What is Digital Transformation (DX)? Introducing definitions and examples

The keyword “DX: Digital Transformation (hereinafter referred to as DX)” has been actively featured in events and seminars and is attracting attention in various business scenes.

According to the Ministry of Internal Affairs and Communications’ White Paper on Information and Communications, 89.8% of Japan’s population uses the Internet, and the evolution of digital technology is bringing about major changes in business models, products, services, and even our lives.

DX is an essential way of thinking to understand these changes, and the fact that the Ministry of Economy, Trade and Industry established a “study group for digital transformation” by experts in 2018 indicates the high degree of attention it has received. Masu.

On the other hand, companies that are working on DX are still rare. Isn’t there a few people who are in the middle of the day?

Therefore, in this article, we will explain DX that you should know now while introducing the latest technology trends and comparison with digitization / digitalization.

DX

Table of Contents

What is the definition of digital transformation?

DX is a concept proposed by a Swedish university professor in 2004, and has been interpreted uniquely by many companies.

Here, we quote the definition of DX described at the beginning of “DX Promotion Indicators” and its guidance published by the Ministry of Economy, Trade and Industry in 2019.

“Companies respond to drastic changes in the business environment and utilize data and digital technology to transform their products, services, and business models based on the needs of customers and society, while at the same time transforming their operations, organizations, processes, and corporate culture and climate.” Transform and establish a competitive advantage”

, which means using technology to change corporate activities for the better .

Also, in a narrow sense, DX refers to “the final form that has reached the transformation of the business model”, but in a broad sense, it can also refer to “the overall process until reaching the final form”.

If various information is converted into data and the entire business division becomes ready to face customers, it will be possible to promote new business models centered on customer experience.

For example, advances in technology have made it possible to accurately ascertain individual customer information, such as offline behavior data, POS data, and website visit history.

In most cases, the accumulation and sharing of such customer information has been limited to a limited number of departments, such as departments involved in marketing and sales.

However, in DX, the ultimate goal is to make the above efforts and bring about positive changes in the value provided to customers.

Therefore, the entire company may work on DX.

If it is difficult to get a company-wide understanding of DX suddenly, some departments may partially work on DX.

Why should we work on DX now?

Why should we work on DX now?
There are probably more than a few companies who feel that the introduction of IT technology is a high hurdle, and that maintaining the status quo is no problem, so why should they work on DX?
So why should companies work on DX now?

This is for companies to survive so as not to be left behind by changes in the market .
The Ministry of Economy, Trade and Industry’s DX report calls it the “2025 Cliff,” and says that many companies will be unable to get out of their existing IT systems, and large economic losses will occur in 2025.

The cliff in 2025 is where we have to create a new business model with DX, and how to break away from the existing system that has become complicated and black box becomes a hindrance. I think it comes from not being able to do it.

If you can’t break away from your existing systems and take advantage of the explosive growth of data, you’ll be a loser in the digital race .

Compared to the rest of the world, Japan lags behind in DX initiatives, and may end up being a loser in global competition.

It can be said that all companies will be able to gain a competitive advantage in the coming era by reviewing what should be done from the management strategy, steadily incorporating the latest digital technology, and promoting DX.

What are the benefits of promoting DX for companies? The keywords are “customer experience” and “employee experience”

What are the benefits of promoting DX for companies? The keywords are "customer experience" and "employee experience"
In this chapter, of the definitions of DX introduced above, we will proceed with explanations based on the broad definition of “the overall process of reaching the final form”.

One of the benefits of promoting DX is the improvement of “customer experience” and “employee experience” .
In particular, regarding the improvement of the “employee experience”, the introduction of IT technology has made work more efficient, and by reducing the resources allocated to simple work, there is an advantage that resources can be allocated to more creative work. is born.
As a result, employees are freed from simple tasks and have more time to think for customers, resulting in the realization of a business model that is conscious of customer experience.

If the business model changes to one that is more conscious of the customer experience, it will differentiate itself from competitors who have not yet embarked on DX, and further improvement in sales can be expected.

