M.Ganmurun: Businesses can achieve dramatic growth through “aggressive” digital transformation

 Mongolian Economy spoke with Munkhbaatar Ganmurun, a Manager in the Business Strategy Consulting Unit at NTT Data Institute of Management Consulting, Inc, about what are the key steps of digital transformation, what is important in developing your business strategy and what is it like to work in Japan. 

-Could you briefly introduce yourself to our readers?

-Hello, my name is M.Ganmurun. I came to Japan in 2007 and I got my bachelor’s degree from Tohoku University. From 2014 to 2017, I worked as a business strategy analyst for Accenture Japan Ltd.,

At the moment, I am working as a manager in the Business Strategy Consulting Unit at NTT Data Institute of Management Consulting, Inc, which is a Japanese consulting firm. Here, I have been involved in strategy and business consulting projects such as Business Strategy Planning, New Business Development, Company-Wide Digital Transformation and Value Chain Optimization across multiple industries including telecommunications, automotive and retail.

-What brought you to Japan?

-When I was little, I watched a Japanese drama called “Oshin”. That was the first time I have been exposed to the Japanese language, culture and heritage. I was fascinated by that drama, especially by the portrayal of hard-working and diligent people during hardships. I could say that “Oshin” left a strong and lasting impression on me. After graduating high school, I had an opportunity to apply for a Japanese scholarship. That’s how I came to Japan. As my goal was to learn the Japanese style of management, I chose to study business administration at a university in Japan.

-Compared to international and local consulting firms in Japan, what’s distinct about NTT Data Institute of Management Consulting, Inc?

-Our company is a consulting firm that was established through a spin-off from the NTT Data Group in 1991. Our company can be characterized as both a think tank and a consulting company. Therefore, our company is engaged in research for government agencies and consulting for businesses in diverse areas including strategy, business process and IT.

At the Business Strategy Consulting Unit, to which I belong, we conduct consulting services on strategy planning, new business development and BPR (Business Process Reengineering) across multiple industries. Our unit can be described by the following phrase: “freedom of challenge”. As a person who previously worked at a multinational consulting firm, I could say many consulting firms tend to have a pyramid organizational structure. In other words, the chain of command goes from the top to the bottom. Whereas, NTT Data Institute of Management Consulting, Inc provides an environment where you take up a challenge regardless of your job level. On top of that, while other companies have separate units and departments for each specific industry such as retail, manufacturing and finance, our unit engages in a wide range of industries and areas which provides an opportunity to grow professionally. In short, the “freedom of challenge” is what is unique about our firm and you are always highly encouraged to challenge yourself.

-Currently, you’re working as a manager at the NTT Data Institute of Management Consulting, Inc. What’s a day in the life of a manager like?

-In terms of work-life balance, our company provides us with flexible working hours and the opportunity to work remotely from home. 

So, a day in my life as a manager goes like this, when I’m not busy, I usually come to the office around 10 AM, start my work by confirming the schedules for the day and finish contacting project members and reviewing documents such as market research and proposals for our clients. Since consultants tend to be involved in multiple projects in parallel, I often have multiple meetings in the afternoon, where we report and have discussions with clients. In the evening, reflecting on meetings with clients, we hold internal meetings with all project members to clarify and determine our next action and plan. After that, I reply to my piled-up emails, complete the remaining work and prepare for the next meeting. Whether it’s in Japan or elsewhere, people in the consulting industry tend to stay a little late at the office.

-Companies know that digital transformation is essential, but most companies don’t know how to start or where to start. What are the key steps of digital transformation and what should we know?

-In Japan, it is said that companies are in urgent need to respond to digital transformation. The reasons for this include “The 2025 Issue”, “Response to Digital Disruption” and “Changes in Consumer Behavior” which will be explained in detail. 

Firstly, “The 2025 Issue” is unique to Japanese companies, they have a long history of building up their massive systems from scratch following rapid economic growth and business expansion. According to the Japanese government, 60 percent of all Japanese companies are expected to have “legacy” systems around 2025. Hence, there is an urgent need to adapt new systems for most Japanese companies.

Secondly, with regard to the “Response to Digital Disruption”, some existing traditional services and products are greatly affected by the emergence of digital technology and business models. For instance, the emergence of Uber, AirBnB and Spotify has disrupted traditional industries. It indeed poses a threat to Japanese businesses. Having said that Uber taxis and AirBnB services are still regulated and prohibited by the law in Japan in order to protect existing traditional businesses. It is clear that there is an urgent need to respond to those disruptors.

