Many of the Japanese manufacturing industries seen in the field of stock investment are sufficient for the understanding of interested parties (stakeholders) whether they have a sufficient antenna to contribute to solving environmental issues and respond to social issues that are required from the outside. There is a lack of sense of crisis that management reforms such as changes in business areas must be carried out, or even if there is, it is difficult to say that we are proceeding concretely. Therefore, I would like to first confirm the previous research on the traps that are easy to fall into about management reform, analyze the cases of companies that are working to overcome the traps, find "DX thinking", and arrive at the practice of sustainable management behind it.

Specifically, taking the automobile industry as an example, we will verify that we can find the possibility of Japanese companies in sustainable management and the possibility of increasing corporate value through management reforms by breaking through the maintenance of the status quo. As traps that DX is easy to fall into, we found from previous research the lack of commitment of top management, lack of grand design, lack of understanding of stakeholder expectations or relationships, lack of sense of crisis, low understanding of DX, and then the author's own The lack of grand design is mentioned as an item of.

1 Previous research on DX and factors of success

First, in the previous research on DX and management reform, Rogers (2016) listed five areas (customers, competitors, data, innovation, value) that change significantly in DX as management that is conscious of corporate value, and "DX. Attention is paid to the connection of "factors of the corporate mindset that influence the promotion" (customer perspective, advancement of business model, creation of next-generation business) (Tsuji (2019)). The case of management reform found in the DX-type thinking that is currently attracting attention should be a useful suggestion. In addition, from the perspective of management reform, these are organized from value delivery to customers (Value Delivery), internal system creation (Value Creation), monetization system (Value Capture) (Linz, Muller-Stewens, Zimmermann (2021)). However, I think it is effective to review the management.

Among management reforms, in business model transformation (BMX), it is important not only to utilize IT technology but also to orchestrate stakeholders. For example, if the manufacturing process is changed with new technology, the staffing and education of employees will change. In addition, the reason why the technology can be utilized is that AI etc. have been developed and can be used externally, and the ability to recognize external technical information etc. is also important. Furthermore, the ability to interact with the outside through collaboration without being bound by in-house production is also required, and it is necessary to have an antenna that knows not only existing business partners but also a wide range of technology locations.

Regarding the value creation of DX, 6 steps (Albukhitan) of (1) introduction of AI and reassignment of human resources to new business (new business), (2) external sales of systems for in-house production lines (business format conversion), and (3) DX (2020)), (4) Rogers (2016) 5 areas (customers, competition, information, innovation, value) (Tsuji (2019)), (5) DX superficial development leads to improved business performance (Westerman et .al. (2011)), it is appropriate to consider. In particular, Kondo (2020), who included Musashi Precision Industry, illustrated the acquisition of competitive advantage by introducing AI in the manufacturing industry, is interesting.

Next, as previous research and cases related to traps that are easy to fall into from the perspective of DX, (1) Opportunity of DX and failure cases of Japanese companies (Kawai, Nasu, Toyoda (2017)) (Ichikawa (2020)), (2) ) Two traps of DX failure: Pursuing new technology, lack of global goals, (3) Responding to requests from corporations (explanation to related parties): Concerns about conflict between social contribution, corporate interests, and shareholder dialogue Management behavior based on the misunderstanding of (Kato (2021), Strebel (2020)), (4) Conflict of understanding of changes such as narrow perspective of uneven society (other companies in the same industry, affiliates, regions) and shift to environment-oriented (Gane) (2019)), (5) Problems in development centered on large companies (Sebastian et al., (2017)), (6) DX trap: Management issues cannot be linked to digital technology (Case: Rolls-Royce (Linz, Muller) -Stewens, Zimmermann (2021)), etc. can be found.

Regardless of DX, the general consequences of existing business science are (1) management leadership (Tada (2018)), (2) human-independent, high-quality data and skills. Ability to systematize and formalize personal knowledge such as implicit knowledge of human resources and use it as an asset as digital data, new on-site capabilities (Tada (2018), (3) Management that supports research and development (Kawai, Nasu, Toyoda (2017)) will be pointed out as a condition for not falling into a trap.

2 DX's "traps that are easy to fall into" and lack of grand design

First, as issues to be solved in the current situation, we will consider the traps that are prone to management reform and their background, especially for Japanese companies. DX's easy-to-fall traps are often the main issues of management execution and supervision (government), but (1) lack of commitment of top management, (2) lack of grand design, (3) lack of understanding of stakeholder expectations or relationships, (4) Lack of sense of crisis, (5) Low understanding of DX was found from previous research, and (6) Lack of grand design was mentioned as an item unique to the author. What Tada (2018) described in terms of design and big picture has been expanded to the context of management purpose, vision, and mission from the perspective of the author who has been involved in ESG investment.

