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Aware about meaning of the word "DX"? I've been hearing this a lot lately, but when it comes to explaining it, many people may not be able to explain it.
DX, which refers to changes in society and lifestyles due to digitalization, has suddenly accelerated as new ways of working, such as remote working, have become widespread due to the spread of the new coronavirus. Nowadays, it has become one of the important points in management.
Therefore, this time, we will explain the current status of DX, starting from the basics, as well as key points for success and success stories about DX, which you may know but do not know. Please watch till the end.
In my exploration of the digital landscape, I've often pondered, 'What is digital transformation?' This term, first proposed in 2004 by Erik Stoltermann, a professor at Umeå University in Sweden, captures the profound impact of IT on our lives. It's not just about technology; it's about how digital transformation strategy reshapes organizations, societies, and individual lives.
Digital transformation is more than a buzzword; it's a fundamental shift in how companies, governments, and people operate. Imagine a world where digital business transformation touches every aspect of our lives, even sectors like healthcare. This is what digital transformation in healthcare aims to achieve - revolutionizing patient care through technology.
In Japan, the Ministry of Economy, Trade, and Industry promotes this societal shift, defining DX as a method for companies to rapidly adapt to business environment changes. It's about harnessing data and digital technology, transforming products, services, and business models to meet customer and societal needs. This transformative process is integral in establishing a competitive edge.
Think about the manual tasks in various sectors, now being digitized. This is what digital transformation examples are all about - making life more convenient and efficient. Moving away from legacy systems allows businesses to set up more effective frameworks.
As someone deeply involved in system and app development, and digital transformation, I've seen firsthand the importance of understanding the nuances of this field. For instance, DX service generally refers to 'support' in digital transformation. This includes technical support, like system construction and IoT, and business transformation support, encompassing digital strategy formulation and DX human resource development.
When discussing 'What is a digital transformation strategy?' it's crucial to recognize the role of DX companies. These are firms that specialize in DX promotion, offering the aforementioned supports as their strength. However, a challenge arises when companies lack in-house DX expertise. In such scenarios, external support becomes invaluable.
Isn't "digitization" and "ITization" words similar to "DX" that are often used interchangeably?
A simple image is that digitization involves converting surrounding analog information into data, and IT introduces technology to efficiently use the converted information to improve productivity. I will explain the specific details below.
・Digitalization
It is the process of converting the analog information around us into digital information using numbers, integers, and other information that computers can understand. For example, you can listen to your old cassette tapes on your computer, or display your old photos so you can view them on your device.
・ITization
Information technology, such as computer technology, can be used and introduced into organizations and processes to improve operational efficiency and productivity. This includes the use of technology such as computer systems, networks, and software.
IT and digitalization are often used in combination. For example, converting data stored in paper media into electronic data such as PDF is an example of digitization. Transmitting this digitized information through computer systems and networks, and sharing it using cloud services constitutes IT.
This time's theme, DX, aims to transform companies, give them competitiveness, and improve customer satisfaction by creating new value using IT technology . Therefore, IT and digitalization can be considered as one means of achieving DX .
DX is considered important because it can respond to the demand and supply that accompanies modern business and society that is rapidly changing, even to the extent that it is impossible for humans to do so . Here we will introduce some of the many benefits.
・Ability to quickly respond to changing social needs
In the market, we can incorporate cutting-edge marketing technology, allowing us to respond flexibly to the market. We can continue to provide value that fits the times while transforming our business model.
・Improvement of accuracy and efficiency
It reduces errors and mistakes in detailed and simple tasks, allows correct processing, and improves accuracy. This makes it possible to reduce labor costs, shorten working hours, and concentrate on main tasks. By working many times faster than analog technology, it is possible to complete the work of multiple people, improve business processes, and increase a company's competitiveness.
・Strategy based on data
By collecting data, computers can analyze various information and provide services that customers will not get tired of, such as providing content that may be of interest to customers and displaying real-time numerical data.
・Creating new business models
Various digitalization services have appeared during the coronavirus outbreak, such as online payment systems and office work services. In this way, digitalization can give birth to new business models.
