Digitalization Jens Sandström, Head of Digital Business ÅF
Business evolvement Digitalization - technology as well as business evolvement Digitalization is the use of digital technologies to change a business model and provide new revenue and value-producing opportunities; it is the process of moving to a digital business. 1 External Growth & Internal Efficiency Organisation Cloud Culture Advisory in Bus. & IT Agility Data Science Data security Recruiting Business modeling Internet of Things ecommerce IoT VR/AR Areas e.g. development, implementation and maintenance of hardware and software Areas e.g. people, culture, decision processes and way of working Pricing Data security User experience Lead mgmt Service design CRM ERP UX/CX CMS Lead management Architecture Agility MES BI Cloud Technology & IT evolvement Note: 1) Gartner.com/it-glossary/digitalization 2
About half of the S&P 500 will be replaced over the next 10 years 1 A period of relative stability is ending The 33-year average tenure of companies on the S&P 500 in 1965 narrowed to 20 years in 1990 and is forecast to shrink to 14 years by 2026. 2 Record M&A activity and the growth of startups with multi-billion dollar valuations are leading indicators that a period of relative stability is ending and that an increasing number of corporate leaders will lose control of their firm s future. 2 Average company lifespan on S&P 500 Index in years 1 (rolling 7-year average) Note: 1) Innosight - Corporate Longevity: Turbulence (March 2017). Note: 2 )Innosight - Corporate Longevity: Turbulence ahead for large organizations (March 2017). 3
Digital natives reach the same market cap in a tenth of the time with far less employees! Founded 1927 200 000 employees $34,47B market cap Founded 1916 124 000 employees $ 54B market cap Founded 2008 5 000 employees ~$30B market cap Founded 2009 7 000 employees $60B market cap Consider the fact that that new digital business models are the principal reason why just over half of the names of companies on the Fortune 500 have disappeared since the year 2000. - CEO Accenture 4
Not surprisingly, digital transformation is driving an increase in IT budgets world wide Digitalization spending will grow to a global market of $1.0 tn in 2018. 2 Average (mean) Percentage of IT Budget Spent on Digitalization, Nordics 2 17% 26% 2016 As the world re-emerges from the global financial crisis, IT budgets are starting to increase but expected increase in revenue is generally double the change in IT budget. 1 2018 Note: 1) Gartner 2017 CIO Agenda: A Nordic Region Perspective (February 2017) Note: 2) Gartner 2017 CIO Agenda: Global Perspectives on Seizing the Digital Ecosystem Opportunity (February 2017) 5
The Pulp & Paper companies are investing heavily in IT, but 55% believe that they do not get adequate return on investment. The transformation and change for the organization is often underestimated since new digital solutions and business models require new approaches. Source: Skogsbranschens IT-barometer 2016 6
Three digital forces changes the prerequisites for competitiveness Digital added value are being added to physical products Infrastructure and customer expectations in place Digital innovations and technologies create great opportunities for increased productivity Thus Competitive dynamics in industries are affected in depth 2016-11-15 7
30 billion connected devices by 2020! The world as we know it is changing quickly! 2016-11-15 8
More data/service available
Data available, but how usable?
Data with focus on User Experience
Everyone needs a strategy including Pulp & Paper
where there are plenty of opportunities Digitalization of a Pulp & Paper Mill Analytics: Platform to analyse information from multiple sources to optimize production. E.g. integrated with cloud and ERP Data Security: New technologies require extended security efforts. Security measures need to consider internal/technological errors as well as external threats. E.g. production data and processes. IT Business Solution: The ERP system can be integrated with sensors in production to show real-time updates and analytics platform to generate and import processed data The digital twin : Sensor based digital equivalent of machine state in real time. Used to steer production and maintenance systems Cloud: Cloud technologies will store generated data and make it accessible for analysis UX/CX: Consolidate and visualize information in a prioritized order. E.g. to build one master interface for operators IoT, sensors: Sensors integrated with machinery will generate large volumes of production data Customer interaction: Digital interface between client and the current state of the production order enables new ways of optimizing value creation 13
Companies need to act but struggle to be innovative Swedish companies - self assessment 70% 17% 7% Need to do something now Knows what to do Have a clear strategy 94% of companies believe IoT will affect them over the next 3 years
How could Pulp & Paper companies come out as leaders? Integrates digital initiatives into the regular strategic planning process The vision is ground-breaking / stretched / value creating New ways of doing things Evangelise the customer dimension Captures changes in customers behaviour Defines desired customer experience Create conditions that encourage agility/innovation, speed and measurability Build internal & external networks Spreads digital spirit throughout the organisation Terminates projects that do not deliver desired effect (KPI-driven) Anchors at multiple levels of the organisation Captures important trends / threats / opportunities Get things done Realizes quick wins work long-term at the same time Funds the digital budget by reinvesting efficiency gains and generated growth Source: Transformer in chief ; the new chief digital officer, McKinsey, 2015 2016-11-15 15
Thank you for your attention! 16