Want real growth? Here’s the DX formula every CIO needs to see

It has been quite some time since the term digital transformation (DX) first came into use. However, it is not uncommon to hear companies say things like, “We conducted a PoC (Proof of Concept), but it didn’t lead to results — we’re in PoC hell,” or “We rolled out generative AI company-wide, but usage rates aren’t rising.”

Why is it that, despite such widespread efforts, DX often fails to deliver results? One reason is that the introduction of digital technology itself has become the goal. This is what is known as confusing the means with the end.

The essence of DX is not the digital technology itself, but rather

• What challenges do we aim to solve by introducing digital technology?
• For whom and for what purpose are we providing value?
• Is the value provided firmly linked to results?
• Is the sustained accumulation of results leading to the growth and transformation of individuals, organizations and the company?

In other words,

I believe that the success or failure of DX hinges on whether we can formulate this equation, design a value chain and then execute the strategy while consistently delivering results.

Start by defining the challenges

A typical pattern of DX failure is a product-out mindset, such as “This technology looks promising” or “We’ll implement this IT tool because other companies are doing it.” Of course, Intellectual curiosity in the sense of keeping up with technological advancements is very important, but the moment the introduction of technology or tools becomes an end in itself, DX begins to go off track. The first question we should ask is, “What is the challenge we really need to solve?”

• We want to improve productivity by standardizing and automating our operations
• We want to advance data utilization to enable sophisticated decision-making
• We want to improve customer satisfaction by responding quickly to customer needs
• Addressing labor shortages and preserving the knowledge of veteran employees
• We want to create new businesses and services by leveraging digital technologies and data

Amid various challenges such as these, simply applying digital solutions without first clarifying the specific problems to be solved will not generate the expected value.

The CIO plays a key role in listening to the voices of customers and society, engaging in thorough dialogue with senior management and business units, and articulating the specific challenges that need to be addressed. At times, this requires delving beyond the surface-level facts and issues to uncover the underlying needs and challenges hidden behind the words spoken.

Clarifying challenges is not merely an analysis of the current state; it is the act of selecting which issues among many should be addressed now and determining the priority for their resolution. It requires the resolve to make decisions on where to apply digital technology by effectively utilizing limited resources (people, materials, money, information and time).

Digital is a multiplier

Only after the challenges in management and operations that you wish to address have been clearly defined do digital technologies come into play. However, what is crucial here is not implementation but multiplication. Digital technology does not generate value on its own. It is only when digital — the HOW as a means — is combined with management and operational challenges — the WHAT — that it takes on meaning and creates value.

Digital technology excels in many areas. Thanks to recent advancements, it can now solve a wide range of challenges, including market analysis, forecasting trends and equipment degradation, optimization, strengthening customer touchpoints, transforming tacit knowledge into explicit knowledge, and enabling remote operation, centralization, automation and productivity improvements.

For example, if a company faces the challenge of strengthening its sales capabilities by combining generative AI and data analysis technologies, it can:

• Automatically collect and summarize information on the needs and challenges of customers and society at large and deliver them to sales personnel.
• Create AI agents based on customer personas and have them generate a wide range of needs and opinions that lead to improved customer experiences.
• Use generative AI to automatically create proposal materials for customers.
• As soon as a sales meeting with a customer ends, a daily sales report is automatically recorded in the SFA system and shared with the sales team and supervisors.
• Generative AI analyzes and evaluates meeting histories with customers, and AI agents provide advice on closing deals.
• Transform the customer inquiry response process so that AI agents handle routine inquiries, while humans handle non-routine and complex inquiries.

In this way, digital technologies can be leveraged across all aspects of sales operations and scenarios. Furthermore, by extracting successful patterns from the company’s own sales expertise and standardizing and systematizing them, while simultaneously implementing transformations based on the use of AI, even greater value can be created.

What is required of a CIO here is not only knowledge and skills in digital technology, but also the ability to design the interface between business and technology. Understanding the challenges, taking a bird’s-eye view of business processes, and determining where the application of digital technology will yield the greatest leverage, I believe this design capability is the core role of a CIO.

