Organizational Operating Systems: The Key to Success or Failure in Digital Transformation

"OS" is everything

The once thriving Japanese AV industry and mobile Internet industry were turned on their head in 2007 with the advent of iOS and Android.

For a long time, manufacturers had benefited from an industrial structure in which handsets were developed according to the specifications specified by mobile carriers and specialized services were placed on top of the handsets.

The contrast between Apple and Japanese electronics makers is often highlighted, with many attributing Apple's success to its intuitive user experience. However, the real decisive factor was Japan's failure to develop an 'OS' suited for the smartphone era. In my view, the key reason for Japan's defeat was their lack of awareness in developing an 'OS' fit for the smartphone era.

However, Japan's "next core industry" lost the OS at that time and is now struggling on a new level in the "digital platformer era" that continues to this day.

OS for Digital Transformation

I believe that the analogy of OS can be applied to the current DX situation, where we are now in the stage of calmly analyzing the results after the buzzword period.

There are many large companies that have the sufficient number of excellent ideas as software and excellent human resources as hardware, but are they really able to keep their antennae up for a sustainable OS that will continuously generate such hardware and software? The OS here refers to the decision-making mechanism of the organization. Without a good OS, software will be affected by differences in hardware standards and performance, and for hardware, software that can fully demonstrate its performance will be limited.

Even if a successful 'DX' initiative emerges without a solid OS, it will likely be an accidental, temporary success, with no guarantee that similar results will follow.

The type of OS in a DX-friendly organization

As a venture capitalist who invests in seed stage DX startups and as the operator of STORIUM, a platform that organically links startups and large companies, I have had many conversations with many large companies. The phrase "continuously and breathlessly" is awkward, and "common thread" is a clearer expression than "common denominator.

The biggest common denominator is the simple and clear stance of "management taking ownership of risk". A similar but equally important stance is 'management taking ownership of risk hedging.' However, I believe this approach is a key reason why many companies fail to transform.

This is the real reason why many companies are unable to transform themselves. To make matters worse, the management team that examines the business plan often does not have the intuition of the software business and is not the user persona of the business plan in question. The system that is supposed to nurture innovation has become a system that nips the seeds of innovation in the bud.

The "Ashita Conference" is a precedent.

One of the unique internal systems at CyberAgent, now one of the largest Internet conglomerates in Japan, is a business creation/improvement mechanism called the "Ashita Conference. The details of the system are as follows.

Asatsu-Kaigi
The "Ashita Meeting" is a meeting to propose and decide on new businesses and ways to solve problems that will lead to CyberAgent's "tomorrow (future)". The meeting, held once or twice a year in the form of a retreat, involves executive officers selecting business managers and experts in their fields to form teams. The teams are judged by the representative, Mr. Fujita, and compete for points.

For about one month after the teams are formed, each team determines the market trends and areas to be strengthened, and after gathering business ideas and issues from the field, they deliberate on them over and over, resulting in a concentration of the best ideas. The committee functions as a forum for the creation of new businesses and the resolution of management issues.

These discussions have led to the establishment of key businesses for CyberAgent, such as its gaming division, and the creation of specific departments to oversee employee well-being and ensure the right person is in the right role. A management system that allows for appropriate evaluation even in diverse work styles, etc. Many systems that can respond to both offense and defense, so to speak, have been created in order to avoid various risks in the mid-to-long term and continue to grow.

As a result, new businesses have contributed to business expansion, generating cumulative sales of approximately 325.9 billion yen and operating income of approximately 45.5 billion yen*. As of September 30, 2021

Source: "Ashita Conference" supporting CyberAgent's sustainable growth

The key point is that the proposals made by the board of directors themselves are not the same as the proposals made by the company. The key point is the rule that each director heads his or her own proposal team and is responsible for all aspects of the project, from business proposals and strategy implementation after approval, to growth and exit.

It is also noteworthy that the president of the company takes a vote on the spot and the commercialization of the business is completed immediately. I have seen some large companies in traditional industries steal the best parts of the systems of advanced IT companies and boldly put them into practice.

DX is a situation that cannot wait and cannot be turned back. In the past, the opportunity was open to anyone to acquire Android and change the very playing field of the mobile communications game, and anyone could have at least drawn a blueprint for partnering with Qualcomm and pushing forward with structural reforms in the semiconductor industry.

I strongly hope that in the 2020s, many Japanese companies will be able to question the existing environment and create their own internal and external operating systems, rather than accepting the existing environment unconditionally.

References

• サイバーエージェントの持続的成⻑を⽀える「あした会議」