Toward an era of digitalization

Toward an era of digitalization

Every company is moving forward with digitalization. Why is digitization attracting attention now? With the progress of digitalization, overwhelming efficiency will be improved and competitiveness will be dramatically improved.

What is the definition of digital transformation that cannot be heard now?

The other day, it became a big topic that Yahoo acquired ZOZO, which operates the fashion mail order site "ZOZOTOWN". Until now, Yahoo's revenue has been mainly advertising, but we are aiming to make electronic commerce (EC) another pillar by acquiring ZOZO. Yahoo invested the amount of also about 400 billion yen in prospect the beginning of October, we aim to be a consolidated subsidiary of ZOZO.

ZOZO has achieved rapid growth centered on apparel sales since it started online shopping in 2000. In the fiscal year ended March 31, 2019, the transaction volume exceeded 320 billion yen, and the annual number of ZOZOTOWN purchasers was more than 8 million, making it the unrivaled number one on the apparel mail order site.

How could ZOZO grow so fast? This is because the digital transformation (DX), which is the theme of this issue, has transformed the market. Regarding DX, let's limit it to "transformation using digital" first. ZOZO has thoroughly focused on having a large selection of brands that are popular with young people. As a result, we succeeded in rapidly expanding sales even in the apparel market, which was considered unsuitable for mail order because we could not try it on. Until now, ZOZO has completely changed the behavior of young people who walk and buy at stores. It's exactly what we've done with digital.

There are many trends that DX will be indispensable for future corporate management. For example, when Microsoft and IDC conducted a survey on DX among 1,560 business decision makers in 15 Asian countries and regions, it is estimated that DX will increase Japan's GDP by about 11 trillion yen by 2021. did. In addition, DX's "leading company" will enjoy twice the benefits of "followers".

Although DX is becoming more important, the definition of the word DX itself seems to have various interpretations depending on the person. Therefore, this time, I will explain DX as an introduction again. Think about what DX should aim for, why it's becoming more important, and how it should be put into practice.

What is the definition of DX?
The concept of DX advocated by a Swiss university professor 15 years ago
The origin of DX dates back to 2004 and 15 years. Professor Eric Stortermann of Umeå University, Sweden, proposed the concept. "The penetration of IT will change people's lives for the better in every way," he said. However, with this concept alone, I cannot get a concrete image of how DX should actually be used as a company.

By the way, if you take the acronym for Digital Transformation, it seems straightforward to abbreviate it as "DT". In English-speaking countries, when the prefix "Trans" is omitted, it is often written as X, so it seems that "Transformation" is written as "Digital Transformation" ⇒ "DX" instead of "X".

DX for companies defined by the Ministry of Economy, Trade and Industry in Japan in 2018
Therefore, I would like to introduce DX to Japanese people in a way that is easier to understand, as defined in the "Guidelines for Promoting Digital Transformation (DX Promotion Guidelines)" compiled by the Ministry of Economy, Trade and Industry in December 2018. is. The DX promotion guidelines are "to clarify the matters that management should suppress in realizing DX and building the IT system that is the basis of it" and "to check the efforts of the board of directors and shareholders. The purpose is to make it usable in. The definition of DX in this is as follows.

"Companies respond to drastic changes in the business environment, utilize data and digital technology to transform products, services, and business models based on the needs of customers and society, as well as the business itself, organizations, processes, and companies. To change culture and climate and establish a competitive advantage. "

In this definition, the word "company" has come up, making it easier to understand what we need to do. DX shows that we need to be prepared to work, not just transforming our products and services, but also changing our corporate culture. However, given the role of the enterprise, this definition is not enough. No matter how much DX is realized, if the business performance deteriorates, I do not know who the reform is for. As a company, it is still necessary to pursue profits. Therefore, I think that the definition of DX will become clearer if you add "to create a mechanism to earn stable profits as a company" at the end of the above DX promotion guidelines. In summary, the definition of DX is as follows.

"Companies respond to drastic changes in the business environment, utilize data and digital technology to transform products, services, and business models based on the needs of customers and society, as well as the business itself, organizations, processes, and companies. To change the culture and climate and establish a competitive advantage. By doing so, create a system that can generate stable profits as a company. "

DX case study learned from Amazon
"Action," "knowledge," and "things" are replaced by digital in DX

Next, let's take a look at the case of DX to get a deeper understanding of the essence of DX.

・ "Action" to DX

The example of ZOZO introduced at the beginning changed the purchasing behavior of young people. If you look for DX cases in the same retail field as ZOZO, you can find Amazon.com, which has revolutionized the world. Amazon has built its huge e-commerce platform, giving users an environment where they can buy whatever they want, wherever they are. It completely replaced the "action" of going shopping with digital. Major US retailers such as Sears and Toys "R" Us have collapsed, but the impact of DX practiced by Amazon is not small.

・ "Knowledge / Experience" to DX

On the individual product pages of Amazon's e-commerce site, highly related products are listed under the titles such as "Products that are often purchased together" and "People who bought this product also bought such products". It has been. This is called the recommendation function that is now implemented on many EC sites, and it is a hybrid user that combines products based on similar user's purchase information, user's own past purchase information, or both methods. Recommended products suitable for are automatically displayed.

Amazon is known as the pioneer of sites that implement this recommendation feature. It can be said that it is a DX in that it implements a function to recommend products according to individual users on the site like a store clerk and further activates the user's behavior. In this case, it can be said that digitally replaced what was previously created from the "knowledge" and "experience" of the clerk, what the user wants next.

・ "Mono" to DX

This isn't the only Amazon that has transformed consumer behavior. Amazon's main business is e-commerce, but it also provides digital content such as video distribution. In the past, you had to buy or borrow a Blu-ray disc or DVD to watch movies and other videos at home. With video distribution, it is no longer necessary to buy or rent "things", and it has been replaced by digital.

So far, we have seen the essence of DX using Amazon as an example. Analyzing the companies that are successful in DX, there are many examples of realizing transformation by digitizing any one of "behavior", "knowledge / experience", "things", or some of them, as in Amazon. It seems.

What is the "cliff of 2025" that the Ministry of Economy, Trade and Industry sounds a warning bell?

Currently, various digital technologies such as cloud computing, AI (artificial intelligence), and IoT (Internet of Things) are evolving, and many companies are moving toward the realization of DX. And the government is backing this move. The Ministry of Economy, Trade and Industry launched the "Study Group for Digital Transformation" in May 2018. While DX is strongly demanded, some companies are facing issues such as aging IT systems and the associated maintenance and operation costs of IT systems.

Impact on companies given by DX report
The study group first organized the issues related to the current IT system and examined the countermeasures, and in September of the same year, "DX Report-Overcoming the IT System" 2025 Cliff "and Full-scale Deployment of DX-" I have compiled a report called. And it is said that there were many people involved who were shocked by the content.

What shocked you? Regarding the existing systems owned by each company, (1) the aging existing core system will be a barrier to promoting DX, and (2) if the system is not renewed by 2025, up to 12 trillion yen annually thereafter. This is because he sounded the alarm while giving concrete figures that there is a possibility of economic loss.

According to a survey by Microsoft and others introduced at the beginning, the introduction of DX will increase Japan's GDP by about 11 trillion yen by 2021. On the other hand, the government has concluded that the system as it is will reach a cliff in 2025 and will cause a great economic loss. It's unusual for the government to talk about the introduction of private sector systems, but it's a sign of the dangers of sticking to legacy systems and the importance of DX.