-- Shortage of human resources. Legacy system bars in large companies.
-- Issues differ by purpose and industries. Service development in the telecommunication sector, work-flow restructuring in the financial sector.
Remote-work has been promoted under the pandemic, and digital transformation (DX) has attracted every corporation’s attention ever since. How are companies currently tackling DX, and what are the achievements and issues they are facing?
Nikkei Research conducted a “Corporate DX Survey” in January 2021, and collected a total of nearly 2,000 Nikkei ID members, those who are businesspeople of various company sizes and industries. While not every respondent was in charge of promoting DX in their company, they were asked about either the status of their department or the entire company.
Restructure work-flow to increase productivity/reduce costs/save time” was the top purpose of implementing DX, chosen from 4 options, exceeding over half in both department level and the whole company.
Both “Create new products/services/business models” and “Improve customer experience of current business” were relatively low, but that was due to the respondents’ majority not involved in product development or customer contact. However, it only shares up to one-third within the entire company. It seems that they are starting DX from an easier area such as business processes. 15% said they are not working on any of the shown DX activities.
Financial resources are necessary for DX. Upon this context, differences depending on the size of the company were revealed; more than 40% of companies below sales of 100 million yen were not doing any type of DX. On the other hand, more than 90% of companies with sales of more than 10 billion yen were engaged in some form of DX.
Since Nikkei ID members are broad across industries, we are able to analyze the purposes for each industry. The telecommunications and related service industry scored high in both "Creating new products, services, and business models" and "Improving the customer experience of existing businesses". “Work-flow restructuring” in the financial industry scored the top among other industries.
What specific measures are companies taking to achieve the goals of DX?
“Remote-work" was the most common and only to surpass the majority, among the departments in which the respondents belonged. “Paperless and eliminating hanko stamps" which is necessary for accomplishing remote-work, could not top the half. Regardless of the size of the company, these top two items were the same. Remote-work is the leading runner in every company.
We asked the respondents to rate the progress of the DX measures on a five-point scale (“Progressing well,” “Progressing fairly well,” “Neither,” “Somewhat struggling,” “Struggling”).
The share of “Progressing well” and “Progressing fairly well” was relatively high for remote-work and online-based business negotiations. We had many responses similar to this -- “Non-face-to-face customer meetings are essential, and we were able to implement them rather smoothly ” (Construction industry / Sales: 100 billion yen to less than 300 billion yen / Executive level).
On the other hand, few respondents referred the successful progress in DX related to products and services and the establishment of DX culture. It seems that they are facing the issues over employees and organization system which is preventing them to make further progress.
“Taking a lot of time with the resistance by senior classes, operational issues such as hanko stamps, and overcoming the IT literacy “ (Food/Pharmaceuticals/Cosmetics industry, Sales: 300-500 billion yen, Section Manager)
“We are having a very hard time with the lack of staff in the IT department and penetrating the DX culture throughout the organization ” (Automobiles/Transport equipment industry, Sales: 10-50 billion yen, Section Manager)
"Development of new businesses/products/services will not proceed further than ideation” (Information processing/System Integrator/Software industry, Sales: 10-50 billion yen, Section Manager)
In fact, human resources and organization system are the top issues when trying to make progress. Overwhelmingly, 60% said the "Lack of human resources and skills" is the problem.
The larger the company size, the score of "Constraints caused by existing systems" and "Renewal of existing systems" rise high. While 16.7% answered "Constraints caused by existing systems" in companies with sales below 100 million yen, the score rose to 34.6% for companies with sales above 1 trillion yen. This clearly shows that legacy systems are dragging the large companies down.
This also applies to the "vertically divided organization” to large enterprises. 30.2% of companies with sales above 1 trillion yen referred this problem, while it was only 10.3% of that in companies with sales below 100 million yen.
About 20% said their companies have achieved the goals of KPIs and KGIs they’ve set in each of the four purposes. Notably, there was large difference depending on the company size over the measures taken, although, there was not much difference in the achievements.
More than 30% of companies with sales over 1 trillion yen have "not yet set the KPIs/KGIs”. Many companies have made the decision to just kick-start amid the pandemic situation.
The reality seems to be -- "We share the main objectives of DX, but lack confidence in setting and solving specific problems. We will need to continue casting about how we should deal with employee training and infrastructure deployment for the next few years.” (Materials industry, Sales: Above 1 trillion yen, Section Manager)