Summary of the Report by Study Group for Higher Quality of Life through Utilization of IoT and Other Digital Tools Introduced into Lifestyle Products

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1 Summary of the Report by Study Group for Higher Quality of Life through Utilization of IoT and Other Digital Tools Introduced into Lifestyle Products 1. Problem awareness As consumers sense of value and lifestyles change and the fourth industrial revolution advances, lifestyle products 1 possess great potential to enhance our quality of life and contribute to the realization of the Connected Industries and Society 5.0 policies. To this end, industries should take advantage of IoT and other digital tools by introducing them into such products, collect and analyze data through the products, and provide new added value, such as solutions to challenges and customer experience, to consumers. Since a source of competitiveness for companies lies in their data utilization and provision of solutions, companies are required to take a global viewpoint and take new actions quickly rather than just extend conventional efforts. From the standpoints above, the study group focused on utilization of digital tools introduced into lifestyle products from the perspectives of B-to-C or B-to-B-to-C, and ascertained the current situations thereof, in particular, fashion tech 2 and smart textile 3. Based on this, it held discussions concerning future challenges, efforts to overcome them and future potential and directions. 4 These digital tools possess infinite potential that may cause fundamental changes in the existing concept of clothing that may drive industries to provide a variety of new services and solutions that would not normally be achieved under existing means. 2. Fashion tech (1) Current situation of fashion tech As activities in the B to C sector, this report takes up (i) mass customization, 5 (ii) 1 Lifestyle products as broadly defined refer to products used by the people in their lives in general. However, lifestyle products as defined by the Study Group cover products under the jurisdiction of the Lifestyle Industries Division, including textiles, apparel and accessories, and daily miscellaneous goods. 2 The term fashion tech is a made-up phrase combining fashion and technology. This term represents overall efforts for proactive introduction of new digital technologies into the field of fashion so as to enhance productivity and make the added value of products and services higher. 3 The term smart textile" refers to clothing made of conductive fibers and other currentcarrying materials that permit wearers to acquire biological data, e.g., heart rate, cardiac electro gram, electromyogram and breathing rate, or to measure motion data, i.e., data on physical movement, making use of the expansion and contraction of fibers and other materials. 4 Concerning smart homes, a demonstration project was implemented in fiscal 2017 in light of the review of challenges conducted at a review meeting held in fiscal 2016 by the Lifestyle Industries Division. 5 Mass customization refers to the practice of producing and selling made-to-order products with the same level of efficiency as in the case of the conventional mass production by using IoT and other technologies to link individual orders placed in accordance with consumers fashion tastes and body sizes with the production system.

2 proposal-based service, 6 and (iii) information collection and sensing. 7 (2) Challenges for fashion tech When promoting the utilization of IoT, it is important not only to look from the viewpoint of improving business process efficiency or maximizing production and distribution processes but also to consider what solutions can be provided to customers and how that can be developed into a business model. To that end, it is important to conduct the following activities: (i) providing solutions from the standpoint of consumers, rather than the standpoint of business operators; (ii) providing new added value by actively promoting cross-sectoral cooperation; (iii) developing a new business model through the utilization of consumer data; and (iv) making efforts to secure and train workers in terms of both fashion and digital skills. It is important to secure a high level of design and fashion quality and make efforts to achieve results visible for consumers, rather than focusing only on utilizing digital technology. (3) Future vision of fashion tech Proposal-based services and demand forecasting using artificial intelligence (AI) and other technologies, coupled with mass customization, could fundamentally change existing business models in the apparel and other industries. The traditional apparel industry, which mass-produces standardized products based on demand projection in principle, has always faced problems such as excess supply and dead stock because of incorrect demand projection and other factors, so selling at a 60% sales rate is regarded as a great success in the textiles and apparel industry. Selling dead stock at a discount may undermine consumers confidence in prices. Disposing of dead stock increases environmental impacts. Some people doubt the sustainability of a business model predicated on discount sales and disposal of dead stock. In contrast, mass customization, which utilizes IoT and other technologies, not only enables the provision of solutions in the form of products carefully tailored to individual persons body sizes and fashion preferences ultimately, a product may be made for one particular customer alone at prices similar to those of massproduced, ready-made products but also contributes to rationalizing prices (improving cost performance) and securing reliability and sustainability by minimizing discount sales and product disposal associated with dead stock through made-to-order manufacturing. Demand forecasting, proposal-based services and interactive communications between producers and users using AI and other technologies may enable the provision of solutions with higher added value. It is necessary to examine the effects of creating a sustainable supply chain that improves productivity, rationalizes prices and reduces environmental impact through mass customization and to promote full-fledged implementation into 6 A proposal-based service refers to recommending products and coordination styles suited to consumers own needs and preferences after using AI and other technologies to analyze data related to consumers everyday lives and activities. 7 Sensing refers to providing new services based on data on consumers use of products and their movements collected through a sensor installed in the product.