Thirdly, in terms of “Changes in Consumer Behavior, the millennial generation and Generation Z in particular are increasingly becoming more experience-oriented consumers, rather than owning and consuming tangible goods. To illustrate, instead of purchasing and owning a private car, the sharing economy and subscription services are expanding in Japan. In the past, mass marketing was effective and that was all we needed. Nowadays, with the diversification of consumer needs, there is a need for digital products and services as well as personalized marketing that utilizes digital technology.

Furthermore, as you pointed out, I think there are many companies that do not know where to start with digital transformation. At our company, we divide digital transformation initiatives into five stages (See Figure 1). It includes the ① Concept stage, ② Planning stage, ③ Trial and Error stage, ④ Design and Development stage and ⑤ Deployment stage. In Japan, an increasing number of companies are adopting digital transformation, but very few of those companies successfully deploying it.

<Figure 1>

We know that the initiation stage is important but digital transformation is not something you do today and expect to see results tomorrow. Digital transformation requires analysis and modeling in order to be successful. Moreover, management teams must understand that their strategy and their commitments play an essential role in digital transformation. Also, a flexible and agile approach is needed in digital transformation as we go through the trial and error stage.

Also, the defining purpose of your company’s digital transformation is important. The definition of digital transformation is said to be “using digital technology to transform products, services and business models,”. However, in practice, there are very few companies that transform their services and business models. A lot of digital transformation initiatives are focused on operations efficiency.

<Figure 2>

Let’s say we can divide the purpose of digital transformation into “defensive” and “aggressive” based on the goal and scope of digital transformation (See Figure 2). A “defensive” digital transformation is focused on transforming operations and business processes. On the other hand, “aggressive” digital transformation is focused on the transformation of products, services and business models.

For companies, it is easy to start with “defensive” digital transformation, but it is difficult to initialize and realize the “aggressive” digital transformation since it has a dramatic effect on their existing services and business models.

On the contrary, it might be easier for startups and IT ventures to achieve dramatic growth and disrupt existing industries through “aggressive” digital transformation by utilizing new technologies. 

-Mr. Ganmurun, you have an extensive experience in business strategy. What are the common mistakes companies make in their business strategies?

-I have to say that it depends on the industry and the client. The strategy that a company should take depends on its external environment (e.g. digital technology), competitive environment, market trends and situation specific to the client.

In general, misreading the business environment and market trends could create a critical problem. For instance, in the past, there were many famous camera brands such as Nikon, FujiFilm and Panasonic in Japan. However, due to the rise of smartphones, camera sales had decreased dramatically. Some companies have retreated from the market, while others, such as Canon, have succeeded by differentiating themselves with single-lens cameras. Also, FujiFilm has succeeded in the medical camera market using its camera technology. So, it is important for management leaders to have a correct understanding of the business environment and market trends.

Moreover, another similar example happened to mobile phone companies in Japan. In the 1990s and 2000s, Japanese mobile phones were one of the most advanced in the world. They were the first mobile phones to send e-mails and make payments. However, when 4G started in the 2010s, they were replaced by smartphones. As a result, the number of mobile manufacturers went down from 10 to 3. Also, as we all know now, smartphones and 4G played a critical role in the success of internet giants such as GAFA (Google, Amazon, Facebook, Apple) and recently China’s BATH (Baidu, Alibaba, Tencent, Huawei).

-As someone with experience in a business process transformation project in the energy industry, what trends do you see in the business process of energy companies?

-Since the energy industry is an infrastructure sector, it is difficult for the drastic business model transformation to take place. Therefore, digital transformation in the energy industry often occurs around operational efficiency, business process transformation and other similar areas. 

Previously, I have been mainly involved in digital transformation projects for clients in the petroleum industry. Since the energy industry in Japan is regulated and protected by the law, the necessity of digital transformation had been relatively low. Thus, the digitalization trend has begun recently. For example, in the back-office departments (e.g. accounting), stamps and papers are still commonly used. During the COVID-19, some people still had to go to the office just to press a stamp on documents.

On the other hand, in field operations, AI and IoT technologies are becoming more commonly used in the energy industry. Energy infrastructure companies often have huge facilities such as power transmission towers, pipes and tanks all over the country, so the maintenance cost tends to be quite high. Therefore, maintenance and operational efficiencies are being improved through the use of drones and AI cameras. For example, in the past, people had to climb up the power transmission towers for inspection and maintenance purposes, but now most power companies use drones.

