GIX Inc. provides consulting and solutions centered on "Data-Informed (DI)"—where people make appropriate decisions based on data. Dentsu Consulting Inc. possesses extensive expertise in growth support through its "Right Brain × Left Brain × Unique Talents" approach. The significance and concept behind their client support through this business partnership were introduced in the first discussion.
This second discussion focused on more concrete data utilization and B2C growth strategies within the railway industry. Masataka Sugimoto, Senior Managing Executive Officer at Dentsu Consulting Inc., and Hiroshi Yamada, Executive Officer and Deputy Head of the Data-Informed Business Division at GIX, engaged in the debate.
Amidst declining mobility demand due to population decline and the COVID-19 pandemic, which has severely impacted rail and bus operations, transforming B2C businesses has become an urgent priority.
Sugimoto: GIX and Dentsu Consulting Inc. have now formed a business alliance. What kind of B2C growth support can we provide? This time, by focusing on a specific industry as a reference case, we aim to deepen our discussion. Within the railway industry, which broadly operates B2C businesses spanning transportation, distribution, real estate, hotels, and leisure, what growth strategies can be realized?
The private railway management model established by Ichizo Kobayashi, founder of Hankyu Railway, became a model case for post-war diversification. This model involved building theaters and department stores along the railway lines, developing and selling residential land along the routes, and expanding various businesses within the lifestyle scene, including retail and dining.
Furthermore, since around 2000, efforts to enhance synergies between businesses and maximize group profits through mutual customer referrals have accelerated. Additionally, technological innovations in transportation IC cards have spurred the expansion of group card businesses and strengthened CRM through data utilization.
Yamada: Amidst developing various related businesses, the question now is how to leverage data from the perspective of the entire railway group. This area remains largely untapped, and I believe it holds significant potential.
Mr. Hiroshi Yamada, Executive Officer, Deputy Head of Data-Informed Business Division, and Design & Science Div. Leader, GIX Corporation
Sugimoto: That's right. Especially since the COVID-19 pandemic began in 2020, the decline in passenger movement has dealt a major blow to the railway group's B2C businesses. Therefore, it is now urgent to strengthen data acquisition and utilization, advancing both an "offensive DI strategy to increase sales" and a "defensive DI strategy to improve operations."
Yamada: With people moving less and remote work expanding during the pandemic, the role and significance of railways have become less singular, haven't they? Going forward, to prepare for the development of various online services and population decline, creating "reasons to move" and, in tandem, implementing measures concerning "means of moving" – that is, transportation services – will enhance the value of the railway business. But relying solely on past intuition and experience to consider this is difficult. By combining and utilizing not only "data held by the transportation providers" like railways, but also "data related to the purposes of travel" from sectors like distribution and leisure, we can grasp societal trends from the data and consider countermeasures. This approach should enable more effective strategies.
Sugimoto: That's right. Moreover, amid an aging population and declining birthrate, railway companies inherently faced a major management challenge: transforming their cost structures to cope with medium-to-long-term demand decline. In depopulated areas where maintaining railway infrastructure is said to be difficult, solutions like shifting to "demand-responsive transportation" are advancing. This includes next-generation bus systems like BRT (Bus Rapid Transit) and reservation-based shared buses, with railway companies participating in these initiatives. This is public transportation that operates according to passenger demand. Furthermore, the COVID-19 pandemic has accelerated the spread of this demand-responsive concept even in major cities. Essentially, it's an approach that adjusts operating costs and fares based on passenger demand, responding to the decline in public transport users. For example, initiatives are being explored to implement variable pricing for passes and fares based on time of day and day of the week.
Yamada: To implement variable pricing based on time and day, data-driven demand forecasting is essential. Going forward, we also need to consider how to create new travel purposes by identifying underutilized trains or routes through transportation data and leveraging them as "underutilized assets." By linking and analyzing transportation data with distribution data using IDs, we can gain various insights and implement measures that combine transportation methods with travel purposes.
Pursuing CX and UX that truly resonate with consumers by centrally managing 24/7, year-round B2C data across the entire region
Sugimoto: The pandemic severely impacted not only railway operations but also the performance of affiliated department stores and specialty shops. However, for retailers, this crisis presented an opportunity to accelerate digital transformation and drive management innovation through data utilization.
