What is Digital Transformation (DX) in the first place?
What is Digital Transformation (DX) in the first place? Many companies are promoting digital transformation (DX) in order to respond to the digitalization of all environments surrounding companies such as markets and customers, as well as social, economic, and industrial structures. This time, I will reorganize what DX is like and what it does specifically.
What is DX?
It is said that Professor Eric Stolterman of Umeå University in Sweden first proposed the concept of DX. According to the definition given there in 2004, DX is described as “the penetration of IT will change people’s lives for the better in every way.” However, while this definition is very abstract and shows major movements in the world at large, it is difficult to understand what exactly it is to do.
There is a definition of “DX promotion guideline” announced by the Ministry of Economy, Trade, and Industry in December 2018 as a more accurate representation of the DX that companies should work on, rather than the general trends of the world. According to it, DX means, “Companies respond to drastic changes in the business environment, utilize data and digital technology, transform products, services, and business models based on the needs of customers and society, and also operate. To transform itself, the organization, the process, the corporate culture and culture, and establish a competitive advantage ”(Fig. 1).
According to this definition, it is “utilizing data and digital technology”, but it is positioned as a means only. In other words, the purpose is not simply to utilize digital technologies (Digital) such as AI (artificial intelligence) and IoT. By doing so, it will not only “transform products/services and business models” but also “the business itself, organization, processes, corporate culture/culture”.
In other words, the objects to be transformed are diverse, including organizations and corporate culture, and it can be said that it is a very broad concept that transforms the company itself. And while the goal is to “establish a competitive advantage,” once you have established an advantage, that is not the end. As all the environments surrounding companies, such as social, economic, and industrial structures, are becoming digital and changing, we must continue to make changes so that we can maintain our competitive advantage. What is Digital Transformation (DX) in the first place?
It may be a bit extreme, but in other words, it is no exaggeration to say that DX means “the entire company will be reborn in response to the digitalized society.”
What is concrete with DX?
DX initiatives can be broadly divided into two types. One is specific activities related to DX, and the other is to improve the environment for promoting DX and promote internal reforms for that purpose (Fig. 2).
These two activities are inseparable and must be carried out in step with each other. In other words, it means that while implementing the concrete promotion of DX, we will promote environmental improvement and internal reforms in parallel with it.
A common phenomenon in domestic companies is to neglect environmental improvements and internal reforms to promote specific DX activities. In such a way, in the process of promoting the actual DX, you will be hindered by an inadequate environment and will frequently stumble.
There are two types of specific promotion of DX: “sophistication of business and creation of new value for customers” and “creation of new business and transformation of business model”. The former mainly targets existing businesses, and utilizes digital technology and digitized data to significantly change the way business is done and to realize things that could not be realized before. On the other hand, the latter is to create businesses in fields that the company has not developed so far or to open up new markets. The two have different promotion approaches and goals.
We see situations where the discussions about DX do not fit together in many situations, probably because the difference between the two is not clear.
On the other hand, in order to improve the environment for promoting DX, there are “internal transformation” that develops and transforms awareness, systems, authority, processes, organizations, and human resources, and review, simplification, and reconstruction of existing IT environments and IT processes. It includes two things, “rebuilding the IT environment”. What is Digital Transformation (DX) in the first place?
The former means driving a wide range of internal transformations to accommodate the digital age. In order to deal with the “cliff of 2025” pointed out in the “DX Report” released by the Ministry of Economy, Trade, and Industry in September 2018, the latter is a quick renewal of the aging in-house system that is a hindrance to DX. It refers to reviewing the development and operation processes in order to realize systematization.
Working on DX is a long journey for businesses, as it is described as a “journey” rather than a trip or travel. In order to embark on a long journey, you must first determine your destination and, if not accurately, set a policy for your target itinerary and route. When working on DX, which is a long journey, it is necessary for all employees, not just managers and DX promoters, to understand the overall picture of DX and share their awareness of the direction they should take.
Differences between conventional IT utilization and DX
Until now, companies have used digital technology in many different ways, and have used it to convey, share, and make decisions on digitized information. In addition, it is a fact that we have realized things that could not be achieved manually or on a paper basis, such as sending and receiving information to customers and business partners via the Internet, and providing sales and customer support.
The major difference between DX and conventional computerization (so-called computerization) is whether it is limited to substitution/improvement/expansion for business or business, or it involves destruction/transformation.
In the past, informatization has promoted automation/labor-saving of work, counting/visualization of management, transmission/sharing/reuse of information, etc. for the purpose of “improving work efficiency” when looking at the company. It was. To that end, we have introduced and operated e-mail, groupware, financial accounting systems, point-of-sale systems, and ERP (enterprise resource planning).
In addition, with the aim of “improving business responsiveness” to external parties such as customers and business partners, efforts have been made to strengthen relationships with customers, expand sales channels, and improve quality and delivery times. To achieve this, we have built systems such as CRM (Customer Relationship Management), E-Commerce, and SCM (Supply Chain Management).
On the other hand, DX is also aiming for “business transformation” within the company and is trying to realize automation/elimination of business itself, change of decision-making method, reform of command/organization management, etc. Furthermore, as external initiatives, “business transformation” is expected, such as creating new customer value, changing business models, and entering new business fields.