Jukka Kääriäinen, Päivi Parviainen and Susanna Teppola continue our blog series “Theme digitalisation”, launched by Tuomo Tuikka.
People associate many threats with digitalisation, but they have expectations as well. One of the first fears is that digitalisation will take away their jobs and radically change the way companies do business. For example, the trends related to digitalisation that are already visible – the sharing economy and automation of knowledge work, such as automated decision-making through data analysis – change also the content of work and work duties, and, consequently, the labour market as well. Digitalisation also brings a lot of new opportunities for companies, the public sector and citizens alike, but they will not become achievable without a proactive change in how companies, organisations and individuals operate.
Digitalisation means a change in the modes of operation, where digital solutions are utilised comprehensively in the operations of individuals, organisations and society. The impacts of digitalisation on organisations on the one hand and on their goals on the other can be related to internal efficiency, external opportunities or disruptive change.
Internal efficiency means better internal ways of operation using digital methods (e.g. reduction of routine manual labour, real-time monitoring of operations, and reaction to/anticipation of change). External opportunities, on the other hand, mean new business opportunities in the present business area (new services, new customers). Disruptive change then refers to the disappearance of the current area of operation and emergence of new possibilities, new roles in the value chain.
In his blog text, Tuomo Tuikka introduced the digitalisation theme and wrote that there are challenges when considering the issue of digitalisation against business activity, but these can be alleviated by means of determined planning and consideration of alternatives. This requires a systematic approach, in other words, consideration of how to manage and alleviate the change caused to an organisation by digitalisation.
Unidentified opportunities of digitalisation
The Internet of Things (IoT) is one of the phenomena enabled by digitalisation. At the turn of the year, we asked Finnish businesses and the public sector for their views on the situation of IoT and related challenges. Big companies in particular said that the challenge lies in the lack of an IoT strategy, whereas small companies highlighted their lack of understanding of what benefits the IoT could bring, and their uncertainty of how to proceed with developing the use of IoT in the company. Accordingly, one of the biggest challenges companies identified is adopting a novel way of thinking and, through that, new business opportunities in own operations. Such general uncertainty would seem to be associated with the change caused by digitalisation even on a wider scale.
In other words, companies have recognised digitalisation as an opportunity in Finland, but they do not necessarily know how it will affect their particular operations, or what opportunities digitalisation might afford them. In practice, it is easier for companies to make multi-million euro decisions on the purchase of new production equipment than to start considering own business operations from a new perspective. At the same time as companies should consider whether they could offer their customers or other network stakeholders totally new services, they must also evaluate the willingness, maturity and readiness of potential partners to exploit the opportunities afforded by smart solutions.
Get ready for the change required by digitalisation
People everywhere are fervently considering the transfer to digitalisation and the relevant threats and opportunities, but how can all this be implemented in practice? Nobody likes surprises – particularly if they are negative. VTT has been developing a model by which threats and opportunities related to digitalisation can be assessed in a systematic manner, and digitalisation methodically introduced to the company’s operations and products phase by phase. This model will make the company more aware of the development of digitalisation within its own sector and better prepared for the change required by digitalisation in its own business operations.
In the first phase of the model, the company analyses the potential impacts of digitalisation on the company and conjures up a picture of what the company aims at through the change. In the second phase, the company analyses its current situation in comparison with the goals. This is a natural part of the improvement activity, as we need to know where we are at to know how big a “digital leap” is required. In the third phase, the company defines the improvement steps in practice and draws up a plan on how it will take the digital leap. In the fourth phase, the digitalisation solution is implemented and validated. The model is iterative, so that the goals, plans and the solution for the company’s digital leap can be formed gradually and fine-tuned, if necessary.
For a company, digitalisation can be a threat or an opportunity but, by taking systematic steps, the company can successfully navigate through this change.
Jukka Kääriäinen, Senior Scientist
Päivi Parviainen, Principal Scientist, Research Manager
Susanna Teppola, Research Scientist
Parviainen, P., Teppola, S. & Kääriäinen, J., Tackling the Digitalisation Challenge: How to Benefit from Digitalisation in Industrial Practice, under work, to be submitted to open access journal in spring 2016.