DIGITALIZATION: TACKLING THE DIGITALIZATION CHALLENGE

Transcription

1 DIGITALIZATION: TACKLING THE DIGITALIZATION CHALLENGE TIHINEN MAARIT, PhD Senior Scientist, VTT Technical Research Centre of Finland Project Manager (IPMA level-c)

2 CONTENT Current situation in business Recent technology opportunities Examples of solutions Model for tackling digital transformation

3 INDUSTRIAL INTERNET BAROMETER 6/2016 Barometer was organised by VTT, UoO and Tivi Questionnaire was open : The link to the questionnaire was sent by s The barometer was also available and advertised on Tivi and TEKES web pages A total of 58 respondents No 38 % Yes 62 % Electronics and electricity industry Information and communication 8 Machinery and metal products industry 2 Real estate activities (incl. the building automation) 6 Professional, scientific and technical activities Public administration and defence Education Finance and insurance activities Breakdown of Industrial Internet exploitation Figure. Business scope (N=58) Tihinen, Maarit; Kääriäinen, Jukka (Eds.) The Industrial Internet in Finland: on route to success? VTT Technology: 278. VTT, Espoo, 84 p.

4 INDUSTRIAL INTERNET BAROMETER 6/ < > 1000 Organisation size. Number of employees (N = 58)

5 INDUSTRIAL INTERNET BAROMETER 6/ The first year when Industrial Internet was included in companies strategies (N = 31)

6 INDUSTRIAL INTERNET BAROMETER 6/2016 Our customers are not mature with digitalisation or new technologies Our employees are not willing to participate in any digitalization activities. Our top-management is not interested in that topic. We have not thought about that topic yet The ROI (return of invest) is unclear Too expensive in relation to the current situation (it s ok now) We do not have enough budgets. There is no need in our industry We are lacking skilled employees We have not time to be familiar with their possibilities or potential (not enough knowledge) Possibilities and alternatives are under studying Possibilities are not known 13 Technologies are not suitable for our business 7 Some other reason, what? The main reasons for not exploiting the Industrial Internet s possibilities (N = 22)

7 INDUSTRIAL INTERNET BAROMETER 6/ < 1 year 1-2 years 2-3 years 3-4 years 4-5 years > 5 years never Timeframe for starting to exploit (N=22; not exploited yet)

8 Main reasons for exploitation (N = 36; already exploited) INDUSTRIAL INTERNET BAROMETER 6/2016 Some other reason, what? It has increases our company s revenue substantially. It has enabled to identify and utilise new revenue streams. It has improved efficiency inside our company (e.g., new IT systems, process changes). It has enabled cost savings inside our company (staff, support services ). It has improved our services /products availability and opened new markets with via delivery channels. It has increased our services /products visibility and desirable. It has enabled to achieve better customer satisfaction. It has supported our company to be profiled as a forerunner and an innovative company. It has enabled to do branching outs or to work in new customer segments. It has helped to maintain our current customer segments. It has improved security of our products and/or security of our company. It has improved quality and availability of our services and/or products. It has increased our company flexibility and/or agility. It has enabled faster and up to date decision makings. It has opened new possibilities to create new customer relationships. It has enabled transparency /visibility to company activities and this way increased trust to our company in current operating networks. It has provided new service /product concepts via totally new business opportunities (/models). It has created new possibilities for expanding current business concept(s)

9 INDUSTRIAL INTERNET BAROMETER 6/2016 Activities to be performed in the near future (Yes, N = 36; No, N = 22) Increasing general awareness of digital transformation and Industrial Internet Increasing awareness of the strategic importance and impact of digital transformation and Industrial Internet Getting Industrial Internet visible in company s strategy Providing a vision and a roadmap where Industrial Internet is included Studying possibilities and benchmarking of competitors Changing mind sets of the company towards positive of Industrial Internet technologies Increasing knowledge and skills (incl. recruiting) Identifying potential business partners and networking Enhancing current services/business concept utilising Industrial Internet technologies Developing new business models to meet new business potentials Calculating ROI and estimating impacts Identifying and planning new commercialisation service(s) Increasing security of services/products or increasing security inside the company Defining rules for data sharing in collaboration networks Digitalising company s own processes or work practises with new IT systems or applications Some other means, describe? Yes No Total