・Improving customer experience
Digitalization allows you to use data and algorithms to display recommended items and articles tailored to each customer. By providing services that are tailored to each individual customer, customers will be able to enjoy a service experience that lasts for a long time, and the customer experience can be expected to improve.
・Achieving sustainability
Currently, many companies in Japan are facing high costs in maintaining old systems. Some of them emit a lot of CO2 or use a large amount of energy. By introducing systems that match the trends of the times, it is possible to reduce energy consumption and achieve sustainability.
There is something called the Digital Governance Code (formerly DX Promotion Guidelines) announced by the Ministry of Economy, Trade and Industry in 2018. It describes how organizations can establish a system for appropriate decision-making and management in a digital environment, and is used as a reference by many companies. The following is a general way to proceed with DX.
First, clarify what you want to achieve with DX and the issues you are facing, and then research how your competitors and other companies have succeeded in DX. At this point, we also understand market needs and our own resources. The key to success is for top management to lead with strong will and direction, and to reform the company's mindset and organization. By developing your own human resources rather than relying on external resources, you can build a consistent internal system for promoting DX in the future.
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We consider business and IT systems as one, consider how transformation through digital technology will affect your company, and formulate a medium-term management plan. We design a business model, understand the impact of DX in terms of risks, deepen our understanding, and determine the overall direction. By setting a goal, you will not become swayed or lose sight of your purpose, and you will be able to maintain a common sense as a team.
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At this point, create a detailed roadmap for your digital strategy, including leveraging data as one of your key business assets. Decide which departments will accomplish what by when, how much the budget will be spent, etc. By involving local personnel and planning together, you can make it even more reliable.
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We will establish a system to promote DX. Typical configurations are the "IT department expansion type" that strengthens the existing IT department, the "business division expansion type" that places a DX promotion department within each department, and the "specialized organization establishment type" that establishes a dedicated DX promotion organization. "And so on. In addition, we will deepen our understanding of the culture and IT literacy that can respond to the rapid changes in the environment unique to DX, and create a system that allows smooth and continuous operations in each department.
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Once the environment is set up, we can move on to execution. Sometimes things don't go as planned, so instead of making a huge effort all at once, try implementing them little by little, collecting data, and making improvements. At this point, training and education for employees is often required, and coordination with other departments often needs to be done carefully, so we also focus on human resources management.
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In order to improve business processes, we will summarize the merits and demerits of the DX that we have implemented so far and come up with future improvement plans.
It is said that Japan is behind in DX compared to other countries. Why Japan's DX is lagging will become clear when you read the Ministry of Economy, Trade and Industry's ''DX Report - Overcoming the IT system ''2025 cliff'' and full-scale development of DX''.The reasons for this can be broadly divided into "lack of human resources", "existence of legacy systems", and "Japan's unique culture".
For example, the ``2025 cliff'' problem is a problem in which it is said that the maintenance costs of continuing to use existing legacy systems will increase to 12 trillion yen by 2025, three times the current amount. However, the cost and effort required to introduce a new system even when updating an old system is one of the reasons why DX promotion is delayed. Additionally, Japan's corporate culture has a strong sense of stability and protection, making it difficult to proactively incorporate new things.
Recognizing that this cannot continue, efforts are being made to promote DX in Japan, mainly among large companies, and the government is also focusing on developing IT human resources in order to solve the problem of lack of IT human resources, but compared to other countries, it is still far from widespread. The current situation is that it is slow.
On the other hand, DX is actively progressing in the United States and China. The reasons for this are centered around a culture that is flexible to changes in the business environment and government initiatives, as well as customer data that has been collected for decades, behavioral data analysis, the use of big data, research into AI, and This is said to be due to the investment in development costs.
I mentioned earlier that Japan is behind in DX, but of course there are companies that have taken the lead in DX and succeeded in reforming it. Here, we will introduce two successful cases of DX from overseas and Japan.
