Customers and services should be the focus when developing digi-solutions

Manufacturing industry has become widely interested in developing digitalisation. Companies are interested in gathering data from existing devices and using it to develop new products and services. They want to get new ideas to the finish line quickly, while growth and internationalisation are on offer. But while technical solutions are being developed at a frantic pace, services are lagging behind. Companies remain unsure of how to create added value for the customer and what the customer is willing to pay for.

Digiteollisuus

In industry, digitalisation is being exploited by connecting machines or devices to the internet and analysing, and combining the data obtained from them for business purposes. However, the customer only actually benefits from various value-added services. Technology-driven development of digitalisation can seldom respond directly to the customer’s needs. On the other hand, the service business perspective shifts the focus to the holistic development of digitalisation, by combining the service provider’s and customer’s perspectives with technological potential.

Developing digitalization solutions from this perspective ensures that added value is generated which the customer is willing to pay for. It is also ensured that the business, strategic objectives and services of the company supporting the services being developed can be implemented profitably in terms of its service processes and business.

When developing digitalisation solutions, consideration must first be given to business objectives and how the solutions fit with the company’s strategy. Specification of a business model aimed at target groups can begin after this, not forgetting the value promise and earnings logic. The technological solutions and information processes required for the services are also defined when designing and outlining the service processes. Quick experiments are conducted at the customer interface during development work; this provides a realistic picture of the viability of the business model, earnings logic and technological solutions under development.

See you at the Subcontracting Trade Fair in Tampere from 26 to 28 September 2017

VTT Technical Research Centre of Finland has served as an expert and service provider in numerous projects to develop the digitalisation of Finnish companies. Elisa has created production solutions for similar companies, together with players from its IoT ecosystem. These two major players have now begun collaborating to help Finnish industry utilise digitalisation more effectively. Come and discuss the opportunities being created by digitalization with our experts at the Subcontracting Trade Fair on 26 to 28 September 2017, at VTT’s stand (E210) and Elisa’s stand (C422).

Jyrki Poikkimäki                                                           Jukka Nurmi

Manager, SME Sales                                                   Director, IoT

VTT Technical Research Centre of Finland Ltd           Elisa Corporation 

Twitter: @JPoikkimaki                                                  Twitter: @jukkanurmi

Do you know your organisation’s digimaturity level?

Is your organisation prepared for digital transformation and is it capable of adapting its activities to gain best possible benefit from it? Do you understand the full scope of digitalisation’s impact?

Digimaturity

There is much talk about digitalisation and digital transformation. However, they often remain high-level concepts, or the issue is viewed from a particular perspective. According to a survey published in January 2017 (Vatanen 2017: Digikyvykkyyskysely 2016 – “Digital capability survey 2016”, the respondents consisted of more than 250 CEOs and board members), while Finnish companies are aware of the threats and opportunities presented by digitalisation, they do not fully recognise the significance of such threats and opportunities for their own business. In particular, the concrete measures are missing. Is the current situation unclear, both within organisations and in relation to others? Is the vision of target state missing? Or, is it question about development resources required by reforms whose impacts are difficult to determine?

In order to address all the perspectives and impacts of digitalisation, the topic needs to be understood broadly. A Digimaturity model developed by VTT helps decision-makers to understand digitalisation, providing a comprehensive framework on the issue. An online tool based on this model helps, in turn, to determine the digimaturity level of an organisation.

Digimaturity refers firstly to an organisation’s readiness for digitalisation: its motivation to change, and its ability to adopt new technologies and new operations models. Secondly, it refers to an organisation’s performance based on digital technology. In other words, digimaturity is a combination of business, technology and social activities – and is not limited to just own organisation.

Digitalisation permeates all activities of organisations

Digitalisation acts as an enabler for the development of activities, supporting the operations of the company itself and its stakeholders. Digitalisation normally refers to exploiting new technology, providing organisations with the opportunity to use information gathered in various ways to develop its business. In other words, it enables entirely new services and business models in addition to process development.

Those who have given thought to digitalisation know that it involves a number of perspectives which, ultimately, affect the strategy and operations of an entire organisation. Under VTT’s Digimaturity model, aspects selected as the principal dimensions of digitalisation include the following six: strategy, business model, customer interface, organisation and processes, people and culture, and information technology. The selections are based both on widely used maturity models presented in the literature and VTT’s empirical experiences of development projects. (Leino & al. 2017)

Where to start?

Starting can be compared to orienteering: you need to know where you are, where you aim to go, and to find a route and means of getting there. As this involves competition, you should also know where the others stand. In particular, if the company’s own industry segment is lagging behind other segments, an operator outside the traditional segment may unexpectedly enter the market, revolutionising the entire segment’s business logic. This is currently known as disruptive change, but only twenty years ago the phenomenon would have been termed structural change.

The Digimaturity tool helps in determining the current situation

Using VTT’s Digimaturity tool, an organisation can review its current situation and development needs with regard to digitalisation. It can be used by a single person who wants to develop a better understanding of the situation of his/her organisation, possibly comparing it to other organisations or, alternatively, it can be used to provide a visual representation of the various viewpoints in an organisation , in order to provide a baseline for analysing the current situation.

Based on the responses provided by the online tool, an organisation’s digimaturity can be visualised in a diagram. The tool enables the interpretation on which areas the digimaturity is already in good shape as well as those that lag behind, or identifying differences in organisation’s digimaturity levels. The tool also enables a comparison of the organisation’s digimaturity using a control group based on segment, turnover and/or headcount, as well as all organisations that have responded, answering the question “Are the others ahead of us and, if so, in what areas?”

Test your organisation’s digimaturity free of charge here: https://digimaturity.vtt.fi/?lang=en

For more information on VTT’s digital transformation tools, please contact us.