10 INDUSTRIAL INTERNET BAROMETER 6/ year 1-3 years > 3 years Not yet exploited (N=22) year 1-3 years > 3 years Already exploited (N=36) Increase greatly Increase slightly Stay the same Investments in the near future (N = 58)

11 INDUSTRIAL INTERNET BAROMETER 6/ RESULTS IN BRIEFLY In those companies that new Industrial Internet technologies or possibilities weren t exploited, the identified main reasons for non-exploitation were lack of information and knowledge. In near future: They will increase awareness of the strategic importance and impact of digital transformation and Industrial Internet. They will identify potential business partners and networking. Correspondingly, in those companies where Industrial Internet possibilities were already exploited, the following activities were identified to be performed in near future: identifying and planning new commercialisation service(s). providing a vision and a roadmap where Industrial Internet is included. Companies have realised that the digital transformation does not happen by itself!

12 RECENT TECHNOLOGY OPPORTUNITIES: - EXAMPLES OF TECHNOLOGY TRENDS AND THEIR UTILIZATION Big data Analytics Amount of data is continuously increased; 59% annually Virtual simulations: Predictive simulations in use AI, deep learning A new wave in continuum: factory automation, ERP (Enterprise Resource Planning), mobile, IoT, industrial internet, big data, AI, Digital twin Innovative way to design product, even production lines and factories

13 AMOUNT OF DATA IS CONTINUOUSLY INCREASED - INFORMATION MANAGEMENT HAS TO BE DEVELOPED Live Digital Twin Semantic product model Document hotel Filing cabinet Camp fire stores

14 BIG DATA ANALYTICS Gartner Newsroom: STAMFORD, Conn., June 27, Worldwide information volume is growing annually at a minimum rate of 59 percent annually, and while volume is a significant challenge in managing big data, business and IT leaders must focus on information volume, variety and velocity. Volume: The increase in data volumes within enterprise systems is caused by transaction volumes and other traditional data types, as well as by new types of data. Too much volume is a storage issue, but too much data is also a massive analysis issue. Variety: IT leaders have always had challenges while translating large volumes of transactional information into decisions now there are more types of information to analyze mainly coming from social media and mobile (context-aware). Variety includes tabular data (databases), hierarchical data, documents, , metering data, video, still images, audio, stock ticker data, financial transactions and more. Velocity: This involves streams of data, structured record creation, and availability for access and delivery. Velocity means both how fast data is being produced and how fast the data must be processed to meet demand. While big data is a significant issue, Gartner analysts said the real issue is making sense of big data and finding patterns in it that help organizations make better business decisions.

15 BIG DATA ANALYTICS - BENEFITS Big Data analytics helps organizations harness their data and use it to identify new opportunities or new business possibilities, and assists with smarter business decisions, more efficient operations, higher profits and happier customers. 1. Dialogue with consumers (e.g., suggest an offer on a mobile carrier, on the basis of a consumer indicating a certain need in the social media) 2. Re-develop your products (e.g., test thousands of different variations of computer-aided designs, analysis of unstructured social media text) 3. Perform risk analysis (e.g., allows you to scan and analyze newspaper reports or social media feeds so that you permanently keep up to speed on the latest developments in your industry and its environment) 4. Keeping your data safe 5. Create new revenue streams (e.g., analyzing your market and its consumers) 6. Customize your website in real time (e.g., personalize the content or look and feel of your website in real time to suit each consumer entering your website) 7. Reducing maintenance costs (predicative actions taken based on analysis) 8. Offering tailored healthcare (with human genome mapping and Big Data tools) 9. Offering enterprise-wide insights 10. Making our cities smarter (e.g., reduced street lighting energy consumption)

16 EXAMPLES OF AI SOLUTIONS Search: Google etc. (data analytics and machine learning ML) Amazon and Netflix (recommendation engines) Gyber security, viruses (ML) Stock and currency trading (ML) Credit card fraud detection (ML and pattern recognition) Chat bots, customer service (Natural Language Processing NLP) Security checks on airports (Machine vision and pattern recognition) Image recognition (deep Neural Networks NN) Diagnostics in narrow fields of medicine (Machine vision, ML) HR, Requirement process (NLP)

