It is possible that digital transformation (DX) will bring about not only internal change but also new services and businesses that tear down industry barriers. We asked KDDI Digital Design’s President Yasuaki Kuwahara and Vice President Hiroshi Tatematsu what business models they see that Japanese companies can create and successfully bring to the global stage.

Link to article on Part 1

The Future That DX Will Bring Part 1 :　KDDI Digital Design Taking on a Challenge

Form “Economic Bloc” Tie-ups to Gain a Deeper Understanding of Customers

――In the last interview, you used the phrase “economic bloc” comprising the customer base of the two companies. Where does this come into play with respect to DX creating new value?

Kuwahara: Last time, I described our 50 million corporate and retail customers as an “economic bloc.” An economic bloc has gravity, and the source of this gravity is big data. If you leverage big data effectively and get different economic blocs to work together, you’ll attract various players. But if economic blocs don’t work together well, not only will you fail to create gravity but you’ll also fall behind the rest of the world. That’s how things work in business today.
KDDI’s economic bloc has hundreds of thousands of corporate customers across a range of industries, so companies will be able to forge partnerships when implementing DX and create gravity.

Tatematsu: Companies collect various customer data through their businesses, but they have no clue when it comes to parts of customer data that have no direct connection with their own business. Take an automaker. It has a wealth of data about what customers do when they’re riding a vehicle, but doesn’t know what customers do when not riding a vehicle. Going forward, an automaker needs to understand what motorist customers are interested in besides automobiles and propose new services—or else it won’t be able to enhance CX. If it gets connected to a company that does have such data, they will share customer data that they wouldn’t have had on their own, and analyze the data so they may be able to provide even greater CX. This is new value created through a tie-up of economic blocs.

Assessing a Prospective Partner is Key

――What do Japanese companies need to focus on when tying up economic blocs?

Kuwahara: Whether a tie-up will truly enhance the value provided to customers, and whether a win-win scenario can be envisioned. It’s important to gauge whether these are possible with the prospective partner. Another point to note is that a tie-up means putting together two companies’ precious customer assets, so they need to have a firm determination before doing so.

Tatematsu: As companies form economic bloc tie-ups with a variety of industries and enterprises, there may be times when they have to do away with their legacies. A Western-style management might split off a segment without any hesitation, sell it and be done with it, but Japanese companies can’t do that, and in fact they shouldn’t. Western counterparts may view this as a slow development, but there must be a way that Japanese companies do things that is distinctively theirs. When it comes to improving CX in particular, Japanese companies have higher awareness of CX and thus they can be on the same page with different companies and pursue the same vision—this should give a clue.

Transforming a Company’s Own DX to True DX That Has an Impact on the Industry as a Whole

―― What’s your advice to companies that are starting to pursue DX?

Tatematsu: DX is a long-term effort. Say DX 1.0 contributes to a company’s business transformation and DX 2.0 changes its business model itself. The next step would be to work on DX that would destruct the industry as a whole and create new value. In doing so, a company may need to drastically change its business segments. This would require strenuous work, but unless you go to that extent, you won’t be able to achieve true growth.
Still, for a company that is just starting to work on DX, enhancing its CX and forming a cross-industry tie-up would present too high of a hurdle. So instead, they might consider digitizing small, everyday tasks one by one—such as coming up with a digital solution for affixing 10 seals on a document. Through such business reform process, companies will notice new things and accumulate experience, grooming employees into digital technology-capable personnel. It’s important for managers to use short-term and medium-term timeframes in different situations and move things forward.

Kuwahara: DX is not just a trend and it’s becoming a strategic means and foundation. Companies need to implement DX1.0 to automate operations to enhance efficiency and cut costs to generate funds, and carry out DX2.0 to enhance CX. Unless they do both of these, they won’t be able to continue using DX as a strategy. Down the road, they will also face the question of how to go beyond reform for individual enterprises and battle together as a unified Japan. We hope to facilitate engagement for companies, helping to accelerate the pace of change brought on by DX and broaden their economic blocs, and to contribute to enhancement of the competitiveness of corporate Japan—and Japan as a country.