Have you heard the term Digital Transformation but are unsure about its detailed meaning or why it’s gaining attention? In reality, many people find themselves in this situation.
This article will explain the overview of Digital Transformation and the reasons it is attracting attention, including some practical examples.
What is Digital Transformation?
It signifies the profound changes and improvements in people’s lives brought about by the pervasive integration of technology into society.
Originally a concept proposed in 2004 by Swedish university professor Erik Stolterman, in Japan, the Ministry of Economy, Trade and Industry (METI) defines it as follows. Simply put, it means “companies incorporating digital technology into their businesses to drive change for people, and automating traditional analog operations to bring about transformation in work styles.”
Therefore, Digital Transformation is a term used in a broad sense, ranging from its application in business to its wider impact on society.
Why is Digital Transformation Gaining Attention?
While Digital Transformation has often been a topic of discussion for some time, it can be said that its necessity has become widely recognized due to the progression of digitalization across various fields.
Here, we will detail the main reasons why Digital Transformation is currently in the spotlight.
Impact of Technological Innovation
The recent evolution of technology is also considered a factor influencing the focus on Digital Transformation.
Particularly overseas, companies like the so-called GAFA (Google, Amazon, Facebook (now Meta), and Apple) have been central to bringing about societal changes, attracting global attention. It is said that for Japanese companies as well, survival will be difficult in the future without engaging in digitalization.
Furthermore, supported by technological advancements, the widespread adoption of online environments, especially through smartphones, has been a significant factor.
Therefore, to adapt to societal changes, it is crucial for companies to engage in Digital Transformation and drive digitalization forward.
The 2025 Digital Cliff Problem
The “2025 Digital Cliff” refers to a warning stated in the “Digital Transformation Report” by METI: “If Digital Transformation does not progress, there is a potential for an annual economic loss of up to 12 trillion yen from 2025 onwards.”
While several issues such as security and talent shortages are raised as concerns, there is particular apprehension that outdated core systems, known as “legacy systems,” could cause companies to miss out on business opportunities.
Consequently, there is a need to overhaul old systems and invest budgets in new IT and digital technologies.
Influence of Remote Work
Changes in work styles driven by recent shifts in lifestyle patterns are another reason Digital Transformation has garnered attention.
Previously, commuting to the office was the norm, but the adoption of remote work and telecommuting was increasingly encouraged.
Although remote work was not common in Japan, many companies likely recognized its efficiency and the importance of Digital Transformation upon implementation.
As adapting digital tools according to the times is essential, a proactive approach to new ways of working is considered important.
Challenges in Digital Transformation
Although Digital Transformation is promoted, factors like talent shortages mean it may not be easily implementable in the future. Therefore, it is crucial to consider securing and developing human resources early on.
Here, we discuss the challenges associated with Digital Transformation.
Shortage of IT Human Resources
A reason cited for the lack of increase in companies undertaking Digital Transformation is the shortage of personnel in the Digital Transformation and IT fields. The problem is not just a lack of engineers and other hands-on professionals but also a deficiency in management-level personnel who understand Digital Transformation.
According to announcements by METI, there are concerns about a shortage of over 450,000 people in the IT field by 2030, which could be a critical issue for promoting Digital Transformation.
Therefore, to prepare for this future shortage, it is important for companies to start focusing on securing IT talent and fostering their development as IT professionals now.
Lack of Clear Management Goals
When engaging in Digital Transformation, it is vital for management to have clear objectives and strategies. Without this clarity, employees cannot set a direction, leading to half-hearted efforts across the entire company.
Thus, it is important first for management to correctly understand Digital Transformation and then share the purpose and vision for undertaking Digital Transformation with employees.
Moreover, as Digital Transformation often involves entirely new initiatives, it is crucial to conduct regular reviews and make improvements. Actively incorporating employee feedback is also an effective approach to Digital Transformation implementation.
Essential Human Resources for Digital Transformation
The personnel required to realize Digital Transformation need not only IT knowledge and experience but also the ability to think and act from a business perspective. This is because promoting Digital Transformation relates to the company’s overall direction, requiring a forward-looking approach. Specifically, the following skills are needed:
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Basic IT skills
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Cutting-edge knowledge in digital fields such as AI and blockchain
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Project management skills
Digital Transformation is rarely undertaken by a single person; it is typically a team effort. Therefore, management skills to coordinate and lead the project are also crucial for achieving Digital Transformation.
A Digital Transformation team is typically composed of roles such as:
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Producer
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Project Manager (PM)
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Engineers/Programmers
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UX Designer
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Data Scientist/AI Engineer
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Architect
Since the required knowledge and skills differ by role, it is important to gather a balanced mix of talent when forming the team.
Examples of Digital Transformation
As Digital Transformation can be applied across industries, there are numerous examples both domestically and internationally. Here, we will detail some cases that have had a significant impact on society.
Business Transformation Area: BMW i Visualiser
The app “BMW i Visualiser,” which utilizes Augmented Reality (AR), is an example of Digital Transformation undertaken by the automotive company BMW.
This app allows users to select a car with their preferred color and design and view it from any angle.
A key feature is the ability to customize fine details like lights, offering an experience incredibly close to viewing the actual vehicle. This was a novel idea in the automotive industry, where visiting a dealership was the norm, and it has proven effective in attracting new customers.
Digital Economy Area: JapanTaxi
The taxi dispatch app “JapanTaxi” is a Digital Transformation example that significantly changed the taxi industry in Japan.
Using this app eliminates the need to wait outside, allowing users to call a taxi to their desired location at their preferred time.
An attractive feature is that since the pickup and drop-off points are set upon boarding, the fare can be calculated and payment processed even before arriving at the destination. It’s a service convenient for many people and represents a business model with a substantial impact on society.
Conclusion
In the modern era of evolving digital technology, promoting Digital Transformation is essential for every company. However, due to factors like the shortage of IT human resources, it is entirely possible that companies may find themselves wanting to promote Digital Transformation but unable to do so.
Therefore, it is necessary to take measures for Digital Transformation early on, aiming for a state where your organisation is not left behind by the times.
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