Hitachi, one of Japan’s most storied conglomerates, has successfully redefined itself in the past decade. Its strategic focus on artificial intelligence (AI), data monetisation, and digital transformation has propelled it to become one of Japan’s top five most valuable companies, with its market value tripling to over $100 billion. For businesses in Europe, the UK, and globally, this transformation underscores the promising potential of Japan’s AI sector and the collaborative opportunities available for international firms willing to enter the market.

Hitachi’s Strategic Shift to AI and Data

In the early 2010s, Hitachi faced challenges typical of legacy conglomerates: sprawling operations and limited focus. Recognising the need to adapt, the company initiated a significant restructuring to streamline its operations and prioritise areas with the highest growth potential. The result was a pivot towards industrial software and AI.

The centerpiece of this transformation is Hitachi’s Lumada platform, which integrates digital and physical technologies to offer data-driven solutions across industries such as manufacturing, logistics, healthcare, and urban planning. Lumada has not only enhanced operational efficiency for Hitachi’s clients but has also created new revenue streams through data monetization.

Lumada’s success reflects the broader appeal of Japan’s AI market. It demonstrates how AI can bridge traditional industrial practices with cutting-edge technology, solving challenges that are both local and global in scale. For example, AI-powered tools on the Lumada platform have been employed to optimize factory operations, predict equipment failures, and improve supply chain efficiency.

Hitachi’s AI Investments and Partnerships

Generative AI and Workforce Upskilling

A significant aspect of Hitachi’s transformation is its investment in generative AI. By the end of 2024, the company plans to spend $2.1 billion in this domain. Recognising that AI adoption is as much about people as it is about technology, Hitachi is also training over 50,000 employees in AI-related skills. This dual focus ensures that its workforce is not only proficient in deploying AI but also capable of integrating it effectively within its diverse operations.

Internally, Hitachi has implemented an AI assistant to streamline workflows and boost productivity. As of mid-2024, nearly 48,000 employees had conducted over 797,000 interactions with the system, showcasing how AI can enhance efficiency even in traditional corporate structures.

Collaboration with Microsoft

To scale its AI capabilities further, Hitachi entered into a multibillion-dollar partnership with Microsoft in 2024. This collaboration integrates Microsoft’s cloud services and AI tools, such as GitHub Copilot, into Hitachi’s Lumada platform. The partnership enables the development of more robust digital solutions tailored to the needs of various industries, from manufacturing automation to predictive maintenance systems.

Such partnerships exemplify the opportunities for European and global companies to engage with Japan’s AI ecosystem. By collaborating with established players like Hitachi, international firms can gain a foothold in Japan while contributing their expertise to joint innovation efforts.

Opportunities for the AI Sector in Japan

Japan’s AI sector presents a unique combination of advantages that make it an attractive destination for global firms. Here’s why the market is ripe for exploration:

1. Government Support and Industry Alignment

Japan’s government has been proactive in promoting AI development. The “AI Strategy 2025” initiative, led by the Ministry of Economy, Trade, and Industry (METI), aims to integrate AI across all major industries. From healthcare and agriculture to transport and urban planning, AI is seen as a critical driver of Japan’s economic growth and societal well-being.

This alignment between government policies and industry goals creates a stable environment for investment. Companies entering Japan can benefit from subsidies, tax incentives, and a regulatory framework designed to support innovation.

2. Industrial Scale and Technological Expertise

Japan’s advanced industrial base provides a fertile ground for AI applications. Sectors such as automotive manufacturing, robotics, and precision engineering are already leaders in adopting AI to enhance productivity and reduce costs. International firms specialising in industrial AI solutions can leverage these opportunities to co-develop technologies tailored to the Japanese market.

3. Data-Driven Solutions with Global Applications

Hitachi’s focus on data monetisation through its Lumada platform illustrates the growing importance of actionable insights in the AI space. For instance, Lumada’s applications in smart logistics and urban infrastructure not only address Japan’s needs but also offer scalable solutions for global markets facing similar challenges. European firms with strong analytics capabilities can find synergies in these areas, collaborating with Japanese companies to deploy solutions both locally and internationally.

Lessons for European and Global Firms

Cultural Understanding

One of the keys to success in Japan is cultural competence. Japanese business practices emphasise trust, long-term relationships, and a commitment to quality. Companies looking to enter the market must invest in understanding these cultural nuances to build credibility and foster meaningful partnerships.

Partnership-Driven Approaches

Collaborating with local players, as seen in the Hitachi-Microsoft partnership, is essential for navigating Japan’s businesses. Such alliances not only provide access to local expertise but can enable firms to align their offerings with market-specific needs.

Focus on Long-Term Goals

Unlike some markets that prioritise short-term gains, Japan values long-term commitment. Companies should be prepared to invest time and resources into establishing a presence and demonstrating their reliability over time.

The Global Implications of Hitachi’s AI Success

Hitachi’s transformation has broader implications for the global AI sector. It highlights the potential of AI to drive sustainable growth in industries that form the backbone of economies worldwide. Here’s how…

Sustainability

Hitachi’s AI solutions are increasingly geared toward addressing environmental challenges. From optimising energy consumption in factories to developing clean energy systems, the company is at the forefront of sustainable innovation. These advancements align with global efforts to combat climate change and present opportunities for international collaboration.

Standard-Setting

As one of the most established players in the AI-driven industrial sector, Hitachi’s practices are likely to influence global standards. Companies entering the Japanese market can position themselves as contributors to these standards, enhancing their credibility globally.

Expanding AI’s Reach

By focusing on real-world applications rather than speculative technologies, Hitachi demonstrates the value of pragmatic AI deployment. This approach resonates with businesses worldwide that are seeking tangible outcomes from their AI investments.

Conclusion

Hitachi’s reinvention through AI is more than a corporate success story; it’s a blueprint for how global firms can engage with Japan’s evolving AI ecosystem. The combination of government support, a mature industrial base, and a collaborative business environment makes Japan an ideal destination for similar  innovation-driven companies. As Hitachi continues to expand its AI initiatives and global partnerships, it opens the opportunity for other companies to join in. By entering the Japanese market with a commitment to quality, collaboration, and cultural understanding, businesses can not only contribute to but also benefit from one of the most dynamic technological ecosystems in the world. For businesses seeking more insights on Japan, please check out our other blogs on our website, and feel free to contact us for more information.

References: 
Financial Times: https://www.ft.com/content/56eb8539-ed4d-45ce-bcc2-6774354091d2 
Technology Magazine: https://technologymagazine.com/articles/how-hitachis-new-ceo-will-lead-ai-driven-transformation 
Hitachi: https://www.hitachi.com/corporate/about/it/contents/technology-strategy/contents1.html 
Kyodo News: https://english.kyodonews.net/news/2024/10/c30ef6d56b44-hitachi-launches-ai-powered-railway-maintenance-service-with-nvidia.html 
Japan Times: https://www.japantimes.co.jp/business/2023/08/04/companies/hitachi-tranformation-japan-hope/ 
Nikkei Asia: https://asia.nikkei.com/Business/Companies/Hitachi-to-train-50-000-employees-in-AI-in-push-for-new-businesses