Introduction

In the last article, we talked about the origin and history of DX, explaining what it is and how it is currently happening in Japan. Now, we will keep the conversation going by looking at how Japan compares to the West in terms of DX.

DX: Perspectives from Japan and the West

Here is a surprise quiz for you:

You are the person handling the accounting department. Your daily routine involves verifying receipts with the paper vouchers submitted for reimbursement, entering the details into the system, and notifying the person if there is an error. You even make calls to remind them if it is urgent. You consistently work late to keep everything in order. Then, one day, the entire process is digitized, freeing you from the long hours. Now, you can focus on the more analytical side of finance. Is this transformation considered DX?

In Japan, it is X (or at least a △ close to 〇), whereas in the West, it is more like 〇 (△ close to 〇).
**"〇" denotes "yes"; "△" denotes "partially correct; "X" denotes "no"

In Japan, just making work digital and more efficient is not considered DX. But it is often labeled as DX when the perks of going digital free up time for people to do new and valuable tasks. In the West, they do recognize DX, but if it lacks the "X" factor, meaning it is not tied to management strategies and opportunities for change, it is not highly regarded.

The definition of DX according to the Ministry of Economy, Trade, and Industry's "DX Promotion Guidelines" is as follows:

"DX is the transformation by companies of products, services, and business models based on customer and societal needs by utilizing data and digital technologies to respond to drastic changes in the business environment, as well as the transformation of operations themselves, organizations, processes, and corporate culture and climate, in order to establish a competitive advantage."

In contrast, Gartner, a top research and advisory firm in the IT field, talks about "digital business" and breaks down how companies use IT into three (3) phases:

1. Changing the way business processes work
2. Linking and combining businesses, companies, and people
3. Fusing the virtual and physical worlds so that people, things, and business connect directly, making instant changes in relationships with customers the new normal

Furthermore, McKinsey & Company, a major strategy consulting firm, describes DX in the following ways:

1. Comprehensive digital transformation: Using digital methods to fundamentally change the structure of an organization and promote strategies that are digitally focused.
2. Digitization of customer experience: Restructuring the way customers interact with a business by using digital tools in marketing and personalization efforts.
3. Operational resiliency: Enhancing the strength and adaptability of operations through analytics, such as preventive maintenance and productivity improvements, and optimizing and automating back-office processes.
4. New business development: Creating new businesses or exploring new customer segments by leveraging digital technologies.
5. Skills retraining and organizational capability building: Developing the necessary skills within the organization for digital endeavors, retraining existing staff, and establishing systems that enable digital personnel to contribute actively.
6. Overall organizational agility: Cultivating agility throughout the entire organization by implementing agile operating models and building the necessary frameworks.
7. Modernization of core technologies: Upgrading the foundational technologies of the organization, including the use of cloud and API technologies, optimizing IT costs, and implementing data architecture and transformation.

To put it simply, in Japanese DX, the focus is often on improving day-to-day operations like making things more efficient or implementing new systems. These are seen as significant achievements. However, in the West, DX is just one part of the process and is considered a basic step. There, DX is mainly valued as a chance to make changes according to management strategy, especially those that benefit customers.

Moving Forward with DX

In a conversation with the head of a big company's DX Promotion Office, he mentioned, "Our DX Promotion Office mainly focuses on enhancing operations through tools like RPA. I know the crucial part of DX is the 'X,' but relying on just one department is not enough. Without top management leading the charge, ideas tend to stay at the frontline, and improvements stay limited. But for now, I am okay with that. By making small tweaks, we are building up DX skills, and I am confident we will eventually see a breakthrough".

He seems to understand that the ultimate goal is achieving the 'X'. However, he admits that the current approach is not fast enough, and unfortunately, it falls short.

So, what is the plan? We will address this question later on.

Conclusion

In this article, we talked about how DX is seen differently in Japan and the West, touching on just a small aspect of how to move forward. In the future, we want to delve deeper into how to proceed and the steps to consider.

References

1. Business + IT "What does Gartner recommend for digital business?"
2. McKinsey & Company "Acceleration of Digital Transformation"