Corporate e-learning in Japan: a new multibillion-yen business.

IT-enabled corporate training made a splashy entrance into the Japanese market in the late 1990s, heralding a new era of vast reductions in corporate training costs and increased accessibility for geographically diverse employee groups. But since then, the early excitement about the potential for this "e-learning" has largely passed. Some large company end-users have been dismayed to find that they overpaid for unwieldy custom systems that have never been effectively leveraged and that currently lie largely unused on their servers. But recently, a new group of providers has refined their offerings, emphasizing value-added learning development services and more flexible, ASP-based content offerings. When combined with improvements in broadband infrastructure, these services may well spark those revolutionary changes in the way that learning is integrated at the corporate level to significantly improve the diffusion of corporate knowledge, increase job productivity, and secure some of those cost savings in the process.

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Broadly defined as the use of any electronic or digital media in educational or job-training programs, e-learning in its simplest form includes the use of packaged CD-ROM's and DVD's for language and even hobby study. However, in its most recent incarnations e-learning vendors have developed sophisticated WBT (web-based training) contents, LMS (learning management systems) architecture, and even highly interactive "blended" solutions that mix the best of remote learning with more traditional tutoring or even team simulation exercises.

This evolution in product and service offerings has driven rapid industry growth over the past few years. Yano Research Institute estimates that the corporate Japan e-learning market reached 1,350 billion yen in 2004, representing a 41.7 percent rise from 2003. While this represented a slowdown over the 100 percent plus annual growth the industry had enjoyed in prior years, it still indicates an industry with great future potential. For instance, a study by Goo Research indicates that as of 2004, only 30 percent of Japanese were aware of or had been exposed to e-learning. And the government-funded "e-Learning Business White Paper 2004-2005" indicates that while 61.2 percent of companies with over 5,000 employees surveyed had already implemented some type of e-learning program, that number dropped to 31.8 percent for smaller companies. Combined, this shows that a vast majority of industry potential remains untapped.

So what has held e-learning back? Some basic frameworks are now in place. In order to make various e-learning content more broadly accessible (and thereby drive down the price for users), both METI and the e-Learning Consortium (eLC), a Japan industry group with over 100 corporate members, have been instrumental in bringing international SCORM content specifications to Japan. The eLC began a SCORM certification service this past autumn, and already over twenty of the major LMS systems have received certification through this service. This guarantees that content will run problem-free on these systems, making it easier for end-users to pick and choose among the best content providers, no matter the LMS installed at their corporations. METI and the eLC also cooperate to sponsor the largest annual industry event in Japan, e-Learning World, in order to facilitate the exchange of best practices and promote the rapid adoption of new e-Learning products and services (the next e-Learning World event will be held July 20-22 at Tokyo's Big Sight).

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But to understand better the forces affecting where a new industry like e-learning has been, and where it might be going in Japan, a good place to start is usually the responsible government ministry in Kasumigaseki.

Shinji Kusunoki is an assistant planning chief for the Information Service Industry Division of the Commerce & Industry Policy Bureau at the Ministry of Economy, Trade, and Industry (METI), the government agency that funds the annual e-Learning White Paper cited earlier. When asked why Japan's e-learning market may seem small relative to the country's population and position as a worldwide technology leader, he replies, "every country has its own particular set of conditions that affect the diffusion of this technology. There has been good adoption in the yobiko [prep schools] and juku [cram schools], and in corporate Japan e-learning has been established as a strong supplementary training tool. I don't think it will grow at an explosive rate, as it has in Korea--Japan does not have that concentrated type of effort toward this single goal. But I am confident that it will be adapted in a special Japanese way." Although recognizing that the explosive early growth of the e-learning industry in Japan has slowed, Kusunoki sees great potential in e-learning for Japanese companies to build on existing concepts and adapt these through their traditional process of suriawase (or integration) for their own use.

Hidekuni Komatsu, Director of Standards Research at NTT Learning Systems as well as Chairman of the e-Learning Consortium, identifies a more specific issue affecting the growth of the e-learning market in Japan; specifically, the country's lack of trained multi-media instructional designers and other specialists. "Japan's personnel system emphasizes job rotation, leading to development of generalists. When such managers take over an HR training function, it is hard for them to see the real strategic advantages that e-learning can offer. I sometimes meet professionals from corporate America that hold joint titles such as Chief Information Officer and Chief Technology Officer--these are the type of specialists that can really help to transform a company because of their ability to see e-learning as an information technology system. But unfortunately, we have not trained many of these professionals here in Japan."

