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HOME NRI JOURNAL The Role of Management in Digital Transformation


Innovation magazine that generates hints for the future


The Role of Management in Digital Transformation

Ichiro Morisawa, Managing Director and Deputy Division Manager, Consulting Division, Nomura Research Institute (NRI)



Sep. 03, 2019

While Digital Transformation (DX) initiatives are being taken in more and more companies, on the other hand, we also see an increasing number of clients who are dissatisfied with their companies’ progress in this field. The major reason behind this is their difficulty in coordinating between departments. In other words, the main challenge for companies in promoting DX does not lie in the digital aspect, but rather in the transformation aspect.
As a long-term and large-scale project, achieving DX requires that certain defined steps be followed methodically. These include the establishment of a cause, assurance of consistency in individual projects, and clarification of the responsibilities and authorities for achieving goals. From this standpoint, we would like to specifically consider the management’s responsibilities for the realization of DX.

The transformations that Japanese companies have been undergoing might be hindering DX

To transform a company, it is necessary to establish a cause for that transformation. Most of the transformations that Japanese companies have undergone so far have been a result of business failures. This trend is emerging in DX as well, and it is certainly not right.
In the case of cost structure reforms, which have clear goals, methods, and deadlines, the more pressing the issue is, the clearer the need for transformation becomes, and the smoother it can proceed. There is, however, a risk in implementing reforms, such as DX, that require the implementation of continuous initiatives over a long period of time. This is because goals and methods change with circumstances, and as time passes and the business environment changes, they may become irrelevant. dditionally, due to countless similar cases, Japanese companies are tired of transformations emanating from business failures.
In such an environment, the management needs to establish a universal cause that is not affected by the passage of time or changes in the environment, and promote it throughout the company. To be specific, I think an effective cause of transformation would be one that is based on the corporate philosophy, i.e., the company’s mission, vision, and value.

The formulation of a roadmap is important for company-wide DX

In order to achieve DX, individual initiatives led by business divisions as well as various other initiatives need to be implemented in parallel. Other initiatives include organizational restructuring, planning and implementation of new systems, and reformation of the existing system. In addition to executing tasks promptly at the workplace, some initiatives should be addressed from a company-wide perspective as well, and the timeline for each of these initiatives is different. Therefore, if we do not understand these factors and ensure consistency, discrepancies will inevitably occur, delaying the progress.
However, since the DX initiatives have started to expand rapidly, business divisions tend to prioritize their initiatives before those of the company. Furthermore, companies tend to emphasize the speed of implementation and hesitate to reinforce company-wide regulations, considering their impact on the workplace. As a result, the company-wide vision and framework are given secondary importance, while divisions take the required initiatives by themselves.
Even though a roadmap that defines company-wide policies is extremely important, the formulation of one for DX is falling behind. Companies that have not yet formulated such roadmaps should take immediate action. They should understand the individual initiatives being taken across the company, establish a connection among them, and clarify the initiatives that must be taken care of at a company-wide level. In particular, those that have a significant impact on other initiatives should be strictly managed under the direct control of the Corporate Division.

As DX initiatives are generally led by business divisions, there are some cases where the goals, responsibilities, and authorities for each initiative are left unclear at the corporate level. Although there is no problem with business divisions taking the lead, there is often a requirement for company-wide coordination, so it becomes necessary to have a system in place that facilitates such coordination.
To resolve these issues, it is effective to reestablish the goals, responsibilities, and authorities for each initiative as a part of the formulation of the roadmap. It is also important to use the roadmap as a means to support smooth company-wide progress and not to deprive business divisions of discretion.

DX is often led by business divisions only; hence, company-wide bottlenecks impede its progress. Eliminating bottlenecks is the responsibility of the management. To establish a corporate culture that continues to change for the better while steadily reaping the benefits of various initiatives, the management must display strong leadership to ensure consistency at the company level and navigate the cross-divisional implementation of initiatives.

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