For example, major U.S. retail chains transformed during the pandemic, evolving from "EDLP (Everyday Low Price)" to becoming leaders in "CX (Customer Experience)." They increased touchpoints by offering apps with concierge-like functions, providing more personalized services. For retailers, leveraging data gained from physical touchpoints to deliver customer-centric services and improve operations is paramount.
Masataka Sugimoto, Senior Partner, Managing Executive Officer, Dentsu Consulting Inc.
Yamada: That's right. For physical stores to compete with online shops, there are increasingly more cases where they need to offer that extra something—the benefits or motivation that make users want to go out of their way to shop in person. In that sense, the current trend in the online world, where optimization through recommendations has become excessive, leading to users only encountering things they're already interested in and making it harder to discover new things, is actually an opportunity for physical stores, isn't it? I believe the biggest challenge for retailers is how to effectively utilize data to provide the unique discoveries and enjoyment of shopping that only physical stores can offer—experiences unavailable online.
Sugimoto: I agree. Not just in railways, but traditional retail has often been supplier-centric, placing burdens on consumers. Going forward, reforming operations from a consumer-centric, data-driven perspective will enable us to deliver unprecedented shopping experiences.
For the entire railway group, it's crucial to focus on how we can provide services and products that truly align with consumers' needs. To achieve this, we must establish customer-centric branding and consistent CX design as our foundation. We then track customer responses through data to predict their status and needs. Based on this, we improve operational processes and services by continuously running the PDCA cycle. By advancing such initiatives, we can expand the world of possibilities to deliver greater convenience and more memorable experiences to our customers.
Yamada: I believe the organizational culture and personnel skills needed to realize this are precisely what are required now. Given the significant paradigm shift from the past, this can also be seen as an opportunity for bold organizational reform.
Sugimoto: Technological innovation has now enabled a CRM foundation that allows the railway group to holistically manage its various businesses—transportation, logistics, real estate, travel, and more. Technologically, it's possible to offer things like "10x points for passengers riding the train" or "free return fare for shoppers on specific days." Point programs are already being implemented in various places.
Therefore, adding electronic money, points, and credit functions to IC tickets will significantly expand the breadth and quality of data. Furthermore, we could leverage mobility and consumption data even outside the group. The key question is how to utilize this for the benefit of customers and the community. Embracing this holistic design philosophy and driving innovation from the perspective of everyday life is crucial for railway companies in the Well-being era.
Yamada: In that regard, we believe GIX can be of great assistance. Ultimately, I think the field for railway companies will expand significantly by viewing the entire 24/7, 365-day experience as UX – encompassing not just the journey itself, but also destinations for work, shopping, travel, and even the home environment before and after outings. Combining and collaborating on data effectively from this perspective will be essential.
I believe the greatest strength of railway companies lies in their ability to develop initiatives that involve not only the railway as a means of transportation, but also the facilities and local businesses that serve as destinations. It would be wonderful if we could work together with Dentsu Consulting Inc. to provide support that leverages this unique industry value, extending beyond the railway sector itself.
In Part 1, we discussed various current agendas within the railway company group and how integrating group-wide data creates opportunities for new business creation closely aligned with local residents' lives. Part 2 delves deeper into the potential of DI strategies for urban development and regional revitalization led by railway companies.
Completed the Doctoral Program (Postgraduate Course) at Nagoya University Graduate School of Science. During the doctoral program, concurrently served as a JSPS Research Fellow. After gaining experience as a researcher in organic chemistry at a business corporation, joined GIX Corporation in 2015. In his current role, he drives clients' data-informed decision-making through DI consulting services. These services integrate two key elements: "Design"—the process of designing effective data utilization methods through trial and error—and "Science"—the analysis of data, including building machine learning models, to uncover the mechanisms behind phenomena.
Masataka Sugimoto
Dentsu Inc. Consulting Inc.
An intrapreneur, new business consultant, and entrepreneurship educator. Worked for a major railway company for 10 years, creating multiple new businesses. Spent 10 years at Deloitte/PwC, serving as head of customer strategy, new business, regional revitalization teams, and regional office launches. Joined in 2019. Graduated from Keio University's Faculty of Policy Management and Kyushu University's Graduate School of Business. Visiting Professor at Kyushu University and Lecturer at Asia University Graduate School of Business. Holds a Master of Business Administration (MBA).
