Theme digitalisation: Physical product or digital service?

Welcome to read our specialists’ views on digitalisation! In this blog series, VTTers consider how digitalisation will affect the world – and especially the Finnish industry.

We are living through the greatest transition in the history of humankind. Computers, tablets, mobile phones, the internet – in a word, digitalisation – have quietly permeated our activities, gradually transforming all of our actions and practices. For those living through it, the magnitude of such change is difficult to grasp. Exactly what kind of change is involved? What precisely is changing? How will business be affected?

The World Wide Web was still a barely understood concept in the 1990s. It is now just part of the digitalisation of our daily lives, sharing our world with applications running on a range of platforms embedded in smart home electronics, vehicles and increasingly in our very surroundings. Virtually all of the world’s information will soon be simultaneously available for those who want it – real-time has made its way into our services.

Digital applications and services for corporate finances are increasingly necessary to maintaining and developing competitiveness. Enabled by digitalisation, many firms plan to shift increasingly from product to service provision.

This business transformation is directly associated with changes in the operations of digitally aware companies. The big question is how will a company’s value-adding factors change – for example, should you sell devices or not, and how will the related production activities be transformed? Should a firm buy in change-related expertise, or build its own competencies when responding to market and customer trends? Could it be that there is no need for a physical product in its current form, if standard off-the-shelf software can be used to replace certain activities?

Every company should consider its activities and whether it has a clear digitalisation strategy, with someone designated to take charge of it. Setting digitalisation in opposition to your current business practices may sound like a recipe for uncertainty, but this can be countered through methodical planning and by weighing up the options.

A digi-step forward

VTT’s research on digitalisation seeks to understand the dynamics of the digital transformation by studying our client companies. This takes us to the heart of the phenomenon, on which we can have a systematic impact by using well-chosen methods. The creation of customer added value and greater competitiveness are key priorities from a business perspective. A potentially digital, service-based business has to be designed to generate added value of this kind.

Current information processing methods and practices often form the basis of change within a company. This does not call for a leap into the unknown – the issues should be considered carefully and the company should proceed one step at a time. When the issue is examined sufficiently well, mutually beneficial experiences can be gathered and operational development models can be identified. In this way, the company can understand how to benefit from digitalisation at various stages of the product development lifecycle and drive its business forward.

Human activities define new services

The Internet of Things holds out the prospect of exploiting digitalisation’s opportunities in industrial processes. On the other hand, technology has never been an isolated element in human activity. Since the days of ancient hunting cultures, cooperation, tools and goal-oriented activities have formed the basis of the success of human culture. Such goal-oriented activity is therefore the cornerstone of success, even if we are now discussing digital services rather than mammoth hunting.

When designing digital services, the focus is no longer on the product but on the added value – generated, perhaps, alongside other network members – that the service provider can create in the customer’s operating environment. The focus moves from aircraft engine construction to the reliable transportation of people. Or, healthcare services are now about the patient experience rather than the use of physician resources, and so on. Creating a successful service is about understanding and building the service together with its users. We have developed collaborative methods of this kind to meet the needs created by digitalisation.

From the digitalisation markets to conquering blue oceans

The potential of digitalisation can be achieved through fast and timely market conquest. This requires a firm grasp of the development of the related business opportunities. On the other hand, sufficiently rapid R&D enables a firm to test the markets’ receptivity to a service and to try out the service concept. Creating an agile service – or software, for that matter – enables a company to target just the right niche and conquer ‘blue oceans’ of uncontested market space.

Now is the time to venture further into the digital realm and ask ourselves what it is about – from the point of view of Finnish industry in particular. In this blog series, VTT experts will shed light on their research activities and discuss the digital transformation from a variety of angles.

Welcome to our take on digitalisation!

Tuomo Tuikka

Head of Research Area, Digital Systems and Services (DSS)

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