What does DX mean? Explanation of definitions to understand and effects of initiatives

What does DX mean?

Here, we will explain the meaning of DX as it is understood as a concept and the meaning of DX used in business situations, so let’s deepen your understanding of the meaning of DX.

DX is a “concept”

DX (digital transformation) is a concept proposed by Professor Eric Stoltermann of Umeå University in Sweden in 2004. It is defined as “the penetration of IT that changes people’s lives for the better in all aspects.”

The reason why it is written as DX instead of DT is that in English-speaking countries, the “trans” in “transformation” is generally abbreviated as “X” and written as “X-formation.”

What does it mean in business terms?

The term DX was originally born with an academic meaning, but now it tends to be interpreted and defined from a business perspective. Also, since there are a wide variety of industries and occupations, each person’s perception may be slightly different.

The general meaning is to transform a company’s business model through the use of digital technology. It also has the meaning of increasing the company’s competitiveness so that it can survive in the future digital age.

All definitions provided in DX

DX is not only defined by Professor Eric Stolterman’s concept. We will explain two other main definitions, so let’s check what the differences are.

Digital business transformation

Digital business transformation is a concept proposed by Michael Wade and others in 2010.

It is defined as using digital technologies and digital business models to transform organizations and improve performance. It is a concept that involves many things other than technology, such as performance improvement, digital-based transformation, people, and processes.

Ministry of Economy, Trade and Industry definition

The Ministry of Economy, Trade and Industry has redefined the concept of DX, which was proposed by Professor Eric Stolterman in 2004, for Japanese companies. In 2018, we published the “DX Report” and published the “DX Promotion Guidelines” to discuss possible future issues and measures to promote DX.

The definition includes creating an environment that can respond to rapid changes in the business environment through the use of data and digital technology. The objective is to establish a competitive advantage by transforming the entire organization, including business models, services, and operations.

Explaining “digitization” and “digitalization” until DX implementation

Before proceeding with DX, there are stages called “digitization”, “digitalization”, and “DX”. These words are often confusing, but each has a different meaning, so you must understand their true meanings before approaching DX.

Let’s understand how we proceed and what the implications are.

Digitization is “efficiency”

In the digitization stage, the purpose is to digitize business operations and improve business efficiency by utilizing IT technology. The idea is not to change the business process itself, but to move specific operations from analog to digital.

For example, we can automate tasks that were previously performed manually using RPA tools, or shift from exchanging documents using paper to cloud management. This not only eliminates the need for document storage but also makes data easier to find, significantly reducing work time.

In addition, customer management using CRM and transitioning from analog advertising to online advertising are also effective. This step not only improves business efficiency but also greatly contributes to cost reduction.

Digitalization is “process transformation”

In the digitalization stage, the purpose is to transform business processes themselves by utilizing digital technology.

The goal of this phase is to streamline workflows across the organization, rather than digitizing departments. We will discover new business models and work towards improving productivity.

Additionally, business flow optimization can be achieved based on the accumulated data managed online. In addition, by switching to digital approval, it is possible to make approval more efficient and lead to faster management. This is also expected to create new business opportunities.

What strengths can companies gain from DX?

Engaging in DX not only contributes to efficiency improvements and business process transformation but also to organizational strength. We will specifically explain the effects that can be obtained, so please use this as a reference when working on DX.

Ensuring stable business continuity

Companies around the world have probably reconsidered their business models and work styles due to the impact of the new coronavirus infection. Even in Japan, where there are many natural disasters, it is extremely important to have a foundation that can respond to sudden market changes.

Companies that have implemented DX, by adopting telework, have an environment in place that allows them to work even in situations where they are unable to come to work due to a disaster. In addition, the introduction of electronic seals eliminates the need for stamps when making payments, allowing smooth communication with business partners without having to go to work.

Having a foundation in place that can respond to any situation will ensure business continuity even if your office is damaged.

