Making taxis mainstream

This series follows Dentsu Inc. 'Company Design' team as they uncover the secrets behind 'vibrant companies' with 'originality.' In the 13th installment, we delve into the essence of Den'nō Kōtsū—a company born from a long-established taxi firm in Tokushima that is revolutionizing all forms of transportation nationwide.

President Kondo spent his years from age 18 to 22 in the US pursuing his dream of becoming a Major League Baseball player. After his dream was shattered, he returned to his hometown of Tokushima and joined Yoshino River Taxi, run by his grandfather. He started as a taxi driver. What he witnessed there was a company operating at a loss with only nine taxis.

He wondered if there wasn't some way to change this situation. Taking the initiative to implement management reforms, he achieved a V-shaped recovery in just a few short years. He was decisive, swift, and precise. For me, living in a regional city in the same Chugoku-Shikoku area, this company clearly stood out. This time, seeking to unravel its mystery, I knocked on the door of Den'nō Kōtsū.

The interview proved fascinating. For each question, President Kondo responded with calm yet passionate words that flowed freely. As the interviewer, I often forgot the next question I had prepared. Perhaps that's just how people who drive innovation are. If you were the president of a regional taxi company right now, in the midst of this COVID-19 crisis, what exactly would you do? I'm too scared to even imagine it.

Written by: Satoshi Teshirogi (Dentsu West Japan Inc.)

Den'nō Kōtsū: Founded December 2015. Under the theme "Advancing Taxi DX," it provides cloud-based dispatch systems for taxi operators. Its user-friendly, affordable systems gained popularity among small and medium-sized enterprises in Western Japan from the start, gradually expanding nationwide. In 2018, it secured funding from NTT DOCOMO Ventures, JR West Innovations, JapanTaxi (now Mobility of Technologies), and others, expanding its business at an annual rate of 200-300%. In 2020, it raised additional capital from Mitsubishi Corporation and JR East Startup, among others, and is now developing businesses aimed at maintaining and sustaining regional transportation, including collaborations with on-demand transportation and MaaS.

I learned what it meant to be broken.

"Failing to make it to the major leagues was certainly a big blow, but returning home to find the state of my family business in Tokushima was an even greater shock. I was stunned," President Kondo confessed at the start of the interview.

Taxis are supposed to stop immediately when you hail them. They're as commonplace and unremarkable as rice, water, electricity, gas, or toilet paper. President Kondo was shaken to the core by the realization that this essential lifeline operates on such fragile foundations.

The idea that a taxi will always be there when you hail one is an illusion. In reality, about 90% of taxis in rural areas are arranged by phone. That "phone" part is key. Younger generations living in cities might think, "Why not just call one with an app?" But does that common sense apply to, say, an elderly woman living in Tokushima? "Ah, I realized this wasn't a time for me to get discouraged and give up," President Kondo reflects on that period.

Yosuke Kondo:
Born in Tokushima City. After studying in the U.S. aiming to become a Major League Baseball player, he returned to Japan and joined Yoshino River Taxi. He became President in 2012, achieving a V-shaped recovery from near insolvency. Founded Den'nō Kōtsū in 2015 and became its President. Visiting Professor at Tokushima University.

"If I had to describe Den'nō Kōtsū's service in one sentence, it's about how efficiently we can dispatch taxis," says President Kondo. Just imagining the scene—taxis lined up in front of stations in the city versus not a single taxi parked at a quiet station in the countryside—makes the waste obvious even to a layperson. The idea is: Can't we use digital technology to create an experience that replaces the taxi you can hail anytime by raising your hand on the street?

The mechanism itself is simple. Just connect taxis and people, following the model of major foreign distribution companies. Here, "people" includes not only customers but all employees, including drivers and operators. Yet, when it comes to actually realizing this simple idea, the minds of ordinary people like myself freeze.

The demand exists. What's missing is the mechanism to capture it.

"Even during the pandemic, the demand for taxis itself exists. Businesspeople leaving their company buildings and hailing taxis to clients. At night, scenes like managers boarding taxis one by one from entertainment districts saying 'Good work tonight' have drastically decreased. But elderly people with weak legs desperately want to go out. Mothers with small children or large luggage desperately want to get to their destination right now. Even getting to the bus stop or station is tough. That's when taxis become the reliable option, right?" How to provide that taxi service to customers became the starting point for President Kondo's thinking.

"Corporate clients make up 30% of taxi usage. Tourists account for about 20%. These segments certainly saw a sharp decline due to COVID. But the remaining 50%? That's taxis serving as essential transportation for daily life. This demand hasn't changed. In fact, it's increasing due to factors like an aging population. Couldn't we solve this problem by leveraging digital technology? That was the core idea."

The system of dispatching taxis using radio communication is a long-established practice in the taxi industry. Recently, smartphone apps have also emerged. However, no taxi company is using these efficiently, and customers who can skillfully navigate the apps are extremely few nationwide. President Kondo concluded that this was the only way for his small, traditional taxi company in Tokushima to achieve a V-shaped recovery.

A photo from when he was a driver at Yoshino River Taxi. Tokushima Prefecture has one of the smallest taxi markets nationwide, and Yoshino River Taxi was just a small operator within it, running only nine vehicles.

Railways and buses are not rivals for taxi companies

"What I learned while building a cloud-based dispatch system is that railways and buses aren't rivals for taxi companies; they're actually partners," says President Kondo. Partners aren't limited to railways and buses. Every conceivable business—from travel agencies and department stores to cram schools and nursing homes—faces challenges in "transporting people." President Kondo believes that by committing to solving these challenges, even a rural taxi company can help make society better.

