leverage freelancers to strategically use specialized expertise instead of just cost reduction and adjustment in employment volume, experience enhanced competitiveness. If companies and organizations continue to utilize external skilled workers for important tasks, organizations will become more open and flexible.
Personalization is shifting toward individualization. Stronger advocacy of individual demands, along with the new ability to acquire accurate information on individuals and their behaviors, have made it clear that services that segment customers simply by attributes, e.g., age and sex, and purchase histories, do not attain maximum results. For example, analysis of information distribution via social media, and information on families and assets, real-time analysis of location and individual situations and behaviors, are now being combined to increase contract success and likability rates. One case reported that individualized rewards program based on personal taste and interest lead to more than ten thousand times as many variations of rewards program, doubling the rate of utilization. To achieve customer satisfaction, it is imperative that providers of products and services restructure business models. In the medical field, treatment methods that incorporate genetic information, patient personality and living environment in addition to the state of illness and comorbidities, will likely become more commonplace. Although concerns about privacy may make the application of these methods optional, evidence of the significant impact on users will likely promote continued adoption of these techniques.
As a system that supports individual needs more accurately and rapidly, 3D printing is expected to expand rapidly in the future for prototypes, finished products and parts. Spread of 3D printing will lead to the shift of manufacturing locations closer to final consumption, enabling even individualization of manufacturing processes. This may cause the restructuring of supply chains as a whole. A recent IDC study forecasts that the 3D printing market will grow at the CAGR (Compound Annual Growth Rate) of 22.3%, with a market size of approximately 29 billion dollars in 2020, almost 2.2 times the size of the market in 2016*1. Expansion of 3D printing is expected especially in the dental and medical implant treatment fields.
Digitization has caused rapid changes in the business models of existing companies. For example, the way to purchase music has evolved from record albums and CDs to individual pieces of music, and consumers can subscribe to a newspaper on an article basis, radically shifting distribution systems. The service industry has seen the appearance of FinTech companies, which specialize in their areas of strength to provide functions to existing financial institutions. This indicates a change from provision of uniform service to provision of service restricted to certain functions. Some financial institutions offer only digital services without providing any branch offices, while other banks have expanded their functions to meet customer demands. In place of large companies offering uniform services, the distribution arena is experiencing unbundling, where a selective combination of multiple startups can provide similar services. An increasing number of construction and healthcare companies are also providing highly specialized services by narrowing down to certain functions. Startups have the advantage of proximity to customers.
Digitization has caused standardization and lowered transaction costs, decreasing the advantage of one company providing all functions. Large organizations are also hindered by bureaucratic structures and slow decision making resulting in the need for a system to create and adopt innovations. For this reason, collaboration between large companies and startups has become more popular. In addition, acceleration of the IT revolution is blurring the boundaries between industries. For example, some IT-related startups are entering the automobile and space industries.
The power of the individual is already fundamental in the world, bringing changes to the relationships among entities in society. Although a negative aspect exists where fake online news is affecting even politics, the impact of the individual will likely continue to expand, encouraging modifications in industries, reexamination of regulations and construction of new systems. The power relationship (power balance) in society will also likely continue to change. As a result, companies need to look beyond these changes and adequately prepare for next steps in the future.
*2 Short-term contract type for individuals in the labor market