For those who are currently wondering,"We decided to promote DX in our company, but what should we do?" or for those who are thinking about promoting DX in small and medium-sized companies, look no further than this guide–where we will explain all about what DX is and its benefits!
In layman terms, the purpose of DX is to "improve society through digital technology.” "Digitalization" and "transformation" are the two key words when you’re considering DX.
Here’s the official definition of DX in the Ministry of Economy, Trade and Industry's DX Promotion Guidelines.
“DX is the process where a company responds to changes in the business environment and transforms its products, services, and business models based on the needs of customers and society by leveraging data and digital technology, as well as its operations themselves, organization, processes, and corporate culture and climate to establish a competitive advantage.”
In other words, DX goes beyond technology. It’s about a company’s ability to embrace change, rethinking its offerings and internal structures to meet customer and societal needs, using data and digital tools, while also adapting its culture and practices to thrive in the new landscape.
As you can see, the main key words in DX are the use of “digital technology” and “transformation.” You may have heard of the term, digitization and digitalization in relation to DX. The core difference between digitization and digitalization is that digitization focuses solely on the converting analog data such as physical documents, audio tapes, etc. into digital formats meanwhile, digitalization focuses on utilizing digital technologies to improve existing processes and operations.
While digitizing information lays the groundwork of DX, DX truly shines when companies leverage digital technologies to make informed choices, streamline operations, and implement positive changes that propel business growth. Hence, digitalization is the bedrock upon which DX thrives.
Here is the flow of DX:
Digitization → Improved operations → Increased efficiency → Improved performance
So why should we do DX? According to the Ministry of Economy, Trade and Industry (METI) and consulting firms, there are two major advantages to DX:
- Increase competitiveness and establish a competitive advantage in the industry:
According to McKinsey's September 2020, DX has a positive impact on business, including increased revenue, reduced costs, increased innovation, and a significant boost in productivity.
Companies that have successfully implemented digital transformation (DX) show three to four times better work performance than those that have not, according to the report. DX impacts different aspects of a business, leading to improved competitiveness and establishment of a competitive advantage.
- Avoid critical losses due to DX failure (2025 cliff):
The "2025 cliff" issue is often mentioned in discussions about DX. The 2025 cliff refers to the inability to escape the current situation in which systems are aging and becoming more complex. In other words, if DX fails, the resulting economic loss will be 12 trillion yen, three times the current amount, after 2025. The loss of IT system operators will make it difficult to maintain and carry on business infrastructure, and cybersecurity safety will deteriorate–resulting in significant damage beyond economic losses. On the other hand, DX offers numerous advantages, including the ability to prevent the various losses that are expected to occur in 2025 and beyond.
Digital transformation (DX) offers numerous merits and advantages for companies, but it is not without its challenges. To ensure a successful DX implementation, it is crucial to keep in mind the following four factors:
1. Full participation from management and decision-makers
2. Sufficient IT human resources
3. Selecting the system that suits your company
4. Establish a workflow for DX
Effective digital transformation (DX) requires full-scale participation from management, otherwise it may lead to failure. During the implementation of DX, the workplace may resist the changes that are required in business processes. However, if the management team has a strong will to push back against such opposition and promote DX, it is possible to move forward. Therefore, the decision-making by management plays a crucial role in promoting DX.
Securing IT human resources is also important to promote DX. Japanese companies often outsource their IT departments and often do not have IT personnel in-house; since digitization is the first step to successful DX, it’s important to recruit and train IT talents externally.
For your DX transformation to be a success, It’s important to choose a system that is suitable for your company. For instance, when you’re implementing a customer management system, the best system for you and your teams will vary based on the size of your company and the services you offer. If you choose a system that is not optimized for your business, and you’ve chosen this system because "everyone else is using it," the system may not function as well as you thought and may have too many features that you don't use or know how to use. This scenario often leads to problems where the new system is gradually abandoned or its efficiency decreases. Selecting a system that matches the size of your company, the services you offer, and your business's format will help you maximize the benefits of DX and improve your productivity.
It is important to understand that achieving digital transformation (DX) is a gradual process that requires careful consideration over a significant period of time. To ensure the success of DX, it is crucial to establish a workflow for the process. When implementing DX systems, it is necessary to provide training to employees on how to use the new technology. Without a well-planned workflow and long-term strategy, DX initiatives are likely to fail.
By adhering to the four considerations above, organizations can ensure that their DX journey is a success. Companies seeking to achieve DX objectives must continually assess their progress against these four considerations to ensure they are on the right track.
Tokyo Techies can provide a one-stop solution for your company’s DX journey from start to finish! For example, from an IT consulting perspective, we can assist your management in making informed decisions, selecting the appropriate IT systems for your company, and creating a workflow for DX for you and your teams. We can also help you acquire IT professionals by providing highly skilled experts in AI, software development, application development, and other related fields.
As a one-stop IT consulting firm, Tokyo Techies specializes in providing innovative solutions through digital transformation. We offer free consultations, so please feel free to contact us for more information.