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4 Necessities for DX 《Must Read for Beginners》 | Thorough Explanation of 3 Success Cases and Promotion Methods

Many of you reading this article may be thinking, “I want to know about the necessity of DX.”

If you can understand the necessity of DX,

・You can persuade the decision-maker to promote
DX ・You can grasp the essence of DX promotion

There is an advantage.

Therefore, this time, I will explain “4 reasons why DX is necessary” so that even beginners can easily understand it!

In addition, after understanding the necessity of DX, we will also explain three important points and success stories for promoting DX for those who want to actually promote DX!

Table of Contents

  • What is DX?
    • DX definition
    • Difference between DX and IT
  • 4 Reasons You Need DX
    • 1. Because we fear facing the ‘2025 cliff’
    • 2. To create a comfortable working environment for employees
    • 3.To respond to changes in the business environment
    • 4. Because the existing system has many risks
  • 3 benefits of introducing DX
    • 1. Improving productivity and operational efficiency
    • 2. Creation of new business
    • 3. Avoid the risk of continuing to use existing systems
  • Two disadvantages of introducing DX
    • 1.It takes time and cost to get results
    • 2.Difficult to update large-scale systems
  • 3 key points driving DX
    • 1. Development of IT human resources to promote DX
    • 2. Construction of IT system
    • 3.In-house organizational reform by top management
  • Two success stories of DX
    • 1. Mercari
    • 2.JapanTaxi
  • summary

What is DX?

Before explaining the necessity of DX, I will first explain the definition of DX and the difference between DX and IT .

DX definition

DX (Digital Transformation) was proposed in 2004 by Professor Eric Stolterman of Umeå University in Sweden.

“It is a technology that continues to evolve and has some impact on human life, and as a result, people’s lives change for the better.”

This is the concept.

In addition, the Ministry of Economy, Trade and Industry of Japan announced in 2018 that

“Companies can respond to drastic changes in the business environment, utilize data and digital technology, and transform their products, services, and business models based on the needs of customers and society. To transform our culture and climate and establish a competitive advantage.”

defined as

In this way, DX is defined as “companies using the power of technology such as data and digital technology to gain a competitive advantage and enrich customers and society .”

Difference between DX and IT

Many people are confused between DX and IT, so I will explain.

  • DX: Transformation of business processes themselves using technology, transformation of products/services, business/management
  • IT: Improving the efficiency of existing businesses using technology

becomes. in short,

  • DX: Transformation of products, services, and business models using information and digitization as “means”
  • IT: The promotion of information and digitalization with the “purpose” of improving operational efficiency.

It can be said that it is a thing.

In this way, DX and IT look the same at first glance, but they actually have completely different meanings.

4 Reasons You Need DX

There are four reasons why DX is necessary.

  1. Due to fear of facing the ‘2025 cliff’
  2. To create a comfortable working environment for employees
  3. To respond to changes in the business environment
  4. Because the existing system has many risks

I will explain each.

1. Because we fear facing the ‘2025 cliff’

On September 7, 2018, the Ministry of Economy, Trade and Industry announced “DX Report: Overcoming the IT System ‘2025 Cliff’ and Full-scale Development of DX” (abbreviation: DX Report). It was pointed out that we are facing the 2025 cliff.

If DX cannot be realized, it is predicted that there will be an economic loss of up to 12 trillion yen annually after 2025 . On the other hand, it is also stated that if DX can be realized, the real GDP will exceed 130 trillion yen in 2030 .

With the extension of existing legacy systems (systems built with past technologies and mechanisms) limited to corporate growth, how quickly can a DX strategy be developed to minimize losses and eliminate market losers? It is important for .

2. To create a comfortable working environment for employees

As the digitization of existing operations progresses through the introduction of DX, the productivity and operational efficiency of employees will improve, leading to an improvement in the working environment for employees .

For example, in the past, it was common to make decisions and approve work on paper, so the approvers and approvers had to come to the office to complete the work in a few minutes.

However, by digitizing these tasks, we were able to eliminate situations such as “approval does not proceed due to the absence of the person in charge,” and not only did things proceed smoothly, but also reduced the burden of the person in charge coming to work.

In this way, the need is increasing because the introduction of DX can improve the working environment for employees.

