During the year 2020-2021, as the novel coronavirus (Covid-19) rapidly spreads around the world, the majority of stock companies have been forced to reorganize their work styles, business models, and organizational structures. Hasn’t it been a year since there was a change?
In particular, the biggest change experienced by any company is work style reform. With remote work using Zoom and Google Meet, internal meetings, and business negotiations, the number of work styles that are not bound by location has increased.
Also, this matter is a little bit of a majority of Japanese companies, but it was the first step to connect to DX (Digital Transformation). In the future, with the advent of AI, IoT , and big data, Japanese companies will be forced to convert to DX in order to survive the competition with companies around the world.
In this article, we will organize and explain the success and failure cases of DX of companies that are currently leading the Japanese DX market, as well as the organizational structure for making DX successful.
This is a must-see article for managers who are considering converting to DX in their organization and executives who have been entrusted with promoting DX. If you read this article, you will be able to acquire the basic knowledge of creating a DX organization to make further progress in the future, so please read it.
Table of Contents
- Definition of DX (Digital Transformation) Review
- Why was organizational reform necessary using DX in the first place?
- The “2025 cliff” problem faced by Japanese companies
- We are becoming a data-centric society
- Three patterns of organizations that efficiently promote DX
- ① IT department expansion type
- (2) Business division expansion type
- (3) Professional organization establishment type
- What kind of human resources are necessary for an organization that promotes DX?
- What to do when there are no DX human resources in the organization
- 6 steps to promote DX in your organization
- ① Purpose setting
- (2) Current situation analysis
- ⑤ Project execution
- ⑥ Effect measurement
- Success methods learned from DX failure cases
- GE’s DX organization failure example
- Ford’s DX organization failure example
- 4 examples of DX promotion organizations
- ①Mitsubishi Corporation
- ②Sumitomo Corporation
- ③ Suntory
- ④ Kao
Definition of DX (Digital Transformation) Review
First, let’s review the definition and interpretation of DX (Digital Transformation).
Definitions that are currently pervasive in the business arena include:
Companies 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.
The above definition was announced by the Ministry of Economy, Trade and Industry in 2018 in the “DX Promotion Guidelines”, and the main focus is on the business perspective.
Many of the DX that are currently a hot topic are mainly DX from a business perspective as defined by the Ministry of Economy, Trade and Industry, where companies quickly grasp changes in the external and internal environments and use the power of digital to optimize management. It is important to create new value by guiding the strategy.
Why was organizational reform necessary using DX in the first place?
One of the reasons behind the necessity of organizational reform using DX is the buzzword in the DX world called “2025 Cliff” in the DX report announced by the Ministry of Economy, Trade and Industry on September 7, 2018. .
As you can guess from this word, you can see that by 2025, Japanese companies will be at the edge of a cliff as to whether or not they will be further separated from the world’s companies in the digital field.
The “2025 cliff” problem faced by Japanese companies
In the DX report, the government warns that if Japanese companies cannot promote DX, there will be an economic loss of 12 trillion yen annually from 2025 onwards.
In addition, if Japanese companies succeed in promoting DX, it is expected that the real GDP will exceed 130 trillion yen.
In recent years, AI, big data, and IoT-related specialized words have appeared, and DX has penetrated society quite a bit in the past few years.
At first, many business people may have thought, “Leave it to someone who specializes in engineering or digital work.”
However, considering the speed at which the above specialized words spread, wouldn’t it be fair to say that these classroom lectures should be learned by business people all over the world?
Also, by having general knowledge of DX, not only will the company be able to respond flexibly to the rapidly changing digitization, but it will also be possible to grow into a valuable human resource in the business market when considering individual careers.
We are becoming a data-centric society
Digitization efforts by each company have made it possible to store vast amounts of data more efficiently than before, from storing analog data using paper and sound to digital storage.
In the future, regardless of the industry, the key to surviving the competition will be how to effectively utilize internally accumulated data in the business field.
Each company has a different way of using data, and in the future, creativity will be required more and more to improve business while using data.
As a step to prepare for creativity, we should first acquire knowledge that allows us to respond to digital, one step at a time every day.
Three patterns of organizations that efficiently promote DX
First of all, in order to efficiently promote DX, it is important to create a solid organizational structure. From here, we will introduce three organizational patterns that efficiently promote DX.
- IT department extension type
- Business division expansion type
- Professional organization establishment type
① IT department expansion type
It is an organization that has expanded the department where people who are strong in code skills, wide IT knowledge, and so-called digital fields gather.
