What are some of the challenges within Digital Transformation (DX) in Japan?
What is DX?
Digital Transformation has been a recent buzzword that is often heard but exactly what does it mean? In general, it means leveraging on new digital technology to add value to businesses and enhance their ability to compete. As Tetsuo Iwamoto, CEO of I’LL explains – it is the system and human resource strategy for enterprises and more practically, DX is “all the necessary information for business is stored in the key system and are available in digital forms”. Masayoshi Saito, CEO of Net Commerce Inc. provided a different perspective on the ways DX engages businesses and human resource development. He understands DX as a transformation from a human-centred business model where technology takes a supportive role to a technology-centred business model where humans supplement what technology cannot do.
In either case, DX is becoming an important part of our everyday life that companies have to be a part of in order to survive the fast changing markets. However, with DX, it is crucial to go beyond simply a system implementation. There is a need to have a clear vision and strategy, which many companies find daunting. According to DX Report published by Japan’s Ministry of Economy, Trade and Industry in 2018, there still remains a number of challenges in substantiating DX and it is a long way to fully achieve it. In the following sections, we look at the current situation of DX and what the obstacles of implementation may be in Japan, as well as its future prospects.
Major challenges for DX in Japan
- Older systems become a black box
Transitions from older systems are one of the biggest challenges to organisations. It is especially common that these older systems have become a black box, in which none of the current employees in the company are familiar with their usage, simply due to various reasons:
- Engineers who had developed major internal infrastructure previously are now starting to retire, resulting in a lack of knowledge that is being handed over;
- In Japan, it is more common to outsource infrastructure development than to devote internal resources. In addition, systems are usually customised to each company’s needs therefore making them less universal and harder to maintain;
- As shown in the chart below, more than 70% of engineers work for IT businesses rather than engage in internal IT development. This makes the running of regular updates or maintenance of key systems even more difficult.
- Increasing gap between management and employees
Japan’s Cyber Security Minister Yoshitaka Sakurada had recently admitted that he had never used a computer and this attracted much global attention. As unbelievable as it may sound, it well reflects the major problem in many traditional Japanese companies. In fact, DX Reports criticises executive members of management teams in Japanese companies as they do not actually understand what is happening at the work field. As such, employees often find it difficult to get approval for putting innovation into action.
Furthermore, as mentioned above, as Japanese companies have traditionally outsourced the building of their IT infrastructure, it results in executive members within the management team taking less of a risk to make decisions themselves but instead are more eager to accept external advice. Abolishing this gap can be a good starting point to drive DX forward.
- Work-style reform
The government is increasing its efforts in reforming the working style in Japan. The country has had a long-standing culture where it places a great value on long working hours when evaluating employees’ contribution to a company. As such, Japan’s Ministry of Health, Labour and Welfare has taken initiatives to reform traditional work-style mainly due to the decrease of working-age population and the need for a more diverse way of working. This would be a great force to propel DX forward since the large part of manual labour can be streamlined or even substituted by technology.
Nonetheless, a survey held by JUAS (Japan Institute Users Association of Information Systems) in 2017 revealed that more than 40% of Japanese companies spend 90% of their IT-related budget to run and maintain their current systems. It is also worth considering that DX can involve additional manpower and cost which can be relatively high, not all companies will be able to portion out a part of their budget or afford such investments. However, the benefits in the long-run will make it more cost efficient for the organisation. It is therefore essential to understand how an organisation needs to navigate in an era of multiple transformations as this can greatly affect its growth in the coming years. And this will create an even greater impact if their competitors are taking the leap on DX, and therefore might reap the benefits first.
Will this lead to a strong competition for talent within DX?
DX is likely to change how companies runs their businesses, as well as how a company recruits for their team. There will be a higher demand for talented engineers, which would result in a consistent shortage of professional talent. In addition, as professionals with skills and experience in relatively new fields such as Artificial Intelligence (AI) or Internet of Things (IoT) development are rare, companies of all sizes may have to invest in development of internal employees including re-skilling and relevant training.
On the other hand, there are companies which have benefitted from technology for their talent strategies by leveraging on their database and AI. This is great evidence to show that this is a great time for companies to revise their managing systems to possibly expand their business using DX as a springboard, rather than getting swallowed by the tide of digital disruption.
While Japan is experiencing a serious talent shortage, Computer Futures can offer a global tech talent network across 15 countries and one of the world’s largest database. As such, Computer Futures will be able to source the right fit for your organisation, whether the purpose is to propel DX forward or to further establish your presence. If you are a tech professional who would like to find out more about opportunities within the market, please also get in touch with us. You may contact us at [email protected] if you would like to find out more or follow us on our LinkedIn page for more industry related insights.