3.To respond to changes in the business environment

The promotion of DX leads to the expansion of business opportunities, so it can be said that the introduction of DX is necessary.

For example, there is a system that allows the purchase of Shinkansen tickets to be completed online.

In the past, tickets had to be purchased at the Midori no Madoguchi. However, by going online, even those who do not have a Midori no Madoguchi nearby or the elderly with physical disabilities can purchase tickets at home, so it can be said that the customer base has expanded (and business opportunities have expanded). increase.

There are many other examples, but the introduction of DX in this way leads to the expansion of business opportunities.

4. Because the existing system has many risks

The system that has been used for many years has two main risks, so it is necessary to promote DX.

Risk 1: Exposure to cyberattacks and virus threats on the Internet

This is a risk that can occur due to the end of the support period for OS, software, and hardware.

This risk leads to leakage of personal information and theft of confidential information, increasing the possibility of losing the trust of companies, so it is an issue that needs to be resolved as soon as possible.

Risk 2: It is too costly to operate and maintain the existing system, so it is not possible to invest in hiring IT personnel.

According to a report by the Ministry of Economy, Trade and Industry, more than 90% of a company’s IT budget is spent on maintaining aging systems.

If we cannot invest in hiring IT human resources and transforming our business model using IT, it will be difficult for companies to maintain their superiority as the importance of DX is increasingly emphasized in the future.

In this way, there are various risks in continuing to use the existing system, so it can be said that the introduction of DX is necessary as a solution.

3 benefits of introducing DX

There are three benefits of introducing DX.

  1. Improving productivity and operational efficiency
  2. Creation of new business
  3. Avoid the risk of continuing to use existing systems

I will explain each.

1. Improving productivity and operational efficiency

DX has the advantage of improving productivity and operational efficiency.

Here are two concrete examples.

Example 1: Realize automation of clerical work by utilizing RPA (robotic process automation)
Example 2: Utilize MA (marketing automation) to deliver emails to customers and prioritize customers to realize efficient marketing activities

In this way, the introduction of DX will lead to improved operational efficiency.

2. Creation of new business

The introduction of DX tends to focus on improving the efficiency of operations, but it actually leads to the creation of new businesses.

Here are two concrete examples.

Example 1: Dynamic pricing that fluctuates spectator ticket prices according to conditions such as the day of the week and time of day
. Leads to profit maximization
Example 2: Collecting data such as when patients take their medicines and using sensors to prevent forgetting to take prescribed medicines (Otsuka Pharmaceutical)
→Preventing worsening of medical conditions leads to a reduction in social security costs such as medical and nursing care costs
Reference: Aiming to Control Social Security Expenses with “Medical IoT”! – Developed the world’s first “medication support system”

In this way, the introduction of DX has great potential not only to improve the efficiency of existing operations, but also to create new businesses.

3. Avoid the risk of continuing to use existing systems

Earlier, I mentioned that there are two risks in continuing to use the existing system, but these can be avoided by introducing DX.

*Two risks
1. Risk of being exposed to cyberattacks and virus threats on the Internet
2. Risk of not being able to invest in hiring IT personnel, etc. due to the high cost of operating and maintaining existing systems

In order to solve the above two risks, it is possible to change the old or damaged existing system to a new system or another system with equivalent functions.

In this way, the promotion of DX can avoid risks by renovating existing systems that have become complicated due to changes in functions over many years.

Two disadvantages of introducing DX

While the introduction of DX has the above advantages, it also has two disadvantages: “ It takes time and cost to get results ” and “It is difficult to innovate a large-scale system” .

I will explain each.

1.It takes time and cost to get results

The disadvantage is that it takes time and money to promote DX.

Generally speaking, it is said that it takes an average of 3 to 5 years for companies that have started DX to see visible effects .

Also, in order to promote DX, a large amount of investment in IT human resources and IT tools is necessary .

In this way, let’s understand that it takes time and cost to get results when promoting DX.

2.Difficult to update large-scale systems

For companies that have introduced a large-scale system as part of their business flow, the disadvantage is that they cannot easily migrate to another system.

Therefore, it is necessary to start by unifying the data format and making simple operations more efficient, and then proceed with DX in several steps.

Also, if you try to change the business flow that you have been familiar with for many years, there is a possibility that the members in the field will oppose you .