Initiatives to strengthen competitiveness in the market

In recent years, the market has seen a surge of new entrants disrupting existing business models. It can be assumed that they are aiming to rebuild a business model that is different from the way things have been done in the past and to strengthen their advantage to rival the companies that have been driving the market.

In a market that is already undergoing various changes, it is only a matter of time before market competition based on conventional services and business models becomes ineffective. Your competitive advantage in the market may be lost as you lose market share to new entrants incorporating the latest digital technology.

To survive in the market, why not consider developing a business model tailored to the market? To strengthen your competitiveness, don’t get too attached to your existing business model and start working on DX as soon as possible.

Able to respond to changes in consumer needs

In recent years, the spread of smartphones and computers has made it easier for consumers to collect information on the Internet. Additionally, there is a growing interest in services such as subscriptions that shift from “ownership” to “sharing.”

For example, “car sharing” is an attractive feature that allows users to freely use a car as needed without incurring purchase or maintenance costs. In other words, it is thought that the need for high-quality “things (cars)” has increased for “things (shared)” that can be easily used when needed.

To promote services and products in the future market, a more personalized approach will be essential than ever before. To achieve this, it is essential to utilize data and IT technology by working on DX and transforming it into a business model that can respond to consumer needs.

Issues you need to understand to make DX successful

DX is not a measure that can be achieved simply by introducing business tools. The entire organization must undertake initiatives aimed at change.

We will explain the issues you need to understand when working on DX, so check if any of them apply to your company’s operations.

Customs unique to Japan

Japanese companies may still have business practices that differ from the smooth and speedy solutions of the digital world, such as circulars that need to be handed over and stamps that need to be stamped.

Furthermore, in Japan, where there is a tendency towards perfectionism, it is thought that there are still a few implementation methods that involve releasing a minimal service and then gradually updating it.

Changing existing practices may require involving not only your own company, but also external related companies or the industry itself.

However, some factors are holding back the promotion of DX, so it will be necessary to respond quickly. Additionally, the hurdles for digital shift become higher as the scale increases, so it is wise to proceed with DX as early as possible.

Business format that matches the system to the business

Japanese companies tend to place importance on membership, and there are companies where it is difficult to clearly define the work that one person should do, and the work is conspicuously individualized. Therefore, many Japanese companies have had to introduce systems tailored to their business.

In recent years, business has become more complex, and if you continue to use systems tailored to your business, you will not be able to improve your competitive advantage as a standalone business, and you will not be able to differentiate yourself from other companies.

A system tailored to your business has the disadvantage of being difficult to replace or update, but since your business depends on the system, you may not be able to let it go easily. However, this can be a hindrance when introducing a new system, so to realize DX, it is necessary to make efforts to adapt operations to the system.

Low IT literacy that does not make use of a rich communication infrastructure

In Japan, communication centered on email and fax is still widely used, and chat tools have only recently become established.

In Europe and the United States, not only are paper-based communications almost eliminated, but the environment is also changing to one where work can be done using mobile devices. In Japan, which is supposed to have a well-developed communications infrastructure, considering the current situation where online services are not widely used, it is clear that IT literacy is low.

DX is an initiative that relies on the utilization of IT, and there are many situations where a cross-sectional response is required, regardless of department or scope of work. Therefore, it is important to assign key personnel with IT literacy and create an environment that allows for smooth responses.

Understand the meaning of DX and strengthen your corporate competitiveness

By establishing a DX strategy, you can strengthen your company’s competitiveness and increase your chances of surviving in future markets where drastic changes may occur. To achieve this, it is important to deepen your understanding of the meaning of DX and take appropriate initiatives.

DX will not be possible unless you simply transition to digital but also utilize the data and digital technology that can be accumulated after the digital transition. Keep in mind that the goal is not to complete the DX environment, and work toward success.

In addition, Pasona Tech also offers services that support companies’ DX promotions.

For example, the Microsoft Remote Help Desk Service is a service that supports companies that are unable to effectively utilize Microsoft products after implementing them.