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What are the challenges of DX? -Commentary on issues and solutions for each company size!

Isn’t there a lot of people who feel that?

Therefore, if you understand the issues in DX, you can prevent mistakes in promoting DX in advance.

This time , we will explain not only the issues of DX in Japan, but also the solutions and success stories in an easy-to-understand manner for beginners .

Table of Contents

  • What is DX?
    • DX definition
    • Difference between DX and IT
  • 3 reasons why you need DX
    • ① There is a risk of facing the “2025 cliff”
    • (2) There are merits such as streamlining of operations and creation of new value.
    • (3) The number of companies introducing telework is increasing
  • Current status of DX in Japan
  • Four basic DX challenges
    • (1) “Defensive IT investment”
    • (2) Heavy burden on existing systems
    • (3) Specific management strategy is not shown
    • ④ There are no IT personnel who can promote DX
  • Issues of DX [by company size]
    • Challenges of large companies
    • Challenges of SMEs
    • Two challenges for local governments
  • 3 steps to solve problems and make DX successful
    • 1. Share your vision with DX
    • 2. Analyze the current state (As-Is) and search for uniqueness
    • 3. Develop a strategy to bridge the gap between To-Be and As-Is
  • How to introduce DX
  • Six success stories of DX in Japan
    • <Bank> The Bank of Yokohama, Ltd.
    • 《Construction》Shimizu Corporation
    • 《Manufacturing》Kimura Foundry
    • 《Municipality》Shiga Prefecture
    • 《SMEs》Nisshin Kogyo Co., Ltd.
    • 《Large company》 Nippon Yusen Kabushiki Kaisha
  • summary

What is DX?

DX definition

DX (Digital Transformation) was proposed in 2004 by Professor Eric Stolterman of Umeå University in Sweden as “a technology that continues to evolve and has some impact on human life, and as a result, people’s lives change for the better. is the concept.

In 2018, the Ministry of Economy, Trade and Industry (METI) announced that “companies will 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 operations, organizations, processes, corporate culture and climate, and establish a competitive advantage.”

In this way, DX is defined as companies using the power of technology such as data and digital technology to gain an 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 and management
ITization : Efficiency improvement of existing business using technology

becomes.

in short,

DX : Using information and digitization as a “means” to promote the transformation of products, services, and business models
IT : Using information and digitization as a “purpose,” such as improving operational efficiency

It can be said.

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

3 reasons why you need DX

There are three main reasons why DX is needed.

  1. We may face the ‘2025 cliff’
  2. Benefits include streamlining operations and creating new value
  3. An increasing number of companies are introducing telework

I will explain each.

① There is a risk of 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, it will be possible to boost the real GDP to more than 130 trillion yen in 2030 .

With the extension of existing legacy systems (systems built with past technologies and mechanisms), there is a limit to the growth of companies. It is important for Japanese companies to think about how they can avoid

(2) There are merits such as streamlining of operations and creation of new value.

For many companies, two important business strategies are to eliminate the negative of resources and value, or to create a positive.

In terms of “zero negatives”, there is a growing need to improve operational efficiency and eliminate dependence on human resources.

In particular, Japanese companies are highly dependent on human work flow, and there are many problems such as “productivity does not increase” and “working hours are limited and scale is not possible”.

In the DX strategy, it is important to maintain and improve competitive advantage by utilizing digital technology and data .

And DX will be an important factor in maintaining and improving the productivity of companies in order to maintain and improve their competitive advantage .

In addition, in recent years, with the development of technology, many technology companies have increased their competitive advantage.

At the same time, existing large companies are also facing the need for transformation through the use of digital technology and data .

In the rise of technology companies, companies represented by GAFA are representative.

For example, Amazon has become the world’s fourth largest market capitalization (as of October 2020) by using a “virtuous circle strategy” to attract customers to online stores based on “customer experience”, and has become a threat to the global retail industry.

If we do not create an unprecedented business model that matches new values ​​based on an excellent DX strategy like Amazon, we risk losing our advantage to emerging companies.

It can be said that many companies are seeking a DX strategy that uses digital technology and data to improve their competitive advantage after understanding their strengths .

