Factors and examples of DX failure – Explain 3 points for success!

In this way, there are probably many people who do not know in detail about the essence of DX and how to proceed concretely.

However, in the “DX report” announced by the Ministry of Economy, Trade and Industry,

“ If legacy systems (old systems that require large running costs) are not renewed and converted to DX by 2025, Japan will have a large amount of technical debt and will be left behind in global competition.”

is concerned.

For the above reasons, there is an increasing need for companies to correctly understand the purpose of DX and change direction to “offensive system renovation and IT investment”.

In this article, we will explain in an easy-to-understand manner, from the purpose of DX, which is different from conventional IT, to examples of DX successes and failures that you should refer to in the future!

[This article is recommended for such people]

The purpose of DX, which is different from conventional IT

DX (Digital Transformation) refers to the concept that the penetration of IT will change people’s lives for the better in every aspect.

On the other hand, the purpose of IT is to “realize work efficiency and value improvement by digital replacement of established industries”.

In contrast to conventional IT, DX requires business model transformation and digital technology utilization that is not bound by conventional policies in order to make society and life more convenient. The figure above is an image diagram showing the difference between conventional information and DX conversion.

Why DX Is Growing in Importance

In recent years, digitization has progressed rapidly, and there are many opportunities to hear the word DX in our daily lives. Below is a chart showing the transition of DX and the number of searches.

In addition, the importance of DX is mentioned in the “DX Report” announced by the Ministry of Economy, Trade and Industry in 2018.

An overview of the report is as follows.

In order to prevent the emergence of various problems related to DX in the future, it is essential to create new business models by radically transforming existing legacy systems, reviewing operations themselves, and realizing DX.

DX failure rate

How often does DX fail? Many people think that DX has increased due to the increase in remote work due to Corona. However, this is not the case.The success rate of DX is 3.1% in the Ministry of Economy, Trade and Industry’s “DX Report 2 (interim report)” announced on December 28, 2020, and ABeam Consulting’s “Japanese companies’ success rate” announced on December 14, 2020. DX Initiative Survey” reported that it was only 6.7%, which was only in the single digits in any survey.

From this, we can see that few Japanese companies have succeeded in DX, and most of them have failed.

5 failure patterns that are common in promoting DX

From here, I will introduce three common failure patterns when proceeding with DX.

1. Wrong organizational change
2. not a sustainable effort
3. Efficiency driven project
4. Management understanding
5. business understanding

I will explain each.

① Wrong organizational change

DX promotion does not go well just by gathering people who are familiar with information technology. It is important to utilize human resources who have the ability to think about business models and management strategies from a company-wide perspective, advance projects, and have good judgment when outsourcing.

② Not a sustainable effort

The digital society is highly fluid, and the required initiatives are constantly changing. In order to improve the quality of people’s lives and make them more convenient, we must continue to create organizations and technologies that can continue to provide value.

③ Efficiency-focused projects

In the promotion of DX, in order to make society and life more convenient, it is necessary to transform business models and utilize digital technology that is not bound by conventional policies.

Therefore, instead of seeking temporary effects and efficiency, it is important to devise a strategy for improving customer satisfaction and loyalty that will greatly change the current situation → shift to thinking using DX for realization.

④Understanding of management

By converting to DX, the management system and business model will also change. Therefore, it is very important that the management layer understands DX.

Without the understanding of management, there is a possibility that the allocation of budgets required for DX conversion, securing human resources, building systems, and cooperation between departments will be delayed.

⑤Understanding of business

In addition, the original purpose of DX cannot be achieved simply by deepening the understanding of DX by management. It is important to deepen your understanding of the specific goals and implementation details of the project and work on DX company-wide.

DX failure case

Here are four examples of DX failures.

1. Isetan Mitsukoshi: Failed to open a store on the American social commerce service “FANCY”
2.  Ford: Failure to establish Silicon Valley subsidiary to lead large-scale business transformation plan
3. Procter & Gamble: Failed with Vague Goal Setting
4. Seven & i – failed due to lax security and lack of strategy

I will explain each.

(1) Isetan Mitsukoshi: Failed to open a store on FANCY, a social commerce service originating in the United States

(2) Ford: Failed to establish a subsidiary in Silicon Valley to lead a large-scale business transformation plan

(3) P&G: Failure due to ambiguous goal setting

④ Seven & i – failure due to lax security and lack of strategy

How to proceed to realize DX

First, changes in business processes due to the use of IT are required. It measures the improvement of work efficiency and quality by digitizing work that was previously done on paper using IT.

By using various business systems to manage and digitize data that was previously managed with paper slips and documents, it will be possible to reduce management costs such as securing paper storage locations and improve the work efficiency of employees. It will be possible.

In addition, by digitizing communication tools such as online conferencing tools, it will be possible to have video conferences with remote locations, eliminating the need to come to the office for meetings, thereby realizing the diversification of work styles.

In this way, it is important in DX to set goals and improve work styles by digitizing various operations to achieve them.

3 important points for promoting DX

The following three points are important for promoting DX.

1. Strategic purpose setting
2. Analyzing and evaluating the current legacy system to understand the overall picture
3. Realizing system innovation while controlling costs and risks

I will explain each.

(1) Strategic objective formulation

Strategic goal formulation is essential for DX promotion. We have to think backwards about how digital technology can solve current problems and meet people’s needs, such as “what kind of inconvenience is there and how can we expect improvement and effect?” Hmm.

② Analyze and evaluate the current legacy system to understand the overall picture

It is important to “visualize” information assets and clarify evaluation indicators in order to improve the environment, including system renewal. If management can understand the existing system and recognize the problem as a management issue, it will be an opportunity to take the next action at the same time as realizing the importance of reforming the current situation.

(3) Realize system innovation while controlling costs and risks

Promoting DX will cost a huge amount of tens of billions of yen depending on the medium- to long-term period and system. For this reason, it is necessary to eliminate unnecessary functions in advance to reduce the scale and complexity.

DX success story

Here are three successful cases of DX.

1. Zebra: Introducing 3D printers to shorten stationery sample production time
2. Japan Post: Delivery of parcels using drones
3. Daimaru Co., Ltd.: Building a data analysis platform

I will explain each.

(1) Zebra: Reduced stationery sample production time by introducing 3D printers

(2) Japan Post: Delivery of parcels using drones

(3) Daimaru Co., Ltd.: Building a data analysis platform

summary

This time, I explained the purpose of DX, points, and examples of DX successes and failures that you should refer to in the future!

In order to successfully promote DX, it is necessary to meticulously formulate objectives rather than prioritizing efficiency alone, and fundamentally change the existing business model.

Understand the problems of your company’s system and business model and advance DX strategically!