Until then, customer information was managed by separate business divisions, but by introducing package products such as CRM, it is possible to integrate and organize it, and to quickly and appropriately approach customers. The impact will be greater for large companies that operate multiple services and have multiple customer lists.

In both employee and customer experiences, promoting DX has other benefits such as the following.

In the employee experience, the introduction of new digital technologies has the potential to improve tasks that have been dependent on individual skills and significantly reduce man-hours. By introducing a centralized management system, cooperation between departments will be strengthened, waste will be eliminated, and productivity will be increased.

It also has the advantage of making it easier to perform quantitative evaluations and making personnel evaluations more transparent.

In customer experience, by adding digital services to products, it is possible to provide unprecedented added value and greatly increase customer satisfaction.

Also, if you can manage customers with high accuracy and close to the customer’s point of view, it will be possible to realize customer success that meets the needs of each person.

The difference between “digitization” and “digitalization” that is easy to confuse

Words that are often compared with DX include “digitization” and “digitalization”.

The two words are very similar and seem to have the same meaning. But there is a big difference between the two.

  • We aim to improve the digitization user interface (UI) and use digital technology to improve operational efficiency, reduce costs, and increase added value. No change in business or service delivery processes.
    Automobile example: cost reduction by automating production lines, added value by implementing autonomous driving
  • Digitalization We
    aim to transform the user experience (UX), update the service itself with digital technology, and provide new value.
    Examples of automobiles that change business and service provision processes : Taxi dispatch apps, car sharing

AI, RPA, IoT, paperless, 5G, etc., even if we say “digitalization” in a nutshell, the technology that should be used will change depending on the purpose . In the first place, if digital shift is not progressing in your company before DX, why not consider digitization first?

First, we secure employee resources by streamlining and streamlining internal operations through the introduction of IT technology. Then, by allocating those resources to the creative work of transforming the entire business model, you can take the first step in DX.

Let’s think once after grasping the latest technology trends whether your company will advance digitization or advance from digitization.

Rough flow and points of DX promotion

If you want to promote DX, how you should promote it will vary depending on the company, but the DX report published by the Ministry of Economy, Trade and Industry summarizes the structure of the system guidelines that serve as indicators for promoting DX. .

In the composition proposal, “How to position DX in management strategy”, “How to consider systems and mechanisms for utilizing new digital technologies to realize DX”, and “How to realize such systems and mechanisms” There are three major phases :

In the first phase, at the management level, we will determine whether DX is positioned as a means to realize management strategies, what kind of value it will create, what business model it will transform, and whether it will be able to respond to speedy changes. We will consider it.

Next, whether the system for building IT systems and utilizing data is in place, whether the top management has a strong commitment, whether the mindset is sufficient, and whether the company can define its own requirements and collaborate with vendor companies. We will carry out specific considerations as to whether DX can be put into practice.

In the final phase, we will continue our DX efforts by sorting information assets, migrating to new digital technologies, and renovating legacy systems.

Detailed guidelines can be found on the following pages.

) You can classify it as an office.

Below, we will introduce the specific points of DX in the back office and front office.

DX in the back office

What is particularly important in back-office DX is the visualization and depersonalization of information. For example, it is very dangerous to store invoices and contracts on paper, and only one person in charge knows where and how to process them. If the person in charge is sick or leaves the job, the work is up in the air.

Also, if a human error occurs, the company cannot follow up. Therefore, we should give top priority to the conversion of paper to data and visualization of data, and then try to improve the efficiency of various operations such as accounting, personnel affairs, and general affairs.

DX in the front office

In front-office DX, integration of customer information is the top priority. When customer information and status are visualized in CRM, let’s consider introducing SFA, which is necessary for sales to approach customers, and MA, which automates marketing.

The point to be aware of here is depersonalization. Let’s get rid of the situation where only the person in charge knows the information of a certain customer as soon as possible.

Important technologies when considering DX

Currently, GAFA, which is called a tech giant by making the most of digital technology, made advance investments in technologies whose markets were still small or immature at the time, and created the future commonplace. Yes.