(3) The number of companies introducing telework is increasing

Recently, an increasing number of companies are introducing telework due to the effects of the new coronavirus.

Telework also has the advantage of reducing costs, improving efficiency, and making it easier to acquire and utilize data.

Due to the benefits described above, some companies may have increased telework as a result of the corona crisis. With the introduction of telework, business operations have been digitized, and it is necessary to build a system that centrally manages data and review business processes.

Current status of DX in Japan

According to the “World Digital Competitiveness Ranking 2022” announced by IMD, Japan is a digitally underdeveloped country and ranks 34th in the world. This ranking shows how actively governments and businesses are using digital technology.

In addition, in the “DX Report 2” released by the Ministry of Economy, Trade and Industry, 90% of the responding companies answered that they were not working on promoting DX.

From the above, we can see that the introduction of DX in Japan is behind the rest of the world.

Four basic DX challenges

There are mainly four basic challenges when DX cannot proceed.

  1. “Defensive IT investment”
  2. Heavy burden on existing systems
  3. No concrete management strategy is shown
  4. There are no IT personnel who can promote DX

These are the four. I will explain each.

(1) “Defensive IT investment”

One is that they are making “defensive IT investments”.

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

In this way, many companies in Japan tend to invest in IT for the purpose of maintaining the status quo of their internal systems.

On the other hand, in the U.S., many companies spend IT budgets to understand the external environment, such as “strengthening analysis of customer behavior and markets using IT,” “swift response to market and customer changes,” and “business model transformation using IT.” It features a dot.

In other words, Japan can be said to be “defensive IT investment” and the United States can be said to be “offensive IT investment”.

“Defensive IT investment” refers to the improvement of operational efficiency, cost reduction, and the use of IT in business processes. increase.

As you can see from the fact that DX is progressing in the United States, it is necessary to make “aggressive IT investment” in order to seriously realize DX.

(2) Heavy burden on existing systems

The second is that the burden on the existing system is heavy.

I mentioned above that Japan is making “defensive IT investments,” but the reason for this is the heavy burden of existing systems.

More specifically , technical debt is created by complicating the system due to additions and changes to specifications over many years and changes in development staff, which leads to huge costs for operation and maintenance and adding new functions. We are connected .

Technical debt is the short-term development of a system that results in high maintenance and operating costs in the long term. For example, problems such as not knowing the specifications, the person in charge has retired, and the old development language is being used and cannot be dealt with are examples of technical debt.

In this way, while Japan spends money on the operation and maintenance of existing systems, the reality is that the budget is not allocated to the promotion of DX .

(3) Specific management strategy is not shown

The third is that the specific management strategy is not clearly indicated.

The Ministry of Economy, Trade and Industry considers a management strategy essential to promote DX.

In other words, as new digital technologies appear more and more, it is necessary to consider how to utilize them to transform the business .

However, at present, there is only recognition of the need for DX, and there is a lack of concrete consideration that goes one step further.

In fact, it has been pointed out that there is a situation in various places where instructions are simply issued such as “Can you do something using AI?” without concrete consideration of how to change the business.

④ There are no IT personnel who can promote DX

And the fourth is that there is a shortage of IT human resources for DX. This issue is considered to be a particularly universal issue regardless of the size of the company.

Don’t you often hear in the news that “Japan lacks IT human resources to promote DX”?

The reason for this is that in many cases the planning and promotion of IT strategies are outsourced to external companies such as system integrators (SIers), and know-how is not accumulated in-house .

In fact, in the United States, 70% of all technology personnel, who are the key to promoting DX, are on the side of business companies, and 30% are on the side of IT vendors such as SIers.

On the other hand, Japan is the exact opposite of America, with 70% of IT vendors and only 30% of operating companies.

In other words, it can be said that the current reality in Japan is that the promotion of DX is “throwing the whole thing” outside .

Issues of DX [by company size]

Next, I would like to introduce the challenges by company size.

  1. Challenges of large companies
  2. Challenges of SMEs
  3. Two challenges for local governments

I will explain each.

Challenges of large companies

Issues faced by large companies include the possibility of information leakage and the lack of ideas for digitization.

