Digital transformation (DX) is considered an urgent need for the Japanese industry. Why is this digital transformation necessary? Here’s why and what we’re already working on.
Digital transformation is an urgent need in Japan
“If Japan cannot achieve this change, it will be left behind by the world and a significant economic loss will be generated from 2025.”
This is not an article that fuels suspicious prophecies and anxiety but is reported in a report summarizing the future trends of the Japanese economy by the Ministry of Economy, Trade, and Industry (METI) based on concrete estimates. What’s important here is the term digital transformation.
Japanese companies are reporting on issues in the “DX Report – Overcoming the IT System “Cliff of 2025″ and Full-scale Development of DX” published by the Ministry of Economy, Trade, and Industry. The challenge is that if digital transformation is not realized, the economic downfall, which has been named the “Cliff of 2025”, will come.
Digital transformation is the transformation of a company’s economic activities into digitalization. It is abbreviated as DX and refers to the entire process of changing the social structure, including a series of transformation initiatives.
The reason why digital transformation is necessary is that many companies in Japan are left behind in the digital environment of the previous era. It is believed to be due to the fact that they continue to use black-boxed legacy systems and are unable to get out of them without revamping them.
Why do you need it? Why is DX in a hurry?
In this way, many Japanese companies are not getting out of the swamp of black boxing legacy systems. What happens if companies don’t get out of it and digital transformation (DX) comes to fruiting?
The cliffs of 2025 are looming
According to a report by the Ministry of Economy, Trade and Industry, the impact on the Japanese economy if digital transformation is not realized is called the “cliff of 2025”.
If you can’t use your data, you won’t be able to respond to market changes, and you’ll end up lacking the flexibility and speed of your business model. In addition, system maintenance costs are bloated, accounting for 90% of the IT budget, and the risk of troubles increases due to a shortage of maintenance and operation personnel.
These technical and personnel debts and the defeat of digital competition can result in losses of up to 12 trillion yen per year from 2025 onwards, which is called the 2025 cliff.
Digital transformation is essential to overcome the 2025 cliff, and the government says companies need to treat it as a priority in their management strategy.
Dx in the world is already progressing
In 2019, Fujitsu Limited conducted a survey on digital transformation around the world and published the results.
The survey surveyed 900 decision makers from companies of different industries and sizes in nine countries around the world. Of these, 87% of the respondents are working on digital transformation. It is particularly high in the financial and transportation industries, and about half of companies say they have achieved results. Even in the relatively low results of wholesale and retail, more than 70% of companies are practicing, indicating that the world’s digital transformation is progressing.
In addition, according to IT market trends from 2020 and beyond, surveyed by IDC, will be transformed into a company that has achieved digital transformation. At the same time, digital transformation and innovation will also intensify the development of digital applications, resulting in an explosion of services and intensifying competition. Edge computing and AI are also becoming more and more, with applications on edge increasing by 800% between 2019 and 2023, It is said that the number of applications will reach 90% by 2025.
In this way, in the years to 2025, the world’s digital transformation is expected to progress rapidly and almost realize. Among them, there is concern that Japan may be left behind by the wave.
Some pioneers who have already realized DX
The world has already begun to move toward digital transformation, and Japan is beginning to feel impatient to feel that it is falling behind it. Under these circumstances, there are already pioneering companies that have realized digital transformation.
DX in medical care that analyzes data that is difficult to quantify with AI
Some companies are enabling digital transformation in the healthcare industry.
In psychiatric medicine, medical information such as medical conditions and medical history is difficult to quantify, so until now, it has been described in the medical record by expressions for each person who filled in. The company, which is engaged in digital solutions in the healthcare field, has succeeded in verbally analyzing such data with artificial intelligence technology and creating a database. As a result, it is expected that accurate and smooth treatment will be possible by being able to reflect it in the case search and treatment of mentally ill patients, which are said to exceed 4 million people.
DX for logistics optimized for trucking with new ICT
In the transportation industry, there are many issues that are solved by digital transformation, and it is a field that is expected to have a significant effect as a countermeasure against labor shortages.
There is an example of working on digital transformation in the transportation industry and using it to calculate transportation costs. It is a mechanism to automatically calculate and optimize transportation routes, truck types, and cargo that minimize transportation costs. Although it has been difficult to optimize with such a combination of multiple conditions, new technologies inspired by quantum computing are being utilized.
DX in the construction industry aiming to realize unmanned construction sites
Even in the construction industry, which tends to be far from digital, there are companies that are realizing digital transformation. It is not related to the surrounding environment such as construction machinery manufacturing, sales, and transportation, but it can be called digital transformation, which has succeeded in digitizing construction machinery itself.
It is an autopilot construction machine called “ICT construction machine” that actually drills the ground and transports earth and sand on-site. Even if the driver’s seat is manned, construction proceeds with a computer that incorporates 3D drawings in advance.
Traditionally, these 3D drawings have been made by surveying with optical measuring machines. However, digital transformation efforts are also underway. The photograph taken by the drone is converted into three dimensions and the drawing is made, the construction simulation is performed based on this, and the fill amount and the cut amount are systematized so that it is calculated.
Along with the transportation industry, it is expected as a way to solve the problems of the construction industry, where labor shortages are regarded as a problem, or in the sense of strengthening the working environment and safety aspects.
Japan’s digital transformation is essential for on-site capabilities
While explaining the outline of digital transformation and what it is like with the related 2025 cliffs, we also introduced examples that have already begun.
As the term “cliff of 2025” implies, Japan’s digital transformation must be realized in a fraction of the time remaining. This is necessary for all industries so that Japan is not left behind by the world, but at present, it is about to lag behind.
However, what I would like to look back on again is the “on-site capabilities” in Japanese industry. This is a different foundation from overseas companies, and Japanese industries have traditionally been a strength, and it can be said that it is a point that cannot be overlooked from the viewpoint of maintaining competitiveness in the future. With regard to digital transformation, which is an urgent need, I think we should seek ways to make use of Japan’s unique strengths. In this sense, edge computing, which processes data on the field side, is a solution that is very friendly with maximizing field power, and it can be said that it is something that we would like to pay attention to in the coming era.