(1) Insufficient commitment of top management: A case where a command is issued but a subsequent promotion mechanism is not created. It may work if there is initiative from the business strategy department. If the business department takes the leadership, has a specialized team, and has an evaluation axis, there is an 83% chance of progressing to PoC (about the chance of DX and failure cases of Japanese companies (Kawai, Nasu, Toyoda (2017), Ichikawa ( (See 2020)). It has been pointed out that in addition to top management, it is necessary to increase the number of staff to a transformation promotion team of 20 to 50 for large companies (Kotter (1995)).

(2) Lack of grand design: I point out the importance of grand design as my own perspective, which has been involved in ESG investment for many years. It has been pointed out that it is important to draw a big picture in terms of design power in the sense of drawing a new picture as a whole, along with recognizing the changing speed and direction of the business environment (Tada (2018)). Based on this, the significance of the company's existence (purpose) should be defined, and the business domain and content (mission) should be determined based on the desired vision. All of these are grand designs.

(3) Lack of understanding of stakeholder expectations or relationships: Show the overall picture of (2) and communicate internally and externally with it, but if that is not done, the significance of management reform is good. It is not understood and the reform itself does not succeed, or the asymmetry of information leads to underestimation and misunderstanding from outside the company, which hinders the improvement of corporate value (Nambisana, Satish and Maryann Feldman (2019)). In addition, there is no understanding that "awareness of leveraging value facilitators is important" (Onozuka and Kainuma (2021)).

(4) Lack of sense of crisis: It is not possible to overcome the stereotype that management reform should be done after trouble, because it is not in trouble, and it is not possible to instill in employees the recognition that "change is an urgent management issue". It has been pointed out that more than 75% of executives need a sense of crisis (Kotter (1995)).

(5) Low understanding of DX: IT investment is improvement, lack of experience in reform using IT, lack of CIO, IT investment is not measured by ROI (misunderstanding that it is not part of management strategy) ( Kawai, Nasu, Toyoda (2017))), etc.

(6) Lack of recognition that reform is a journey: It seems that the cause is that Why is not questioned, and there is a lack of efforts for the next generation of management and the board of directors to fully understand and continue to change. As a result, it seems to fall into practical problems such as stopping at PoC, premature declaration of victory despite the publication of customer satisfaction survey, and misunderstanding of the dynamism of stakeholders who are internal reform promoters and opponents (Kotter (1995)). is. From this, management needs to face the bigger problem.

3 "DX thinking" and the nine key factors that make up it

Explain what is "DX thinking" that overcomes the traps that companies tend to fall into in management reform. The Ministry of Economy, Trade and Industry (2018) described DX as "Companies respond to drastic changes in the business environment, utilize data and digital technology, and transform products, services, and business models based on the needs of customers and society. , Transforming the business itself, organization, process, corporate culture and culture, and establishing a competitive advantage. " DX from the perspective of business strategy is to change the business content and the source of profit, unlike the digitization of work processes.

Next, in this paper, "DX thinking" is the basis of management transformation including digital technology. (1) Providing value to customers: customers, competition, (2) Value creation (internal mechanism) (Making): Manufacturing process aspects (data, innovation), corporate culture (risk tolerance, outward orientation, diversity), (3) Value conversion (monetization mechanism): Value to be created (Linz, Muller- Stewens, Zimmermann (2021)) added the author's unique perspective of "government," which includes a board of directors that supervises management as an important aspect of value creation in (2) and determines the long-term corporate direction. There are nine. In other words, "DX thinking" includes thinking circuits, values, and culture in management reforms aimed at redefining business models and business areas using digital technology.

When a company is in a difficult (prone to fall trap) in setting and implementing a business strategy (for example, when the automobile industry has changed significantly from an internal combustion engine to an EV but allows the status quo to be maintained), the management makes progress. If you think that you have no choice but to introduce the following digital technology into the management of the manufacturing industry, you must at the same time realize the need for creating an agile value creation mechanism and an outward-oriented culture.