If you are a large company, you have a lot of customers, so you have a lot of personal information managed by the company. When introducing DX, you need to be careful with how you handle this information.

In addition, human resources and budgets are easier to gather than SMEs, but the planning of ideas will be an issue. In order to actually plan DX ideas, it is important to share specific DX objectives and management strategies.

Also, at present, large companies have stable business performance even if they do not put that much energy into it, and on the surface there are no particular problems, so as a result, they tend to proceed with DX halfway and fall into a mere form of DX. is also an issue.

Challenges of SMEs

The most important challenge for small businesses is budget.

DX does not give immediate results.

For this reason, it is difficult for small and medium-sized enterprises to secure a new large budget that cannot be collected in a short period of time.

Two challenges for local governments

There are two main challenges facing local governments.

The first issue is that the implementation rate of DX is low in the government and the Ministry of Economy, Trade and Industry, which should lead the way in digitalization.

Specifically, the current government online rate is about 12%, and the completion rate is 7%.

In addition, according to the efforts of major ministries and agencies, the online rate of the Ministry of Economy, Trade and Industry and the Ministry of Internal Affairs and Communications, which should lead the way in digitalization, is 9% and 11.9% respectively, indicating that the onlineization has not yet penetrated. I understand.

The second challenge is that the national and local systems are not aligned.

Currently, the information systems used by each ministry and region are disjointed. And the new coronavirus has highlighted the problem of this state.

I think it’s fresh in your mind that when you applied for the new coronavirus benefits, it took a long time to receive the benefits due to a problem with the online procedure, but the cause was the inconsistency between the national and local systems.

In this way, the inconsistency between national and local systems has become a major issue that hinders the conversion of local governments to DX.

DX by solving problemsTo be successful3 steps

1. Share your vision with DX

The first thing you should do in step 1 is to clarify your ideal company (To-Be) .

By clarifying the direction in which the company should aim and sharing it within the company, employees can unite and aim in the same direction.

The important thing in defining the To-Be is to clarify the figure and vision in which competitive advantage is established .

According to the definition of DX by the Ministry of Economy, Trade and Industry, it is defined as establishing a competitive advantage by transforming business models, operations, organizations, etc. by making full use of data and digital technology.

2. Analyze the current state (As-Is) and search for uniqueness

The important thing in step 2 is to analyze the current state of your company and look for uniqueness.

In promoting the DX strategy, it is very important not only to clarify the To-Be but also to analyze the current situation (As-Is).

Let’s analyze the current situation of your company in terms of items such as business model / products and services, operations / organization / process, corporate culture / climate .

It is especially important to understand your strengths when analyzing your current situation .

3. Develop a strategy to bridge the gap between To-Be and As-Is

Once you’ve identified your To-Be and As-Is, step 3 is where you come up with a strategy to fill in the gaps.

The important thing in step 3 is to classify DX into digitization and digitalization.

Digitization: Converting analog data into digital format so that it can be handled by computers
Digitalization: Improving business flows, business models and processes by utilizing digital technology and data

Just as the key to DX is the use of digital technology and data, digitization, which digitizes analog data, is important .

On top of that, DX can be implemented by accumulating digitalization that brings about transformation by utilizing digital technology .

How to introduce DX

I introduced the points to make DX successful, but there are probably many people who do not know how to introduce DX in the first place. Therefore, I will introduce the steps to introduce DX specifically.

There are mainly six ways to introduce DX.

  1. set a vision
  2. Digitize tools and collect data
  3. Utilize data in systems
  4. Create a foundation for company-wide data utilization
  5. Establish an operational structure
  6. reflect in business

First, decide the vision you want to achieve with DX. This vision should be a long-term goal for several years. From a medium- to long-term perspective, we will decide “in which business field to create new value” and “what kind of business model to build”.

Once the vision is decided, we digitize various tools and accumulate data. We will use the data accumulated through digitization in the system for each department.

It is also important not only to standardize data within a department, but also to build a foundation for utilizing data throughout the company. Furthermore, by utilizing the infrastructure that has been built up to this point, we will create an organization that efficiently manages data.

