Newly introduced code aims to promote digital transformation

Management awareness

What we look for is whether management understands that digital transformation is something management must pursue if they want to increase corporate value. It wouldn’t be helpful if they said, “Cutting-edge technologies are all Greek to me,” and left it entirely to the systems department or said, “So how many sales can we make from it?” They would end up killing ideas about business opportunities emerging from staff on the ground. It wouldn’t lead to substantial initiatives. I think top management must believe in the potential of digital technology if management resources are to be allocated appropriately. Of course, they don’t need to thoroughly understand each and every aspect of specific technologies. Still, they need to at least know what’s happening around the world and technology trends.

This is an age in which the face of technology and society can shift overnight. Many companies are setting up departments or teams tasked to promote digital transformation because they are not sure if their business is sustainable. Upper management members must listen closely to discussions by such a team, maintain dialogue with the members and understand the expected impact of digital transformation on their company’s business, before going on to the next step.

We recently finalized the digital governance code, which is aimed at encouraging businesses to voluntarily make efforts by presenting actions managers need to take. Such actions include working out and disclosing a management vision in response to social transformation triggered by digital technology. Using this code, we go a step further, and companies deemed ready to respond to the digital technology-triggered transformation of society, identified through dialogue with investors and other stakeholders, are recognized by METI. This way, we aim to showcase (the importance of digital transformation) to the wider community. As companies recognized come to be chosen as business partners or, for banks, as borrowers, resources in society will be optimally allocated to companies promoting digital transformation. This is what we hope will happen.

In the past, METI and TSE selected “competitive IT strategy companies” and announced them. This year, we renewed and renamed it “digital transformation stocks” and, ahead of their screening in 2021, aligned the selection criteria with the digital governance code I mentioned earlier. Again, a key criteria concerns management’s awareness regarding digital transformation. I hope companies considering applying for the recognition will have this awareness.