DX Introduction: Everything Business Leaders Need to Know About "Digital Transformation"

What Exactly Is "DX"?

News and meetings frequently bring up "DX (Digital Transformation)". While many business leaders and managers know the term, few actually know what specific actions to take. In reality, DX does not involve memorizing difficult technical jargon; rather, it refers to "evolving the very way the company operates by using IT as a convenient tool".

Consider the taxi industry. Introducing car navigation and cashless payments into existing taxis is "Digitization". This optimizes existing operations. On the other hand, creating a system like "Uber" where anyone can become a driver via a smartphone app, handling dispatch and ratings, constitutes "DX". In other words, "speeding up tasks with tools is Digitization, while changing the shape of business with tools is DX".

Understanding the Concept of DX with Familiar Analogies

Comparing DX to cooking makes it even easier to understand. Traditional business improvement is like "sharpening the knife to increase cutting speed". This is certainly important, but the type of dish itself does not change. Meanwhile, DX is like "introducing frozen foods and cooking appliances to expand the menu and even start delivery services".

How about within a corporate organization? Changing a siloed organizational structure into a flat structure where information is shared across departments using digital tools is also DX. "Revisiting customs such as 'It has always been done this way' and seeking optimal forms assuming digital capabilities" is the essence of DX. Technology is not the protagonist; the crucial perspective is using technology solely for "better management".

The Decisive Difference Between Digitization and DX

Many companies confuse simple Digitization with DX. Digitization aims for efficiency such as "converting handwritten notes to Excel" or "scanning paper documents". This leads to cost reduction and error reduction. However, DX goes a step further, aiming for "improving customer experience" or "creating new revenue streams".

As a concrete example, consider a retail store. With Digitization, it is "changing registers to POS systems". With DX, it is "utilizing purchase data to distribute personalized coupons to smartphones for each customer, increasing visit frequency". The former speeds up accounting, while the latter creates a mechanism to increase sales itself. Thus, distinguishing based on whether the goal is "Efficiency" or "Transformation" makes it easier to understand.

Why DX is Needed Now? 3 Crises

You might think, "Our current state is sufficient". However, the true reason DX is needed is not because our company wants to use IT, but because "the surrounding environment has changed". First is "labor shortage". Due to aging population and declining birthrate, the model of hiring people to complete work as before cannot be maintained. Tasks that can be left to IT must be automated.

Second is "changes in customers". Modern customers exclude a company from their candidates simply if they "cannot search or order via smartphone". Lack of digital対応 directly links to reduced trustworthiness. Third is "The 2025 Cliff". The government warns that continuing to use old systems will result in significant economic losses across Japan. These are not someone else's problems; they are "issues critical to our own survival".

The Executive's Role is to be the "Commander"

In DX, executives do not need to learn programming. There are two main roles for executives. One is "deciding 'why we are changing' (purpose)". They act as flag bearers for goals like "eliminating overtime" or "receiving orders from nationwide". Without a defined direction, the frontline will be confused.

The other is making the decision to break "old customs". Resistance (status quo bias) saying "It has always been done this way" will inevitably arise at the frontline. It is the top's role to suppress this and create a culture of using new tools. Also, as in the case of Siemens, "collaborating with partner companies and experts" is important. Judgment is required to accelerate by borrowing external power without shouldering everything internally.

Cost-Effectiveness and How to Utilize Subsidies

DX requires investment, but the national and local governments strongly support this. For example, under the "Digital Transformation/AI Introduction Subsidy", more than half of the introduction costs for accounting software and register systems are subsidized. Additionally, under the "Manufacturing/Commerce/Service Productivity Improvement Promotion Subsidy", subsidies ranging from millions to tens of millions of yen may be issued.

Importantly, "subsidies are generally 'post-payment'". Cash flow requires attention. However, by receiving support from experts (tax accountants or IT vendors), it is possible to introduce wisely with reduced self-burden. First, let's start by checking if there are subsidies suitable for your company's issues. Clarifying Return on Investment (ROI) makes it easier to gain understanding within the company.

Ensuring Security and Trustworthiness

With digitization, concern arises regarding cybersecurity. SMEs face the reality of being easy targets. However, proactive security measures are also opportunities for trust enhancement. By choosing tools that allow "modular and phased implementation" like Siemens solutions, you can build an environment with standard security features while keeping initial costs down.

If using cloud-type services, confirm where data is stored and how backups are handled. Also, utilizing free trial periods to verify security and operability in your own environment is effective. Choosing vendors based on "not 'cheap and poor quality', but whether there is continuous support" leads to long-term trustworthiness assurance.

Seeing Changes Through Before/After Examples

How does it change in actual business scenes? An example of the sales department. Before: "Returning to the company after visits and typing handwritten daily reports on PC". After: "Entering directly at the visit site with a tablet, confirming inventory on the spot". This reduces travel time and increases customer response time. An example of the manufacturing department. Before: "Adjusting machines based on veterans' intuition and experience". After: "Visualizing sensor data and having AI predict abnormalities".

In this way, DX contributes to "eliminating individual dependency". If know-how known only by specific employees is accumulated as data, business does not stop even if personnel retire. Furthermore, seeing data in real-time dramatically improves decision-making speed. Sharing these concrete benefits with the frontline is the key to successful introduction.

Frequently Asked Questions Q&A

Q1: Is DX necessary even for small companies? A: Yes. Regardless of size, customer digital shifts are progressing. Starting small allows for more agility than large corporations.

Q2: Employees are elderly, is that okay? A: Yes. It is possible to cope by selecting tools with intuitive operations and conducting careful training. In fact, cases where they are pleased due to reduced workload are common.

Q3: What is the trick to not failing? A: Do not aim for perfection. The iron rule is to try with one department or task first, accumulate success experiences, and then expand company-wide.

Where to Start? Concrete First Steps

There is no need to introduce a large system immediately. First, start by identifying "where the waste is at the frontline?" "What is inconvenient for customers?". For example, if monthly invoice creation takes 3 days, consider introducing cloud accounting. Or, if answering customer inquiries is difficult, consider introducing a chatbot.

Next, collect information on subsidies and grants. Then, consult with a reliable IT vendor or partner. Importantly, think with "not 'starting with IT', but 'starting with solving problems'". Accumulating small successes is the sure path to major transformation.

Glossary

DX (Digital Transformation): Fundamentally transforming business models and organizational culture by leveraging digital technologies.

Digitization: Improving the efficiency of existing operations through information technology. Viewed as part of DX.

Cloud: A mechanism to use servers and software via the internet. Requires less initial investment.

SaaS: A form of using software as a service. No installation required and updates are automatic.

ROI (Return on Investment): An indicator showing how much profit or effect was gained relative to the invested amount.

The 2025 Cliff: Problems arising from the aging of existing systems, leading to increased maintenance costs and difficulties in technical succession.

Cybersecurity: Protecting information systems from threats on the internet.

Individual Dependency: A state where only specific employees can perform tasks. Aimed to be resolved by DX.

Subsidy: Non-repayable funds distributed by the national or local government for specific projects.

Partner: External cooperating companies that complement the company's lacking technology or know-how.