Finally, it must be reflected in the company’s business activities. This is the final stage of DX, and the purpose is to brush up the business plan from the accumulated data.

Six success stories of DX in Japan

I introduced that Japan is lagging behind in DX compared to other countries, but there are companies and local governments in Japan that have succeeded in DX. Here, we will introduce six successful examples of DX in Japan for each industry.

  1. <Bank> The Bank of Yokohama, Ltd.
  2. 《Construction》Shimizu Corporation
  3. 《Manufacturing》Toyota Motor Corporation
  4. 《Municipality》Shiga Prefecture
  5. 《SMEs》Nisshin Kogyo Co., Ltd.
  6. 《Large company》 Nippon Yusen Kabushiki Kaisha

I will explain each.

<Bank> The Bank of Yokohama, Ltd.

The Bank of Yokohama set a goal of reducing business hours as a DX goal, and actually succeeded in reducing business hours and achieved results.

With the introduction of RPA, we have automated the cumbersome task of creating a tax survey reply form, which involves accessing various systems from a desktop PC and printing the reply form with the inquiry details entered. As a result, it is now possible for bank employees to create tax survey responses simply by entering key information.

As a result, we were able to save 5,000 hours in 5 tasks, including this work, in about half a year, making it a DX success story.

《Construction》Shimizu Corporation

Shimizu Corporation aims to be a “digital general contractor with the spirit of craftsmanship”. I am using a printer.

In addition, we are actively incorporating new technologies such as the development and practical application of construction management using AR technology, the construction of concrete columns with 3D printers, and the use of autonomous welding robots.

For these reasons, Shimizu Corporation has been selected as a “DX Brand 2021” and has also been selected as a “DX certified business operator” as determined by the Ministry of Economy, Trade and Industry, and is attracting attention as a successful example of DX in the construction industry. .

《Manufacturing》Kimura Foundry

Using 3D printers, Kimura Foundry has shifted from traditional wooden molds, which require several months to create, to 3D printing sand molds and pouring metal into them.

With this method, it is possible to reproduce complex cavities inside the casting, improve the accuracy of the finished product, and achieve mass production and short delivery times, so the demand for prototypes is increasing.

《Municipality》Shiga Prefecture

Shiga Prefecture operates a network called “Omi Municipal Network”.

“Omi Local Government Net” is an administrative information network that connects prefectures and municipalities.

Mutual cooperation between prefectures and municipalities makes it possible to share information, provide cross-sectional and wide-area services, and improve operational efficiency.

Omi Municipal Network is operated by constructing a network layer that can only be used by local governments on the prefectural network called “Biwako Information Highway”. Therefore, in exchanging highly confidential information between administrative bodies, we ensure a high degree of reliability that cannot be achieved with the Internet.

《SMEs》Nisshin Kogyo Co., Ltd.

Nissin Kogyo Co., Ltd. was considering DX conversion with the goal of continuing Japanese manufacturing. Therefore, we developed the MCM System to visualize the operating status of the manufacturing line.

Monitors enable us to grasp the operating rate and stoppage status, and we have succeeded in identifying lines with low productivity. Increased utilization from 50% to 90%.

By accurately grasping the operating rate, we are able to accurately determine the number of orders that can be received.

《Large company》 Nippon Yusen Kabushiki Kaisha

Nippon Yusen Kaisha puts on-board electronic currency “MarCoPay” into practical use, develops a car carrier operation scheduling support system, introduces performance guarantees in actual seas in construction contracts for new ships, and makes the world’s first manned autonomous operation of car carriers. We are implementing five DX initiatives, including demonstration experiments and human resource development at the NYK Digital Academy.

We are also promoting the development of a data infrastructure that acquires and thoroughly utilizes accurate data in a timely manner, and the use of digital technologies such as AI. ” has been elected.

summary

This time, I explained the issues, solutions, and success stories of DX in Japan in an easy-to-understand manner even for beginners.

What I would like to tell everyone is that it is not enough to understand the current issues of DX, but that the implementation of DX is more important than anything else .

Therefore, let’s take a look at the attached articles related to DX and move forward to implement DX specifically!

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