Digital Holdings’ Transformation Through Human Capital Management and ESG, Through the Eyes of CFO

About
Company: Digital Holdings
Employee size: 1,031
Industry: Advertizing
Interviewee:
– Takayuki Kato, Chief Financial Officer
Interviewer:
Chi Tran, COO (Panalyt)
Company Overview
Digital Holdings, originally founded in 1994 as a direct marketing company using FAX technology, has transformed significantly over the years. Initially transitioning into the internet advertising industry, the company pivoted once more in 2020 towards digital transformation (DX) as its core business. This shift aimed to promote industrial transformation (IX) and included the introduction of innovative services like “Connected Pharmacy,” which supports communication between pharmacies and patients via digital platforms, and “ToStore,” a SaaS for managing business information across digital media platforms. These services demonstrate the company’s commitment to evolving industries through digital solutions.
The Role of ESG in Human Capital Management
Trigger for Change
The turning point for Digital Holdings’ focus on human capital management (HCM) was a December 2020 meeting with investors, where ESG (Environmental, Social, and Governance) became a critical topic. This sparked the company’s initiative to integrate ESG into its business strategy. By May 2021, Digital Holdings had established an ESG Steering Committee and rolled out several initiatives, including skill matrix, diversity programs, and innovative working environments like “Anywhere Work” and male-specific parental leave programs.
ESG and Corporate Value
Digital Holdings linked human capital management directly to enhancing free cash flow, reducing capital costs, and mitigating risk—key aspects of corporate value enhancement within the ESG framework. The company applied the International Integrated Reporting Council’s (IIRC) model to break down corporate value into five types of capital, with human capital being one. Investing in human capital, therefore, was seen as a direct path to increasing corporate value.
Aligning Business and Talent Strategies
Purpose and Business Strategy
Digital Holdings’ purpose is to “create new value through industrial transformation and solve social challenges.” This purpose is tightly linked to its business strategy, particularly the “Group DS Innovation 2023” plan, which focuses on two key KPIs: increasing revenue in the digital transformation business by over 400% and improving the operating profit margin in the advertising business to over 5.1%.
Talent Strategy Integration
To achieve these goals, the company implemented a strategy that involves focusing resources (human, financial, and material) on the IX business, while restructuring the advertising business to improve profitability. This included revising the talent portfolio, adjusting evaluation systems, and emphasizing the hiring, development, and promotion of transformation-oriented talent. The overall strategic focus revolved around the theme of “change and transformation.”
Data-Driven Decision Making with Panalyt
Utilizing Data to Drive PDCA Cycles
To ensure the effective execution of its strategy, Digital Holdings adopted a data-driven approach, utilizing the PDCA (Plan-Do-Check-Act) cycle. For example, the company examined the correlation between sales personnel ratios and operating profit margins, using data to inform strategic decisions. However, accessing and integrating data from various departments like HR, finance, and business units proved challenging due to data silos and manual processes.
Panalyt as a Solution
To overcome these challenges, Digital Holdings implemented Panalyt, a data management platform with strengths in complex people data. Panalyt allowed the company to flexibly monitor and analyze various KPIs, enabling more efficient and scalable data integration. Its ability to be customized and updated on the fly made it particularly appealing for the company, helping various departments access and use the data they needed without lengthy implementation timelines.
Overcoming Challenges and Failures
Lessons Learned
While Digital Holdings has made significant progress, it has also faced setbacks. One example was a failed attempt to reduce corporate overhead by transferring employees from corporate to business functions, which led to an increase in outsourcing costs (as the back office workload itself had not changed). This taught the company the importance of aligning KPIs with business context to avoid unintended consequences.
Employee Mobility and Retention
Another challenge arose from frequent employee relocations during organizational restructuring. Analysis revealed a correlation between relocation frequency and turnover rates. Moving forward, the company plans to incorporate this data into its workforce allocation strategy to improve retention and performance.
Conclusion
Digital Holdings’ experience highlights the importance of aligning business strategy, human capital management, and ESG principles. The integration of data-driven decision-making, a flexible KPI framework, and a focus on long-term value creation have been central to the company’s ongoing transformation. As the company continues to evolve, it recognizes that human capital management is not just a responsibility of HR but a shared priority for the entire leadership team, ensuring that every employees’ unique contributions are maximized.
This case study demonstrates how Digital Holdings navigated the complexities of transformation, emphasizing the need for a cohesive approach to human capital, ESG, and business strategy through Panalyt.