・Best Buy (US)
Best Buy is an American electronics retailer. At one time, it was thought that the company would eventually go bankrupt, but it recovered after seeing consumers' behavior of purchasing from online sites for cheaper prices after seeing it in stores. By making full use of physical stores and web technology, we will be able to pick up items purchased online at a physical store, and if the online sales price is higher than the price seen in the store, we will refund the difference, and through digital transformation. We have achieved a V-shaped recovery. We have introduced a system that allows customers to receive an email with explanations about the products they purchase at the store, and we have started analyzing data for each individual customer.
・Etsy (US)
This is a handmade goods sales site founded in 2005. It originally started as an online store for arts and crafts. And we created a system that allows artisans to sell their products on an online platform. It went public in 2015 with a focus on revenue for sellers, major changes to the UI, and personalized advertising.
・Kobata Keiki Seisakusho Co., Ltd.
Founded in 1909, we are a long-established manufacturer specializing in pressure gauges, and our strength was manufacturing instruments for ships. From our traditional business of delivering instruments, we have equipped instruments with wireless devices to enable data transmission of measurement results and remote monitoring, thereby reducing labor costs such as the lack of human resources at delivery destinations and efficient inspection work. It has come true. In 2018, we were selected by the Ministry of Economy, Trade and Industry as one of the ``300 small and medium-sized businesses that thrive'', and in recent years we have entered the medical device manufacturing industry with the development of digital pressure gauges and respiratory muscle strength measurement devices.
・Nanbu Bijin Co., Ltd.
Training in sake production takes many years, and the work and judgment required by experienced professionals has made it difficult to secure human resources. Therefore, we introduced AI verification into the "soaking" process, which is actually performed using the "eyes" of craftsmen, in which the rice used as the raw material is washed and soaked in water. As a result, it is now possible for AI to measure the optimal water absorption time instead of observing the optimal water absorption time, which was previously done by the human eye, and automatically notify the user. It is also possible to learn and accumulate various data such as color, temperature, and rice condition through deep learning, so the range of things it can do is likely to expand further in the future. AI plays an auxiliary role in sake making, efficiently reducing labor and creating a sustainable environment.
Team cooperation is essential for the success of DX (digital transformation). The essential elements for DX success are as follows.
・Leadership from top management
In order to realize DX, it is necessary to carry out current management and organizational reforms. Management also plays a role in deciding what kind of system to introduce, what kind of DX will solve the current issues, and decisions regarding investment in DX, so having a management team that is strong in DX is a key factor in the success of DX. It also connects to
・Development of DX human resources
By developing human resources who are familiar with digital technology and can lead and execute these initiatives, you will be able to maintain consistency in your internal systems and promote DX that suits your company. Providing training to suitable in-house personnel through classroom lectures and OJT will lead to success.
・Sharing the DX vision
Increase motivation for DX by sharing the benefits and vision of DX not only with management but with the entire internal team. In addition, the participation and advice of personnel with specialized knowledge in each department is the key to success, so let's thoroughly discuss what kind of problem we want to solve, what the problem is, and what kind of technology can be realized.
・Execute while testing hypotheses little by little
Instead of making big reforms all at once, try implementing them step by step. DX always incurs costs and labor when introducing it. Additionally, as business processes will undergo major changes, it is necessary to start from where possible and move forward carefully while repeatedly testing hypotheses so as not to lose sight of the vision for internal DX promotion.
・Escape from legacy system
Replacing old analog systems with the latest digital systems can greatly improve operational efficiency and system maintenance costs. Legacy systems cannot handle complex data or AI, and may fall behind the competition and become viable as a business, so it is important to actively look into new systems.
・Discover latent needs
DX promotion can diversify customer needs and provide new value. Therefore, by reviewing existing business models, developing new strategies, and discovering new latent needs, you can achieve success through DX promotion.
In today's rapidly changing business and society, DX has many benefits, such as improving business efficiency and generating new ideas to generate business profits, reforming business flow, and improving convenience. It may be able to solve problems that have limitations.
When it comes to DX initiatives, it is important not only for management to understand, but for all employees to firmly understand the meaning of the word "DX" and to develop strategies and initiatives that are DX-aware throughout the company.
At JIITAK, we support the DX of companies that are transforming their business models and taking on the challenge of creating new value with specialized teams in each digital field of strategy, design, and engineering. If you are interested, please contact JIITAK!
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