As an advantage of this organizational structure, there are plenty of human resources with excellent IT skills in the department, so system development for improving work efficiency, introduction of the latest IT tools, or meetings on DX conversion within the department Communication costs can be reduced.
On the other hand, as a disadvantage, compared to the marketing department and the business department, human resources in the IT department actually have less opportunities to talk directly with clients and experience understanding the consumer’s feelings on the spot. For example, it is difficult to build a new business model for
(2) Business division expansion type
It is an organization that mainly works in business departments, borrows IT knowledge from the internal IT department, and promotes internal DX conversion while receiving consulting on the digital introduction part.
The advantage of this organizational structure is that we can make use of human resources with high monetization ability in the organization and human resources who can grasp the customer psychology layer to create new business models and product improvements, and to improve the profitability of the company.
On the other hand, as a disadvantage, there are few human resources with IT knowledge within the business department, so communication such as assigning human resources to contact within the IT department and holding regular meetings to convert ideas into DX It is mentioned that it takes a lot of man-hours.
(3) Professional organization establishment type
It is an organization that specializes in promoting DX by gathering external experts and human resources with strong digital and business promotion capabilities from within the company.
The advantage of this organizational structure is that there are human resources with a wide range of knowledge and experience within the organization, so projects can be quickly advanced without increasing communication man-hours for improving operational efficiency, reforming business models, and promoting a wide range of DX conversions. about it.
On the other hand, as a demerit, it is difficult to increase production if there is no accurate vision to achieve within the organization of the newly created department or no human resources who can lead it.
What kind of human resources are necessary for an organization that promotes DX?
So far, I have explained the organizational structure for promoting DX. From now on, let’s take a look at the people who are important in structuring an organization.
In conclusion, the most necessary personnel for an organization that promotes DX is “the ability to firmly envision and monetize the business based on UX/UI, improve operational efficiency, and embody new business models using digital capabilities. People who have the ability to do it.”
You will also need to be able to plan projects and have the drive to achieve your goals as planned.
What to do when there are no DX human resources in the organization
Unless you’re a major company, it’s unlikely that you’ll have the best talent available to promote DX.
In this case, as a short-term measure, it is necessary to reinforce human resources, such as “calling excellent human resources from outside as advisors” or “contracting as business partners”.
In addition, as a long-term measure, it is necessary to develop human resources who can analyze the customer’s psychological layer in terms of data while educating employees in the digital domain, while making all employees aware of the promotion of DX on a regular basis. .
6 steps to promote DX in your organization
Now that we have come this far, let’s take a step-by-step look at how the organization specifically promotes DX. The 6 steps to create a DX organization are as follows.
- Purpose setting
- Current situation analysis
- organizational structure
- project execution
- Effect measurement
I will explain each.
① Purpose setting
Goal setting is the most important point as an entrance to DX promotion within the company.
For example, by promoting DX in-house, let’s first prioritize and set goals using KGI, KPI, and OKR, such as “Do you want to increase profitability?” and “Do you want to increase operational efficiency?”
Also, at this point, if you have a clear vision that makes all employees feel happy through internal DX conversion, it will lead to more efficient project progress in the future.
(2) Current situation analysis
After completing the purpose setting, analyze the current situation in the company and clarify how far it deviates from the purpose and goal at the current stage.
For example, how many people do you need to achieve your goals? Or what skills are you lacking? are important items for analysis.
When the divergence between the purpose or goal and the current situation becomes clear, we start planning.
For example, set a long-term goal using concrete figures as much as possible, such as “In order to reduce overtime hours caused by XX by month, we will build the latest system and system and reduce overtime hours by XX%.” It would be good to set
Also, if there are medium- and short-term goals that can solve the bottlenecks in achieving the long-term goals one by one, it will be easier for each member of the organization to take concrete actions at the project execution stage.
Once the planning is completed, we will finally enter the organization formation phase.
The important thing when organizing an organization is to think about the goals you want to achieve, among the above, “Which organizational structure should be used to achieve them efficiently?”
⑤ Project execution
One point to be aware of when executing a project is that “if the explanation is insufficient, there is a high possibility that the employee will reject it.”
When carrying out the project, make sure that existing employees do not hinder the promotion of DX, so that the purpose and vision of the organization’s conversion to DX are firmly shared and supported by employees throughout the company. prize.
⑥ Effect measurement
Once the project is completed, the transformation of the organization to DX is not the end.