Here, we will introduce some technologies that you should pay attention to in order to perform DX with an eye on the future.

1. 5th generation mobile communication system, 5G

In the DX era, the most important technology trend is 5G (5th generation mobile communication system). There are three major differences from 4G: “ultra-high speed”, “ultra-low latency”, and “ultra-large number of simultaneous connections”.

For example, it is said that these features of 5G are a prerequisite for the practical application of automated driving for four-wheeled vehicles.

How to utilize the big data created by linking 5G and IT presents new business opportunities.

In other words, data utilization is the key to business transformation through DX.

2. AR (augmented reality) / VR (virtual reality)

  • AR (Augmented Reality)
    is a technology that superimposes real scenery and arbitrary information on a computer and displays it. In particular, recently, attention has been focused on smartphone games and their use in tourist spots. In addition, by introducing it to the HUD (head-up display) of automobiles and aircraft, it is possible to improve safety and transportation efficiency by reflecting real-time information in the actual scenery.
  • VR (virtual reality)
    A technology that allows you to experience virtual landscapes created on a computer as if they were in the real world. By wearing a goggle-type HMD (head-mounted display) on your head, you can experience the scenery of VR.

3. IoT (Internet of Things)

It is a technology that allows you to connect “things” that could not be connected to the Internet before.

With IoT, for example, it is possible to connect the key of the house to the Internet and operate the locking / unlocking from outside.

In this way, by incorporating various sensors and communication devices into equipment, it becomes possible to collect a wide range of information and control systems remotely.

In addition, by analyzing the accumulated data, you can acquire new knowledge and contribute to the launch of new business models.

Four. AI (artificial intelligence)

In general, it refers to technology for artificially realizing intelligence similar to humans on computers. However, there are various interpretations by researchers and companies, and there is no strict definition.

If I had to say, I would say that the characteristic of AI is that it learns based on given data and can output more output than the programmed calculation. AI is a technology that is difficult to imagine, but it is already being put to practical use in self-driving cars, search engines, voice recognition of smart speakers, and control of industrial robots.

Five. quantum computer

Unlike general computers, quantum computers apply behaviors such as “superposition”, “entanglement”, and “quantum interference” peculiar to quantum physics to computing.

Quantum computers are said to have the potential to bring about innovations in some fields that cannot be achieved with conventional computers.

For example, cryptography, quantum simulation, faster search, and machine learning, which is an important technology in AI, may be greatly improved by quantum computers.

Tips for promoting a DX project that does not fail

Tips for promoting a DX project that does not fail
A company that was slow to digitize until yesterday suddenly introduced DX from today, leaving the organization confused.

Even if you promote digitization on the surface, if your employees can’t handle it, extra costs will only increase. Even in various DX cases, it is a failure case that is often cited that “digitalization was promoted but it did not spread and gave up”.

One of the reasons why DX has failed to spread is often cited as a lack of ownership.

Therefore, it is recommended to create an independent DX promotion team within the company .

In general, the role is similar to the image of the information system department, but it is different in that it also conducts IT education for employees.

There are cases where the DX promotion team is responsible for the penetration of digitization within the company and has accelerated the promotion of DX at companies by setting the penetration rate and operational efficiency indicators as KPIs. If you don’t have the right people in-house, we recommend working with external consultants and partners.

The purpose of promoting DX is to transform the business model and maintain the competitive advantage of the company .
To that end, in addition to adopting digital tools, there are cases where it is necessary to change the system throughout the company, such as training human resources who can use the tools and reviewing the evaluation system for new human resources.

In such a case, it is difficult for the company’s internal structure to be changed by on-site employees alone, so it is necessary for the president and other senior management to show an understanding of DX and take the initiative in promoting internal reforms.

When communicating DX promotion to employees, it is important to first clearly communicate the purpose and vision of DX .

Especially if the company as a whole has little desire to promote DX, it may be necessary to explain that the position of the company or business can change more easily than in the past, and to make employees feel a little sense of crisis about the current situation. not.

Aiming for a continuous competitive advantage for your company through DX conversion will eventually lead to the benefits of each employee.

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