17 AI: IMPACTS ON INDUSTRIES Adoption of AI is fastest in hightech/digitalized industries: ICT, telecom Automotive and assembly Finance services Energy and resources Media and entertainment Transportation and logistics Etc. Source: McKinsey Artificial Intelligence The Next Digital Frontier? Discussion Paper, June 2017

18 EXAMPLE: CARS DRIVING ITSELF BMW: Tesla: Etc.

19 DIGITAL TWIN: STUDENTS DEVELOP NEW INNOVATIONS FOR A SMART CRANE ( ) There new solutions can be simulated with the crane s digital twin i.e. the virtual copy of the crane and its automation system. The digital twin develops according to data produced by the physical crane making it an exact replica. The twin can be used for simulations and in product development, which then is based on real data and not on assumptions. Digital Twin of smart crane ILMATAR: The real and virtual devices use the same real automation (PLC) code. Virtual commissioning of the Digital Twin enabling real simulation. Closed loop from the real machine to its Digital Twin enabling development based on the real data and conditions.

20 PLATFORM ENABLING ECOSYSTEM OF CONNECTED OBJECTS EXAMPLE PROJECT: TagItSmart! - A Smart Tags driven service platform for enabling ecosystems of connected objects. Project s overall objective of TagItSmart! is to create a set of tools and enabling technologies integrated into a platform with open interfaces enabling users across the value chain to fully exploit the power of conditiondependent FunCodes to connect mass-market products with the digital world across multiple application sectors.

21 DIFFICULTIES TACKLING THE CHALLENGE How to tackle the digitalization challenge in companies? How to handle the change? understanding the phenomenon conceptualizing the challenges changing the way of thinking servitization

22 DIGITIZATION IS THE KEY ENABLER Digitalization is the key enabler for providing internal efficiency in organizations, or for providing external opportunities such as new services or offerings to customers. In addition, there can be disruptive changes in the operating environment of the company caused by digitalization. All of these changes can be translated into success even though digital transformation is a monumental and multi-dimensional concept. Each company s situation is different. There is no silver bullet for tackling digitalization.

23 MODEL FOR TACKLING DIGITAL TRANSFORMATION A systematic approach to tackle digital transformation that will help companies analyze the impact of digitalization and the needed steps for their specific environment. The digital transformation is not a one-time-exercise in a company; instead, it is a continuous adaptation and streamlining to meet the changing demands of the business environment. Positioning a company in digitalization Review of the current state Implementation with technical support Roadmap for digitalization Parviainen, Päivi; Tihinen, Maarit; Kääriäinen, Jukka; Teppola, Susanna International Journal of Information Systems and Project Management. SciKA. Vol. 5 (2017) No: 1, pp

24

25 POSITIONING A COMPANY IN DIGITALIZATION This step is divided into four sub-steps: digitalization impacts, digitalization drivers, digitalization scenarios, and digitalization goals. 1. Identifying and analyzing current and upcoming trends of digitalization and the relevance of these trends to the company s business domain: how far the business domain already is in adopting these trends SWOT (strength-weakness-opportunity-threat) analysis into topics 2. Analysis of digitalization drivers: identify the most important drivers in order to understand the potential impact of the company s digitalization 3. Potential scenarios for the company s future should be analyzed for the most important drivers in order to understand the potential impact (internal, external, disruptive) of the company s digitalization. 4. The final task is to define the goals of the company s digitalization process by analyzing the selected scenarios and their feasibility for the company. The goals should formulate to business related indicators; it s important that improvements can be evaluated against the baseline situation and further improvements can be processed. As a result of this step is pinpointing the goals for a company s digital transformation.