On the contrary, if the organization of the company originally has a corporate culture that is common to "DX thinking", it will be possible to succeed in management reform through DX without falling into a trap that is easy to fall into. However, as mentioned in the "Introduction", Japanese companies generally demand to maintain the status quo and lack the spirit of change and risk-taking to flexibly change their business areas in response to changes in social needs, and are inferior in "earnings power". Therefore, when the manager of a company in the "easy-to-fall trap" notices DX thinking and fully embeds it in the organization, it is thought that business development in line with social issues will bring about profit expansion. Here, "dialogue with legitimate investors", which has disclosure by SASB approach as one of the antennas to social issues and knowledge to the industry, is to acquire long-term sustainable profit opportunities through management reform through DX. It can be expected to increase the feasibility. In the process, the shareholders supervise the management to improve the shareholder value, and the board of directors (including the nomination compensation committee) in which the outside director who is the representative of the shareholders participates is the premise of the continuing company to improve the corporate value. Design incentives and discipline for. Therefore, it can be said that a sound restraint relationship works between the manager who implements the management reform and the board of directors who supervise it.

The hypothesis to be verified in the case study is that "a company that succeeds in reforming toward sustainable management overcomes the trap that is easy to fall into by" DX thinking "." Sustainable management is indispensable for improving corporate value, and its realization involves management reforms that match the business environment. We will show that companies with successful management reforms have overcome the traps that are easy to fall into by "DX thinking".

According to Tsuji (2019), "factors of corporate mindset that influence the promotion of DX" are the basis of management reform including the utilization of digital technology.

Figure 1 Nine key factors that make up "DX thinking"

(See below)

Source: Created by the author with reference to Masanori Tsuji (2019), Rogers (2016), Linz, Muller-Stewens, Zimmermann (2021)

The characteristics of the required 9 items were described after clarifying whether they were digital technology or related to the organization / culture. In the reform of value improvement in the automobile industry where DX is indispensable in an environment where the business model has to change rapidly, changes from the perspective of DX (for example, co-creation with customers, collaboration with competitors, next It is shown that not only the creation of generational businesses) but also the transformation of organizational culture (playfulness, openness, diversity, etc.) are important. A case study will be conducted in Part 2 according to these nine items.

4 Strategic development of business areas

After going through the above considerations, experience as an investor, and the process of case studies, the manufacturing industry has found that sustainable management is supported by DX thinking and that "layered development" in the business domain is realized. In the case of Musashi Precision Industry, which will be described later, the external environment may change significantly due to the end of the war. As a company that made aircraft parts suddenly lost its needs and had to make major changes in its business domain, it was jumping into a sewing parts manufacturer and a new "layer" rather than a related industry.

First, Linz, Muller-Stewens, Zimmermann (2021) divide the changes in the business model and business domain into four quadrants in the reform of the business model. According to this, the business model transformation matrix is ​​four business models centered on product customization and transaction inclusion. The inclusion of transactions may change from a "product base" that makes automobile parts to a "platform" type, for example, selling the product inspection process as a single system. Alternatively, it may move from just producing parts to customization and to the business domain of project-based product offerings.

Figure 2 Evolution from a product business model to a platform business model

(See below)

Created by the author from Linz, Muller-Stewens, Zimmermann (2021)

On the other hand, in this paper, we have added one dimension to Linz, Muller-Stewens, Zimmermann (2021), and named the state of advancing to a completely new business area or expanding significantly as "layered development".

Figure 3 "Structural development" to expand existing and new business areas to new layers

(See below)

Created by the author

In Figure 3, the upward change is considered to be "expansion / dramatic change in business domain". "Dramatic" of business, that is, expansion and change to completely different fields, horizontal change of business is "high and low of customization of products and services", and whether the business model is for mass or customized Shows the change in the direction of increasing added value. The change toward the back is the "high and low of transaction inclusion", that is, the business model. Replaced more generalized diagrams, businesses 1, 2, etc.

Replacing with the current example, companies will know that the world is seeking carbon neutral as a social issue with the antenna set up in sustainable management. In the automobile industry, even if there is a debate that hybrid cars and diesel cars are desirable, it may be possible to politically choose only electric cars (EV). If there were any companies that used to have gasoline engines as their main product, they would understand that they would run out of work. Even if you follow the changes of the finished car manufacturer, if you enter EV from the electrical industry etc., the industry will be shaken by the crustal movement and you may lose your job when you notice it.

In the manufacturing industry, one of the means to save this is technological innovation such as DX, and it has already been mentioned that "DX thinking" will be necessary to accept it and make an appropriate constitutional change. In many cases, constitutional change will change the main business area. Although the historical meaning is different from the end of the war, the ban on domestic airplane production, and the substantial ban on internal combustion engine to prevent global warming, it is an opportunity for companies to select and grow their business portfolio, and it is also a constraint.

References are omitted. For more information, please contact us at contact@eminentgroup.ltd.