We must not forget to measure the effects before and after the completion of the project by quantifying them properly, and to increase profits by improving the operational efficiency of the entire company and modifying the business model on a daily basis.
Success methods learned from DX failure cases
When starting DX promotion, it would be good to know about failure cases. The majority of companies aiming to promote DX tend to look to the success stories of other companies.
However, by focusing not only on successful cases but also on failure cases, you can reduce the risk of your company making the same mistakes as other companies when actually proceeding with the DX promotion project.
Below is a summary of failure cases that occur when actually promoting DX, so please refer to it.
GE’s DX organization failure example
In 2011, GE (General Electric) established an IoT platform to establish itself in the digital software field.
We created a new business called GE Digital and set the goal of becoming a powerhouse in technology.
However, despite investing a huge amount of money and human resources, the company could not improve its profitability and operational efficiency, and its stock price fell, affecting other services of the company.
What we can learn from this failure case is that “simply vague visions, objectives, and goal settings will not increase the motivation of employees in promoting DX and the success rate of achieving goals.”
When promoting DX, create a clear vision that will be firmly supported by employees throughout the company.
Ford’s DX organization failure example
In 2014, Ford, America’s leading automobile industry, launched a new segment called “Ford Smart Mobility” to promote DX.
However, because the department was quite far from the head office, it was regarded as an “independent department with no unity with other departments” within the company. Regardless, I have failed.
In addition, the most likely cause of insufficient awareness within the company is the failure of “the DX promotion project has been completed and digitization has succeeded in one part of the company, but other departments have not benefited at all”.
In order to prevent the above problems from occurring, let’s continue to work closely with other departments to share the purpose and vision for promoting DX on a daily basis.
4 examples of DX promotion organizations
Next, let’s take a look at the organizational examples of Japanese companies that are struggling at the forefront to promote DX in Japan. The following four examples of DX promotion organizations are introduced this time.
- Mitsubishi Corporation
- Sumitomo Corporation
I will explain each.
The Mitsubishi Corporation Group has built an “Industrial DX Platform” with the aim of improving business efficiency and industrial production by utilizing digital technology with the vast amount of data and know-how that it has accumulated as a traditional and historical company. rice field.
In addition to improving business efficiency, we are also working to improve environmental issues by using AI to forecast supply and demand, optimize logistics, and reduce food loss and carbon dioxide emitted from automobiles.
In addition, in collaboration with NTT, we plan to establish Industry One Co., Ltd. in 2021 to develop inventory optimization solutions for food wholesalers in the food distribution field.
There are also moves to actively involve client companies and promote DX.
The Sumitomo Corporation Group established the DX Center in its Digital Business Division in 2018 to create new value and solve various social issues using digital technology.
Currently, in cooperation with the company’s DX center and CSK, which provides IT services, more than 300 DX projects have been created.
In addition, there is the establishment of Insight Edge, a company specializing in DX technology that collects and analyzes big data using AI and IoT technology and develops products to promote DX, and is growing at a dramatic speed.
It has also been selected as one of the “2021 DX Featured Companies,” and it seems likely that the future reforms of Sumitomo Corporation will attract attention from various industries.
In 2017, the Suntory Group established the Digital Marketing Headquarters to explore ways to utilize digital in promotions and communications, as well as to provide R&D (research and development) and practical support.
First of all, in promoting DX, we formulated a clear vision of “surpassing competitors and distribution in terms of customer understanding by analyzing consumer purchase information and behavior information.”
As a track record so far, we have been able to accurately analyze customer needs based on UX (user experience) determined from the use of huge amounts of data, and have contributed to improving sales and creating further strategies.
At that time, Kao launched the “Advanced Technology Strategy Office (SIT)” in 2016 to overcome the situation where it could not lead the promotion of DX internally. We faced a large number of issues such as “selection of partial or complete migration from the current system to the latest system” and “how to utilize the huge amount of data accumulated so far”.
First, in order for all employees to accept the newly introduced system, instead of aiming for efficiency, we emphasized whether each employee can contribute to the creation of social value and tasks that all employees can enjoy. I put a lot of weight on it and made a system.
In addition, we succeeded in developing artificial skin Fine Fiber to solve skin problems by efficiently searching and utilizing data, and succeeded in making a further leap forward in the development of cosmetics in the future.
This time, I explained the organization of DX. How was that.
You should have understood how the organization specifically promotes DX. Also, based on the success and failure cases introduced this time, it will be easier to incorporate DX into the organization.