Therefore, it is necessary to carefully explain the effects after the realization of DX to each department and get them to understand.

In this way, it is true that there are major barriers to the realization of DX, especially for companies that have used large-scale systems for many years.

3 key points driving DX

There are three important points to promote DX.

  1. Development of IT human resources to promote DX
  2. Construction of IT system
  3. Internal organizational reform by top management

1. Development of IT human resources to promote DX

The lack of IT human resources to promote DX is one of the factors that hinder Japan’s DX reforms, so it is necessary to develop IT human resources as soon as possible.

However, in order to promote DX,

・Basic IT knowledge
・Understanding the importance of data
・UI/UX oriented

There may not be a suitable person in the company because various skills are required.

In that case, it is necessary to take measures such as mid-career recruitment and training of IT skills for internal human resources to develop future IT human resources.

2. Construction of IT system

In order to promote DX, it is important to unify the disparate IT systems in each department throughout the company.

This is because if each department uses a different IT system, data coordination between departments will not go well, and data cannot be used for business.

Concretely, the following three options are assumed for how to build an IT system.

・Outsource system development to external vendors
・Newly utilize existing external systems
・Develop and operate systems in-house

Regardless of which option you choose, keep in mind that building an IT system will cost a lot of money, including outsourcing costs and system usage costs .

3.In-house organizational reform by top management

In order to promote DX, not only the cooperation of the workplace (each department) but also the commitment of top management is essential .

This is because for the success of DX, it is important for top management to clarify “what kind of value is created by DX and how to transform the business”.

The Ministry of Economy, Trade and Industry’s “DX Promotion Guidelines” also point out the importance of top management commitment.

Two success stories of DX

Here, we will introduce “ Mercari ” and “ JapanTaxi ” as successful cases of DX .

1. Mercari

Mercari is used by many consumers as a flea market app, and is now a company that has become a new infrastructure in Japan.

[Details of specific initiatives for DX]

Shift to smartphone-based services

Before the rise of Mercari, Yahoo! The center was an Internet auction (CtoC) service such as.

However, since auctions were premised on the use of personal computers, they had the disadvantage of lacking convenience
.

Therefore, Mercari lowered the psychological hurdle to use by making it a smartphone-based service in response to changes in the user’s environment, and emphasized the ease of use.

Building a system for easy listing and purchasing

Mercari is unique in that it allows users to easily list and purchase items as long as they have a smartphone.

Example)・”Anonymous Delivery”: Items can be shipped
without knowing each other’s names and addresses.

In this way, Mercari designs its services with user-friendliness and convenience in mind.

【result】

It has gained recognition to the point that Mercari is said to be the flea market app, and has grown to become Japan’s first unicorn company (an unlisted technology company with a corporate value of over $10/listed as of 2021). .

Since then, it has continued to grow steadily, and now boasts over 80 million app downloads in Japan and over 100 million downloads worldwide (as of 2021), making it one of the leading companies in the domestic flea market market.

2.JapanTaxi

JapanTaxi is an IT venture spun off from the information division of Japan Kotsu.

[Details of specific initiatives for DX]

JapanTaxi is the Japanese version of Uber.

This is a service that allows you to call a nearby taxi by simply launching the app, selecting a boarding location, and pressing the “Call Now” button. You can also check the pick-up time and price before boarding.

JapanTaxi also has a JapanTaxi Wallet feature that allows you to complete payment before reaching your destination by scanning the QR code on the tablet in the back seat of the taxi with the app.

【result】

For customers, it can be said that they are providing a stress-free experience because they can pay smoothly even if they are in a hurry.

For Nihon Kotsu and affiliated stores, this has led to a reduction in work such as cash management for drivers and securing change at the office. It also reduces the risk of crime such as cash theft.

JapanTaxi utilizes the JapanTaxi tablet in the back seat to start an advertising business as a new revenue source.

In-vehicle advertisements, which were common on trains and buses, have also been brought to the back seats of taxis, increasing sales as an advertising medium for businessmen.

In addition, since it is possible to acquire a large amount of movement data from each vehicle, the soil for developing various businesses in the future is growing.

summary

This time, I explained the four reasons why DX is necessary and the points for promoting DX so that even beginners can easily understand it.

If you have read this article and decided that DX is necessary, let’s consider and implement specific steps to promote DX!

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