26 INPUT: Current state need to analyzed from the viewpoint of the defined goals (Step 1). REVIEW OF THE CURRENT STATE This step include two sub-steps: 1. First the impacted areas to the goals are identified. Depends on goals it is related to Internal efficiency, the related processes, tools and resources are identified External opportunities, e.g., the customers, competitors and internal resources and processes are identified. Disruptive change, it is likely that all of the company is impacted. 2. After the impact areas are identified, the situation with respect to the goals is analyzed. If the goal is related: Internal efficiency; the questions relate to currently used practices, e.g., How is the issue handled now, and how satisfied are the stakeholders with the current situation? What is the state of technology used to handle the issues? Main bottlenecks exist? Etc. External opportunities; questions are related to the business case, e.g., What are the current company offerings? Who are the current customers/current customer segments? What is the competitive advantage of the current offering compared to competitor offerings? What is the impact on the company s current offering and business? Etc. Disruptive change; questions are related to all the company s areas, e.g., Which current company offerings are impacted? How dramatic is the impact on each offering (offering becoming totally obsolete, current customers of the offering leaving to find opportunities in other segments, etc.)? Which processes are involved with the change? What competencies and resources does the company have? Where can these competences be utilized in the future? What is the timeframe of the change? Etc. As a result, a detailed description of the current state with respect to the digitalization goal is described.

27 INPUT: Detailed description of the current state with respect to the digitalization goals (Step 2). ROADMAP FOR DIGITALIZATION In this step, the detailed plan for reaching a goal is defined. The step is divided into four sub-steps: 1. The gap between the digitalisation goal and current state is determined in detail. internal efficiency, the current state of the processes and technology used is analyzed against the goal, and desired changes are identified external opportunities, the definition of the work that needs to be done to develop the offering for the new customer or segment, including needed competences, development work, and possible changes in the current offering disruptive change, the gap analysis involves defining the current issues (competences and offerings) that can be utilized in the new situation, as well as identifying missing issues 2. Actions to close the gap are planned and defined: Depends on the goal (internal, external, disruptive) and the gap analysis. Actions can be e.g., taking on new technologies, IT tools, re-defining processes, defining or developing new offering, acquiring new competences, analysing potential new markets etc. Organizational agility to transform can be enhanced, e.g., Start-up mentality can be utilized Organization's ability to change should be considered, not to try too much or too little at a time Key Performance Indicators (KPI) should be re-evaluated and updated to better meet new business targets. 3. Feasibility of action is analyzed and they are prioritized Feasibility analysis involves, for example, a cost-benefit analysis, an impact analysis on existing practices, offerings and resources, a risk analysis, and an analysis of constraints. 4. Roadmap is defined; the order, importance and responsibilities for the actions As a results is roadmap for digitalization from viewpoint of defined goals.

28 INPUT: Roadmap for digitalization (Step 3). IMPLEMENTATION AND VALIDATION WITH TECHNOLOGICAL SUPPORT This step is highly dependent on the goals and planned activities of previous steps; there are no generic sub-steps identified. Implementing the services and processes It is often useful to first implement proof-of-concepts when new technical advancements are attempted, e.g., utilizing Agile development and testing of service concepts New technologies and potential business models? Selecting the concepts to be tested. Proposed concepts including service concepts, business models, new processes and technologies are tested and evaluated among different target groups Several iteration rounds. Best concepts are developed further to prototypes Prototypes are evaluated and developed further to services Results: Selection of digital services and tools ready to be implemented Validating the services and the processes The validation of actions should analyze whether the actions lead to desired impacts, or not. Corrective actions should be considered in case desired impacts are not met: Interviews among the stakeholders Results of how the process is on-going, identifying and solving challenges Recommendations for improvement Results: Validated services with recommendations for improvement (INPUT to Step 1)

29 EXERCISE: GROUP/PAIR WORK - TRENDS Mobility 1 Social networking 1 Big data / data analytics 2 AI (machine learning, deep learning, super intelligence) 2 Persuasive technologies and nudging 2 References: 1: Berman, S.J. (2012). Digital transformation: opportunities to create new business models. Strategy and Leadership, 40, pp : Helbing, D., Societal, economic, ethical and legal challenges of the digital revolution: From big data to deep learning, artificial intelligence, and manipulative technologies, Artificial Intelligence, and Manipulative Technologies (April 14, 2015), 2015.

30 THANKS FOR YOUR ATTENTION Questions? Maarit Tihinen