"You fly to your destination. The last mile has traditionally been handled by taxis, right? But is that all taxis are worth? Taxis are the only familiar presence that transports people and goods door-to-door. If you want to enjoy a remote hot spring or breathtaking scenery where buses don't run and you don't have a private car, taxis are the only way to get there, aren't they?"

President Kondo points out, "The taxi industry is the only one without 'pre-determined fares' where you know the cost before riding." You don't know the fare until you get off at your destination. No other mode of transport is like that. That's why, for example, when travel agencies plan itineraries, they hesitate to include taxis as a service because they can't know the cost.

"But actually, since 2019, some smartphone ride-hailing apps have offered services to confirm fares in advance. However, most people don't know this. Unless there's an environment where the same service can be accessed with just one phone call, it's meaningless for elderly people in rural areas. That's why, starting in 2021, we began offering a service to operators that allows passengers to confirm the fare in advance even when calling a taxi by phone."

Tokushima City, where Den'nō Kōtsū has its headquarters, has a population of about 250,000. It developed on the delta at the mouth of the Yoshino River, with 138 rivers flowing through the city. The conventional lines at Tokushima Station use single-car trains, so large stores are built along the main roads rather than near the station. It's a typical regional city where car travel is essential for residents' daily lives.

Let's take a bird's-eye view of the world

"Among regional taxi companies, many could earn a decent daily income without major management reforms, even if they weren't making huge profits. I think that's why they just sort of kept doing things the same way. My experience rebuilding Yoshino River Taxi made me wonder: Couldn't we revitalize the management of regional taxi companies? In today's terms, it's DX (digital transformation), but the core idea was: Couldn't taxis contribute more to people's happiness?" President Kondo's vision gradually expands in scope.

Unprofitable businesses get cut off one after another. It's like how the fishmongers in the shopping district who provided delicious fish are disappearing. But profitability and whether a service is what customers want and need are two separate issues. "I believe digital is what bridges that gap. Taking a bird's-eye view of society, what services truly resonate with customers and are genuinely needed? I believe contemplating this is the responsibility of business leaders across all industries, not just the taxi business."

According to President Kondo, in addition to this bird's-eye view, what's crucial is "asking oneself inward questions" about the company's responsibility and philosophy. You can instantly come up with countless buzzwords that sound impressive, but in a nutshell, it boils down to "surveying the world and then making a firm decision."

Yoshino River Taxi does not display its company name on its vehicle lanterns (the signs mounted on the roof). Rather than pursuing minor differentiators, they adopted lanterns displaying only "TAXI" as a testament to their commitment to enhancing customer service and becoming a symbolic enterprise for the region.

City development is the taxi company's job

"In the future, I hope the taxi industry can become part of city planning, or urban development," President Kondo shared his vision. Approximately 230,000 taxis operate in Japan, employing around 350,000 people. Pre-COVID data shows they transported a total of 1.4 billion passengers annually. These figures alone make it clear that taxis are more than just a means of transportation. "I want to rebuild the framework that supports the social infrastructure of 'local transportation'."

President Kondo states that a taxi company's work isn't just about moving people. It's about creating systems that support the infrastructure of the city. The key concept here is "demand-responsive transportation." It exists somewhere between the current bus and taxi systems. It offers flexible door-to-door travel while carrying multiple passengers like a bus. A transportation method that meets local needs while remaining profitable. Just hearing this vision made me feel excited. Imagining small children and elderly women in the countryside, I felt excited and, at the same time, a little teary-eyed.
 

The company name "Den'nō Kōtsū" (Cyber Transportation) originates from "Den'nō-tai" (Cyber Squad), established in 1996. Before founding Cyber Transportation, while interacting with key figures from domestic IT companies, the founder received significant inspiration and new perspectives from former Cyber Squad members. This strengthened his desire to fuse taxis with IT. Additionally, President Kondo himself experienced how IT completely transformed his life while studying abroad. He felt the taxi industry could also achieve transformation through IT utilization, leading to the naming.

Den'nō Kōtsū's homepage is here.
For dispatch systems for taxi operators, click here.
For regional transportation solutions for municipalities and private companies, click here.

Season 2 of the series where Dentsu Inc. 'Company Design' team explores the secrets of 'vibrant companies' with 'originality.' Episode 13 introduced 'Den'nō Kōtsū,' a company founded with inspiration from a long-established taxi company in Tokushima, now revolutionizing daily life nationwide.

Season 1 of the series can be found here.
The "Company Design" project site can be found here.

[Editor's Note]

Living in the city, there's a certain complacency—like, taxis (sorry!) will stop for you the moment you step outside your company or home and hail one. But step off the train at a rural station and wonder, "Now what?" No taxis in sight. Check the bus schedule? Only one every hour. Just remembering that uneasy feeling gives me chills.

The same goes for convenience stores, supermarkets, set meal restaurants, and bars. If you need something like that (again, sorry!), you just step out into town and there are plenty. That's the common sense ingrained in city dwellers. But then came this coronavirus. Tonight, I feel like grabbing drinks with friends, but the places are closed. For many, this has been a stark reminder of just how precarious our society really is. At the same time, it feels like we've learned the importance of respecting the things we take for granted.

If you hail one, a taxi will always stop. Even when you feel so ill you might collapse, a taxi will always stop. I think the core of the business President Kondo launched is this question: Can't we deliver that sense of security nationwide?

"Management efficiency" is merely a means to achieve an end. What, then, is that end? In the taxi industry, I believe it's the sense of security that comes from knowing you can be taken anywhere, anytime. Digital technology is used to deliver that sense of security. This, I realized anew, is the true essence of DX.