Without defining value, results cannot be measured

Even if Challenge × Digital is realized, the organization will not continue to move forward unless it can measure whether this leads to value. What exactly is value in this context? Below, I have reprinted the three layers of the Value Pyramid — Functional Value, Emotional Value and Social Value — that I discussed in my second article.

In terms of the value provided by DX, functional value primarily focuses on revenue growth, cost reduction, labor savings and risk mitigation. Emotional value includes providing peace of mind, appeal and connections, while social value encompasses social contribution, addressing environmental issues, fostering a sense of belonging and community, and self-actualization.

Regardless of the type of value being provided, it is crucial to design and define the following when conceptualizing DX initiatives:

• What value does this DX initiative provide?
• What constitutes success?
• Which KPIs will be used to measure it?

If these points are not clarified at the outset of the DX initiative, the value provided becomes ambiguous, resulting in a situation where results and effects are not visible.

The CIO is not only responsible for the technologies being implemented but is also a member of senior management who co-creates value with business units and shares responsibility for results. I believe it is essential for advancing DX to define value in both quantitative and qualitative terms and to establish a framework capable of explaining the return on investment.

Growth and transformation begin only when results are achieved

DX is never a one-off project. The true purpose of DX is to establish overwhelming competitive advantages, achieve sustainable growth and drive organizational transformation. Regarding organizational transformation, simply proclaiming a mission, vision or values is not enough. By combining challenges with digital technology to design environments that continuously create value, and by repeating cycles of success and failure until tangible results become visible, the organizational culture will gradually begin to change.

• In Business Division A, we used generative AI to boost efficiency by this much, resulting in savings of XX yen.
• In Business Division B, each workplace is proactively driving digital transformation, leading to growth for both individuals and the organization, and improving the organizational culture.

As success stories like these begin to be shared internally, DX shifts from being a specialized initiative undertaken by only a select few to becoming the operating system of work that all employees engage with as a matter of course.

It’s okay to start small — just deliver results. When results are achieved, share them company-wide and offer praise, recognition and celebration. Repeating and building upon this process will eventually create a powerful wave that drives transformation across the entire organization.

The CIO must be prepared to see the process through—from implementation and evaluation to rollout and adoption — rather than stopping at a proof of concept (PoC).

DX is a transformation of the organizational culture

Ultimately, by repeatedly moving from problem-solving to value creation and linking that to results and growth, a new organizational culture begins to take shape.

• An organization where both psychological safety and work standards are high.
• An organization that experiments quickly and on a small scale, fails more often and sooner than others, and grows by learning from those failures.
• An organization that transforms and rebuilds its operations with the utilization of AI as a given.

When these principles take root throughout the entire company, DX ceases to be merely a set of initiatives; it becomes the company’s operating system and eventually its DNA.

I strongly believe that the role of a CIO goes beyond merely introducing technology. It involves starting with challenges, integrating digital solutions, defining value and designing mechanisms to consistently deliver results. Furthermore, I firmly believe that through the repetition of this process, we can transform the organizational culture for the better.

Keep solving and refining the equation

The equation Challenge × Digital = Value ⇒ Results ⇒ Growth & Transformation is not something you solve once and forget. As the environment changes, so do the challenges, and digital technology continues to evolve. That is precisely why it is crucial to have the mechanisms and resolve to keep this equation in motion.

In this era of VUCA, the CIO is not merely an IT manager but a driver of business transformation. Using digital technology as a tool, they solve challenges, create value, deliver results and drive organizational growth and transformation. It can be said that the mission entrusted to the CIO is to continuously design and execute this chain of actions.

The essence of DX lies not in technology, but in problem-solving ability. I am strongly committed to working with the organization to continuously refine the formula for mastering digital tools, leveraging them to the fullest and translating that into tangible results.

This article is published as part of the Foundry Expert Contributor Network.
Want to join?