McKinsey & Company has analyzed the state of AI adoption in Japan’s manufacturing sector and outlined the challenges and future direction for enterprise-wide transformation and productivity improvement. In light of the long-term decline in productivity and changes in the employment structure reflected in OECD indicators, lighthouse-style initiatives are needed.
Japan’s manufacturing sector has supported GDP and employment for many years, but its international productivity ranking has declined. Although it ranked 1st among all 38 OECD countries in 2000, it fell to 10th in 2010, 17th in 2015 and 19th in 2022. Total employment increased by approximately 3 million between 2000 and 2024, while manufacturing employment declined by approximately 1.45 million. These trends suggest that Japan has been slow to drive transformation through the enterprise-wide use of AI and digital technologies.
An analysis by the World Economic Forum’s Global Lighthouse Network highlights the fact that leading companies deploy AI, IoT and digital twins in the field and link them to business results by transforming data, business processes, talent, organization and technology as an integrated whole. To be recognized as a “lighthouse,” Japanese companies are expected to deliver results across multiple use cases through broader rollout, rather than simply operate smart factories.
The article points out that pilot projects by Japanese companies have struggled to lead to broader transformation, and emphasizes the importance of learning from Chinese companies’ examples of long-term transformation, including data standardization and organizational reform. It concludes that an enterprise-wide approach is essential to restoring competitiveness in the AI and digital era.