Others disagree with this assessment. Toru Kishida, President of Net-Learning, Inc., believes that user needs are simply not being met by current players. "There are perhaps 500 or 600 companies providing e-learning systems and services here in Japan. But only a handful of these are ventures, like us. Most are large companies that got into e-learning just to sell their existing systems or other products." This leads to an overemphasis on hardware and complex IT systems, which client companies purchase but then have a hard time in using properly. "As one of my customers put it," continues Kishida, "I go out to buy books and everybody is trying to sell me bookshelves instead."

Kishida, who worked in new business development at SECOM before founding Net-Learning in 1998, takes a different approach, concentrating exclusively on his mission to create Japan's leading purveyor of "total e-learning solutions." Net-Learning offers over 550 separate "catalog" courses, ranging from basic skills training in Java and TOEIC preparation to privacy law compliance, sexual harassment awareness, and corporate social responsibility. But their strength is in customizing an out-sourced package of unique services for each client--including custom program development, LMS platform operations, usage administration and completion reporting. And it seems to be working: since their establishment in 1998, Net-Learning claims to have e-trained more than 667,000 persons--the most in Japan--while achieving an average completion rate of 90 percent in comparison to an industry average of less than 30 percent.

The evolution of mobile phone technology is another area of interest to content and service vendors such as Net-Learning. As content availability becomes "ubiquitous," more and more employees, hobbyists, and part-time students will be catching up on their e-learning during their daily commutes on the train. Net-Learning recently launched one such program for retail sales staff at Kanebo's cosmetics division. Designed as a follow-up to classroom teaching, content made available on the mobile phone platform includes text summaries that have been simplified considerably to facilitate easy navigation from a mobile phone keyboard, and quizzes that are limited to short multiple-choice or yes/no questions. The project will begin with 2,000 employees, with Net-Learning earning 200-300 yen in content licensing fees each time a user initiates a new session. Net-Learning expects sales of 50 million yen for this service in their first year of operation.

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The trends taking place in e-learning call for ever more acronyms. One is EPSS, also called Just-In-Time Training. EPSS aims to put information where employees need it, when they need it. For instance, with increasing deregulation and competition in the financial industry, bank clerks are handling more and more sophisticated products. At its simplest level, EPSS is the genre of job-aid reference training that would put product specs, FAQ's and other handy information at the bank clerk's fingertips, on demand. But strategically, this means that e-learning must evolve into a system of knowledge management and sharing that focuses on making experience and other intangible skills available throughout the corporation. In other words, the industry is being challenged to move from an "education-based" to an "experience-based" training model.

At the vanguard of this move is Yoshiki Sakurai. As the head of the e-Learning Promotion Center at NEC University, Sakurai is responsible for training the 60,000 plus employees at NEC's over 100 group companies. The facility also offers open-enrollment programs to firms and individuals. NEC was an early adopter of e-learning technologies, implementing company-wide educational e-programs in human resource policy as early as 2000. Sakurai feels that e-learning has reached a strong level of awareness within the group, but he still feels the challenge of getting individual units to take advantage of NEC University's various offerings. He sees two factors as responsible for the holdup: first, the need to lower platform operating costs, especially hardware maintenance that is allocated on a per-user basis; and second, the need for more tools that would allow both individual operating groups to easily develop their own instructional content, and would allow more creative structuring of e-learning courses by qualified instructional design professionals.

With many basic skill-training offerings already in place--including product knowledge for salespeople and maintenance manuals for repair staff--NEC University and similar corporate learning centers are reaching up the value chain for more sophisticated e-learning training contents. They now offer experiential strategic marketing simulation training courses in a "blended" format--traditional lecture seminars combined with online computer simulations originally developed at INSEAD in France. These courses allow groups of participants to run virtual companies in a hypothetical consumer products market. Teams compete "live" against one another by analyzing the market's changing dynamics and responding decisively by allocating their own marketing resources. The courses also foster communication skills and cooperation among team members--and e-learning allows those team members to be thousands of kilometers away from one another, sharing the same computer application and communicating seamlessly over Internet video and audio lines. Such "action-oriented learning" typically provides participants with better retention than typical static or text-based contents, while expanding geographic reach and building cross-cultural communication skills to boot. "We want to create educational programs that force participants to think and react on their own, not just memorize content by rote," says Sakurai. To that purpose, NEC University is also developing sophisticated mini-MBA business programs and even a Management of Technology course in conjunction with Waseda University. Finally, Sakurai also sees broadband technology accelerating in the next few years to better accommodate more "natural learning," in which shorter modules of self-learning, accentuated and reinforced by streaming video and real-time tutoring, could better replicate the traditional classroom environment.

As demographic forces continue to heighten competition for quality workers in the corporate sector, e-learning can be expected to play an increasing role in helping to diffuse population concentrations, reduce costs, and increase the effectiveness of on-the-job training programs.

Jeff Schnack is president of 3Rock Consulting. www.3rockconsulting.com