Hello, this is Matsubara, CRM Evangelist.

"We must promote DX (Digital Transformation)."

Ninety percent of business leaders say this. However, very few can systematically explain "what, in what order, and for what purpose" they should digitize.

The reason is simple: they don't have a blueprint for digital transformation (DX).

When building a house, if you just line up walls and windows without a blueprint, you end up with a collection of disparate rooms. The same applies to a company's IT systems. If you keep installing software because it seems convenient, or adopting a tool because another company is using it, you'll end up with a multitude of systems that don't connect with each other, data will become fragmented, and digital transformation will remain just a slogan forever.

The three concepts of "SoR, SoE, and SoI" form the framework of this blueprint.
AndUnderstanding the role of CRM within this three-tiered structure is the first key to understanding the essence of CRM 4.0 (Creative CRM). will be important.

"DX is not about improving business operations"—the essence revealed by the gap between Japan and the US.

Before discussing the essence of DX, we must first face reality.

While American companies aim to literally "transform" their products and services with "DX," many Japanese companies are still focused on "digitization" (IT implementation of business processes) or "digitalization" (streamlining business processes).

In the United States, more than 70% of companies recognize results related to "innovation," compared to less than 40% in Japan. This difference in figures indicates not a difference in the amount of digital investment, but rather a difference in the philosophy of "what they are trying to achieve with digital . "

In Japan, "defensive IT investments (maintaining and improving the efficiency of existing operations)" still account for the majority of the IT budget, and progress has not been made in shifting to "offensive IT investments (creating new customer value)."

The ideological map that bridges this gap is the three-layered structure of "SoR, SoE, and SoI."

What are SoR, SoE, and SoI? — The roles of each of the three layers

SoR (System of Record) — "System of Records"

This is a system for recording various types of business data. Examples include accounting systems for recording financial information and systems for recording order and receipt data (ERP systems). Designed for the purpose of long-term storage of accurate data, it features a static data structure.

The most important thing: "Integrity"—the ability to store data accurately over long periods of time.

Typical examples: ERP (Enterprise Resource Planning), accounting systems, human resources systems, inventory management, sales management systems

Design Philosophy: Not a single yen off is acceptable. It must never stop. Data must never be lost. — High reliability, high availability, and integrity are paramount.

This area of ​​Systems of Record (SoR) has traditionally been the main responsibility of the IT department. However, the important point is that SoR is merely a "record of what happened" and does not have the power to indicate "what should be done next . "

SoE (System of Engagement) — "A system of customer interaction"

This system is designed to improve the connection between companies and customers and strengthen relationships. It includes CRM subsystems that implement optimal measures based on customer behavior and attributes, and recommendation systems that display recommended products based on purchase history, and is considered of utmost importance in digital transformation (DX).

The most important thing: "Flexibility and versatility" to respond to customer needs.

Typical examples: E-commerce sites, smartphone apps, social media, marketing automation (MA), contact centers, point-of-sale (POS) systems.

Design Philosophy: Flexibility and speed to adapt to change are top priorities. Because customer needs change daily, our designs are based on the premise that required functions and business objectives will evolve over time.

When it comes to creating new customer experiences and opening up new points of contact with customers through digital transformation (DX), SoE (Systems of Engagement) is at the heart of it.

An important reality: Simply expanding and repurposing existing IT departments makes it difficult to build a System of Engagement (SoE) and transform it into a DX (Digital Transformation) driving department. Systems of Record (SoR) and SoE are fundamentally different concepts, and SoR specialists cannot simply take on the role of SoE.

SoI (System of Insight) — "A system of insights and knowledge"

It's a system that analyzes data and derives insights that are valuable to the business. And here's the most important point— CRM is the only business system that can truly deliver SoI.

The only system that fits this description is a CRM system that centrally manages data related to business resources, analyzes customer information and sales data, and proposes effective measures.

The most important factors are: "processing speed" and "depth of insight" for analyzing large amounts of data at high speed.

The role of SoI: In the PDCA cycle, SoI is responsible for "planning measures (Plan)," "analysis and evaluation (Check)," and "considering improvement measures (Act)." SoE "implements for the customer (Do)," and SoR "accumulates the obtained data"—only when all three are in place can the DX cycle begin to run.

"The Power to Connect" - Why SoI is of the Highest Importance

Why is SoI the most important layer in the three-layer structure?

SoR and SoE have a structural problem in that they "cannot communicate directly" with each other.

SoR (Systems of Record) is a "record of past events," while SoE (Systems of Engagement) is a "current point of contact with the customer." If these two systems remain separate, insights into "what the customer will need next based on past data" cannot be gained.

SoI stands between SoR and SoE, acting as a bridge to integrate and analyze data from both to generate "insights for the next action . "

Simply using digital technology to streamline operations is not enough to constitute digital transformation (DX). True DX involves fundamentally changing the business model itself and setting it apart from competitors. Therefore, data utilization—that is, Systems of Information (SoI)—is the most important factor in DX.

And the core argument of this series is that CRM is the only business system that can fulfill this SoI (System of Employment).

The market reality of the three-layer structure and SoI.

The SoI market has been growing at a CAGR of 16.7-24.2% since 2019 and is projected to expand to up to $130 billion. This figure indicates a rapidly increasing demand from companies for the ability to "extract insights from data."

On the other hand, many companies believe they have "implemented" SoI, but in reality, they are only "looking at the data."

Having data and extracting insights from that data are two completely different things.

In the next installment of this series, Part 2, we will answer the question, "Why is CRM the only system that can fulfill the role of SoI?" by tracing the history of CRM's development. We will then explain how its role as SoI has deepened throughout the evolution from CRM 1.0 to 4.0.

Summary – Key points of the three-layer structure

Why SoI is the most important in DX: It is the only layer that bridges the gap between SoR's "historical records" and SoE's "customer touchpoints," generating insights into "what to do next." Without these insights, DX cannot go beyond "digitalized business improvement."

Next episode preview: [DX and CRM Series, Part 2] Why Only CRM Can Handle SoI — The Evolution from CRM 1.0 to 4.0 and "Deepening Insights"

Related article: [What is CRM 4.0? — The latest CRM philosophy and practices that realize "co-creation" with customers]

Related article: [Where should small and medium-sized businesses start with sales DX? – 3 steps to avoid failure]

Related article: [Is customer data an "asset" or a "liability"? The difference between CRM that simply accumulates data and CRM that actually utilizes it]