Also, technology is being used to support field staff. For example, smart glasses are used to remotely support field engineers and tablets are used to share manuals and procedures. Furthermore, IoT is used for matters related to customers. For instance, by attaching sensors to household LP gas meters, accidents can be detected beforehand, and also it can detect automatically when the LP gas runs out so gas can be delivered right away. To sum up, I can say the use of digital technology in field operations and business processes is becoming more and more mainstream in the energy industry.

-The mining sector is the key driver of Mongolia’s economy. Do you think the Mongolian mining sector needs to adopt a new business strategy? Moreover, what type of business strategy would be optimal for Mongolian mining companies?

-First of all, I must say that I am not a mining industry expert and the following is merely my personal opinion. I think everyone knows that the biggest risk the Mongolian mining industry has is a political risk, so I won’t address it here. 

Let’s suppose that we have two basic strategies. One is to improve the sales topline and another is to reduce costs by improving efficiency. In order to improve the sales topline, I personally think that there is no other way than to increase the added value as much as possible because we are competing with giant Australian mining companies that transport high-quality coke coal at low-cost to the Chinese market. It must be pointed out that globally, environmental and sustainability issues are becoming increasingly important meaning countries are gradually moving away from fossil fuels. To illustrate, Japan has set a goal of becoming “carbon neutral” by 2040. 

Also, China has announced that the country will strive to reach carbon neutrality by 2060. That means China will eventually stop buying coal in the future, so we cannot expect that we can sell our coal forever. 

The second strategy is operational excellence which I think is important for Mongolian companies. The management and operational know-how of multinational companies that are operating in Mongolia are in accordance with global standards. Thus, local companies need to strive to learn and adopt global-level management and know-how. Japan is said to be a country that is very good at learning and localizing technology and know-how from overseas. During the Meiji period and after World War II, the country actively introduced technology and know-how from the West. As a result, multinational companies in various industries such as automobiles and electronics, such as Toyota and Sony, were created in Japan.  

-How would you describe your work life in Japan in three words? Furthermore, what people should know about job hunting in Japan? 

-In terms of work life in Japan, I would describe it with these free words: punctuality, trust and salaryman. As a not-so-punctual person myself, I learned a lot about being on time and meeting deadlines. Also, I think Japanese people value trust and the importance of keeping promises. The third word, salaryman, refers to white-collar workers in Japan. Actually, all the characteristics of work life in Japan are ingrained in this concept. 

With regard to job hunting, Japan has its own unique way. For example, if you are planning to start job-hunting after your graduation, you need to start preparation at least a year in advance. Also, although it depends on the company, most of them tend to require you to speak the Japanese language. If anyone has questions about job-hunting in Japan among the readers, feel free to contact me.

-In terms of economic and business relations between Mongolia and Japan, what do you want to see in the future?

-Since the Japan-Mongolia Economic Partnership Agreement was signed in 2016, business relations between our two countries have improved. Unfortunately, if you look at the exports and imports, most of them are used cars imported from Japan. That means Mongolia has not been able to make full use of the EPA. In order to export more goods to Japan, the quality needs to meet Japanese standards (of course we know Japanese consumers demand one of the highest quality standards in the world). For example, in Japan, mutton is imported from Australia and New Zealand because hygiene and quality standards are met. On the EPA, Japan and Mongolia have agreed to eliminate import tariffs on meat products. Hence, I hope we can improve the quality of our livestock products and start exporting meat products to Japan. 

In the future, I expect Mongolian companies to do business with Japan, in the IT sector. I think Mongolians are good at IT and flexible to adapt to new technologies. There is a shortage of IT engineers in Japan. Needless to say that it has become possible to provide IT services to Japanese companies from anywhere in the world. For example, a Mongolian company called Nasha Tech is one of the companies that are providing IT services to the Japanese market.

There is a term called “leapfrogging”. New emerging countries could leapfrog developed countries by introducing new technology before they do. For example, the cashless payment rate is higher in some Asian and African countries than in Japan because mobile banking spread before traditional payments like credit cards. To this extent, if can we can actively incorporate new technologies such as AI, IoT and 5G and conduct market demonstrations or proof of concepts in the Mongolian sizeable market in advance, it is possible to approach the Japanese market, collaborate with Japanese local companies and attract direct investments. I hope “leapfrogging” will occur in Mongolia and we will see more Mongolian IT companies collaborating with Japanese companies in the future.

-Where do you see yourself in 10 years? Do you plan to return to Mongolia in the future?

-I think I will be in Mongolia in 10 years. I came to Japan to learn and gain experience. I want to put it into practice in Mongolia in the future. So I think I will go back to Mongolia in the near future.