Why do companies feel they "are not meeting customer expectations" despite pursuing DX? Insights from the "Survey on Digital Transformation in Japanese Companies (FY2021)"

Dentsu Digital Inc. announced the results of its "Survey on Digital Transformation in Japanese Companies (FY2021)" in January 2022. While an overview is covered in this article, a notable finding is that nearly 40% of companies feel they are "failing to meet customer expectations" despite advancing DX.Therefore, in this article, we spoke in detail with Yuki Toyama of Dentsu Digital Inc., who led this survey, about the challenges for companies revealed by the findings and the key points for successful DX.

The Evolution of Corporate "DX Promotion Challenges" Over Time

Q. What kind of survey is the "Survey on Digital Transformation in Japanese Companies"?

Toyama: This survey has been conducted continuously since 2017. The respondents are "employees of domestic companies with 500 or more employees," specifically in the following roles: "executive/board member level, division head/business unit head/department head level, section chief level, and team leader/senior staff level." We surveyed a total of 3,000 samples.Back in 2017, there weren't many surveys in Japan asking about the progress of corporate DX. Moreover, a survey targeting large-scale companies with "500 or more employees" was quite valuable at the time.

The survey includes both a section with consistent annual questions for time-series comparison and a section with "timely" questions specific to each year. The latest 2021 survey, for instance, covered current topics like "COVID-19," "SDGs," and "Personal Information Protection Law."

Q. The survey results particularly highlight that "nearly 40% of companies feel they are failing to meet changing customer expectations." Mr. Toyama, who has been involved with this survey since 2017, what are your thoughts on these findings?

Toyama: Since the survey began in 2017, we've been asking about "the status of DX implementation" and "the content of DX initiatives." As expected, the number of companies reporting they are undertaking DX has increased year by year. In the 2021 survey, 81% of companies responded that they have already started DX.Furthermore, the nature of these initiatives is evolving. Initially, efforts were at the level of "implementing tools" or "starting data utilization." However, over the past year or two, we've seen an accelerating shift toward concrete business creation, such as "launching new ventures" or "further expanding existing businesses."

Correspondingly, many companies now cite challenges in advancing DX, such as "lack of DX talent," "inability to train or educate internally," and "needing to start from building the organization."

This aligns with my own observations. For instance, at Dentsu Digital Inc., where I work, the nature of consultations has changed. Previously, many inquiries focused on "applying digital to marketing." Recently, however, we've seen a rise in more innovative requests like "supporting the design of new services or businesses," "providing operational support for new business launches," and "building new organizations for business transformation."I believe this survey has successfully quantified and visualized that shift.

For DX to advance, it's crucial for management to commit to it as a "company-wide challenge."

Q. DX is steadily being implemented. Yet, many companies actually feel they "are not meeting customer expectations." What issues lie behind this?

Toyama: One major finding from this survey is that while society as a whole increasingly recognizes DX's importance and more companies are initiating it, a full 40% still report "not meeting customer expectations." So, what distinguishes companies that report "meeting" expectations from those that report "not meeting" them? The trend shows this directly correlates with the level of DX progress.

What are companies with advanced DX doing? They clearly define their purpose and mission, even if it seems like a roundabout approach. Furthermore, they are advancing DX in close collaboration with top management. This is crucial because driving DX often requires cooperation across various departments within the company and frequently necessitates authority that transcends departmental boundaries. Therefore, commitment from top management is vital.

It's common for companies to create new departments for DX initiatives or new business development, only to struggle to get cooperation from existing departments. Other departments often feel, "We already have plenty of work we need to do; we don't have the bandwidth or see the benefit in actively helping." This situation must be overcome.

That said, the spread of COVID-19 has changed this dynamic.In the pandemic era, with the rise of remote work, DX remains effective for enhancing business efficiency. Furthermore, with the old business styles no longer viable, companies can no longer avoid the imperative for operational and business transformation—such as "we must push forward with digital channel business" or "we must generate leads through digital marketing." The key to success lies in whether the entire company is united in its efforts and whether the necessary organization and talent for advancing DX are in place.

Regarding the shortage of DX talent, a key bottleneck in DX promotion, the concept of "reskilling" has recently gained attention. Reskilling refers to equipping employees with the knowledge and skills needed for new tasks that will emerge in the future.Materials from the Ministry of Economy, Trade and Industry (METI) (*) also state that for DX, "it is necessary for all employees, not just a select few, to acquire digital skills" and that "it is effective not only to hire highly paid digital talent externally but also to develop internal talent." In other words, advancing DX requires not only relying on external talent but also creating an environment where employees who are deeply familiar with the company's business can acquire the necessary skills and knowledge.

As DX progresses, various challenges will emerge, such as whether it is actually producing results and how well it is taking root. In a sense, this is an inevitable outcome. Merely "digitizing" is meaningless.The real question is how to connect this to business transformation and service creation that addresses societal and consumer expectations and challenges. The fact that these execution challenges are becoming increasingly apparent suggests Japanese companies' DX efforts may be transitioning to the next phase. Moreover, the pandemic has significantly altered social structures, accelerating the pace of DX. It may be time to calmly reassess the effectiveness of your company's DX efforts and, if issues exist, reconsider the approach to DX itself.

(※) Source: Ministry of Economy, Trade and Industry, Third Meeting of the Study Group on Human Resource Policy for the Digital Age, "Proposed Initiatives for the Future" (March 2021)