3 society. 3. Smart textiles (1) Current situation of smart textiles Textiles, fiber and materials makers and start-up companies are developing applications such as monitoring of elderly people, construction workers and drivers, management of athletes health conditions and analysis of their motions, and motion control for games. In addition, development is underway for fibers and textiles used in solar power generation for wearable devices. Japan s advantage in smart textiles rests in product development that seeks to provide clothing with a smooth and comfortable texture while maintaining the performance of electrodes, which represent a key element of sensing technology. However, while foreign companies are developing smart textiles in such fields as sports and healthcare with concrete applications, and quick commercialization and other concrete outcomes in mind, Japanese companies have difficulty finding concrete applications or customers and fail to achieve commercialization in some cases despite developing high-function materials and systems because of failure to incorporate customer needs. As a result, practical use in Japan has generally been lagging. Compared with wristband-type and eyeglass-type wearable devices, smart textiles are easily made light and flexible. Smart textiles are also elastic and breathable, therefore, they put less stress on wearers when worn during everyday activities, so they have an advantage over those wearable devices in that they can be used to collect highly precise data over long periods of time. (2) Challenges for smart textiles Currently, most smart textile products are still in the development or demonstration stage, so it is necessary to promote practical use and diffusion of products and services. Therefore, in addition to (i) developing element technologies, it is important to (ii) create solutions and develop business models, (iii) promote cross-sectoral cooperation and open innovation, (iv) identify fields of cooperation and competition, (v) promote international standardization, and (vi) promote Japan- France joint projects. In particular, it is necessary to make clear the vision of an outcome in preparation for commercialization, develop a suitable business model and further promote such activities as cross-sectoral cooperation between textile, fiber and materials makers and a shift towards services. Holding of workshops and forums (Smart Textile Promotion Commission (tentative name)) by relevant business operators is effective in identifying fields of cooperation. Smart textiles are positioned as a strategic sector under the Japan-France cooperation on textiles and fibers, so industries in both countries are expected to propose innovative development themes under bilateral joint development projects. (3) Future vision of smart textiles Smart textiles will open a new chapter in the history of clothing in that they

4 incorporate a sensor which is an entirely new function to clothing. Although it has traditionally been common sense that sensors are solid devices, flexible or elastic sensors are starting to be diffused. Therefore, it is a natural course of events that clothing is transformed into a sensor, following suit of such items as wristbands, eyeglasses and belts. If smart textiles make it possible to constantly conduct precise measurement of physiological data and motion data in everyday life, the following applications may be realized in the future, for example, in addition to such services as monitoring of people and health condition management that are now under development: It will become possible for people to make choices and take actions for the future by using smart textiles to better understand their own physical conditions. For example, people will be able to perceive the deterioration in their condition through managing their physical conditions by smart textiles, and smart textiles may be used to improve the quality of sleep by accumulating sleeping condition data. The health conditions of elderly people may be remote-managed by family members and doctors. Development of new medical services based on longterm monitoring, such as disease prevention and detection of potential diseases, can also be expected. Smart textiles can be used to enhance training for professional sports players. In addition, they may enable ordinary people to receive training that reproduces motions of professional athletes through quantitative analysis of their ideal forms. It will become possible to manage the condition of health in manual labor workplaces, as well as contribute to the improvement of the environment of office workplaces through measurement of stress conditions and fatigue levels. Smart textiles may be used as a game controller to reflect the wearer s motions on the game display in real time or as a fashion item or a communication device that emits light or sound in response to physical touch. Moreover, smart textiles may be used to give games an increased sense of reality by applying electrical stimulus to the body, which feels like physical touch with an object, through weak electric currents flowing from electrodes. They may also be used as an actuator of artificial muscles in the rehabilitation process. Accumulation and usage of constantly and precisely measured big data concerning physiological conditions is expected to contribute to the progress of medicine and the development of various solutions. For example, disease symptoms, signs and mechanisms that have until now gone unnoticed may be discovered. The future of smart textiles has not yet attracted the attention of business operators and consumers. Smart textiles have infinite potential to provide new value that could further enrich or entirely change our lives. 4. Challenges common to use of IoT and other technologies in lifestyle products (1) Improvement of the environment for utilization of data METI formulated the Contract Guidelines on Data Utilization Rights, which summarizes the principles for defining the rights concerning data created in

5 relation to contract-based transactions. The guidelines are expected to be used to promote data utilization. In the EU, the General Data Protection Regulation (GDPR) is scheduled to be put into force in May The GDPR provides for the protection of rights related to personal data owned by companies and for the provision of individuals rights to data transfer between companies (data portability). Under these circumstances, it is possible that a business model based on the approach of merely accumulating personal data will become impractical. Therefore, it is essential for companies to develop a business model taking into consideration secondary utilization of data. For example, they should consider how to utilize acquired data and how to differentiate themselves from other companies. A bill on special measures to improve productivity and a bill to partially revise the Unfair Competition Prevention Act, etc. provide for measures to support datasharing business operators and measures to protect against illegal data acquisition. (2) Support for start-up companies If start-up companies expand business through cooperation with large enterprises on an equal footing and repeatedly implement the proof of concept process, industrial rejuvenation is expected to proceed through the development of new business operators. Therefore, it is important to develop an environment that supports such activity. The New Energy and Industrial Technology Development Organization (NEDO) and the Small and Medium Enterprise Agency, among other organizations, provide support to start-up companies activities such as demonstration of new technologies. Technology development and other activities using this support are expected to promote practical use and create new markets. Equity investments by large companies in start-up companies possessing new technologies are expected to increase business operators entering new markets, thereby invigorating the markets.

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