Olli Kuusisto VTT

Olli Kuusisto, Senior Scientist
Twitter: @olliquu

Simo-Pekka Leino VTT

Simo-Pekka Leino, Senior Scientist
Twitter: @LeinoSP

This blog post is based on the digimaturity project
conducted under the “For Industry” programme of VTT.

References

Leino, Simo-Pekka; Kuusisto, Olli; Paasi, Jaakko; Tihinen, Maarit. 2017. VTT Model of Digimaturity. In: Towards a new era in manufacturing. Final report by VTT For Industry spearhead programme. VTT, pp. 41–46. http://www.vtt.fi/inf/pdf/technology/2017/T288.pdf

Vatanen, Eira. 2017. Digital capability survey (Digikyvykkyyskysely) 2016. https://www.linkedin.com/pulse/hallitusty%C3%B6-ei-ole-muuttunut-digitaajuudelle-peiliin-aika-vatanen

Who designs and controls our digital platforms? Does it matter?

henttonen

“If you use a proprietary [software] program or somebody else’s web server, you’re defenceless. You’re putty in the hands of whoever developed that software”

So claimed Richard Stallman, the founder of the Free Software movement, quite provocatively. Do you feel “defenceless”? Hopefully not, but sometimes it is worth considering how ICTs  shape our lives and society.

Few would deny that digital platforms have huge and increasing control of our personal lives, business and governance. The algorithms determine the stories we read on Facebook, the search results we see on Google and even partners we find on Tinder. Hundreds of thousands of full-time labourers, from Uber drivers to Handy cleaners, follow supervisory  commands which are delivered to their mobile phones by an algorithm.

Increasingly many decisions on the public sector are also made by digital platforms which process big data algorithmically. As you may have read, judiciary is not an exception: New Jersey recently replaced a human-led bail system with new software which uses maths and data science to predict whether or not a person is a risk to the society if released.

As digitalization accelerates,  many  people have started to ask questions on who designs and controls the platform technologies. Grassroots movements such as Platform Co-operativism, Internet of Ownership and Commons Transition are pushing demands for more open and democratically governed digital platforms. They have also inspired hundreds of “open” platform co-operatives, such as FairMondo, Loomio and Open Food Network.

The phenomenon seems to resemble the early days of the Free Software and Open Source software movements. People demanded more control over how software is designed. Many started small software projects, which based on the ideas of transparency and open collaboration (e.g. GNU operating system which later turned Linux). Within relatively short timeframe, the marginal idea went mainstream. Large software companies, such as IBM and Sun Microsystems, shifted to open source -based business models.

Today, open source software is very commonplace, mostly uncontroversial and consequently unvisible. But what happens to alternative digital platforms that echo similar demands of ‘openness’ and control by users? Are they the next mainstream?

 

VTT Katja Henttonen

Katja Henttonen, Digitalization Specialist
Twitter: @KatjaHenttonen

Päivi Jaring VTT

Päivi Jaring, Senior Scientist
Twitter:
@PaiviJaring

 

 

See more:

Ongoing research on this topic in the Accelerate project.

Simonite, T. (2015) . “When Your Boss Is an Uber Algorithm.” MIT Technology Review December.

Computer says no: New Jersey is using an algorithm to make bail recommendations.

Are you ready for the shift from B2B to B4B?

B2B is over! The manufacturing industry is shifting to B4B, where suppliers no longer focus on selling things to customers but rather on creating outcomes and value for their businesses. In B4B models, customers pay much less up front for a product or service, sometimes nothing at all. Instead, the supplier gets paid when customers use their products and often only according to the benefits they receive.

So where does the value come from and how can businesses reinvent themselves to stay in the game? For suppliers value will come from knowing what outcomes customers really want, creating solutions to meet those needs and making their value-add visible. It’s also about finding win-win outcomes balancing both supplier and customer needs, which we are seeing more of in new partnership-based businesses.

Digitalisation must go deep into the DNA

These B4B models require transparency, which digital technologies enable. Digitalisation is also a big part of the solution where products can behave more like digital platforms that bundle data to enable outcomes to fit customer needs. So once you’ve sold a product it can become a launching pad for new future products and services for your customer.

Digitalisation is critical, but on its own it’s not enough. If it’s used like a sticking plaster, only quick fixes can be achieved whereas B4B models require real and sustainable value add. Real change needs to go deep into the DNA of a business, reflecting the most critical customer needs in a real operating environment.

B4B much more than just nice apps and XaaS offerings

We all know the story of Air BnB and the two guys with one extra room who couldn’t make rent. They launched a web site and disrupted the entire global travel and hotel business. Doing the same in big industry is much more complicated. Most of us understand how the hotel business works. You take a room, have your stay, and pay the money, and then you leave. But how many know how to run an electricity grid? If you really want to change the DNA of a smart grid, something critical for society, you need to know about much more than just digital technology, you need to know all the technical ins and outs of the business, how it’s run, where the valued add or beef of the business is, and all of the many technical restrictions that come with it.

In B4B we’re better together

As no single entity can overcome these complex challenges alone, effective networking is a core success factor in B4B. Just as you a consumer might consult a social media network to share or learn more from crowd knowledge, at industry level, companies big and small are also jumping into sharing partnerships to develop their competitive advantage. Partnerships can be with researchers, ICT providers, sometimes customers, and even with competitors, in the growing spirit of coopetition.

Take an example of Company A: a small business with a big idea. They’re in the healthcare industry where the fail-fast approach is not a viable option. In order to test and prove their idea they need a cutting edge 3D printer but the cost of purchasing one upfront would be a prohibitive especially with no guarantees that the idea will actually fly. In this case, an effective innovation path can be found through sharing partnerships with shared infrastructure and expertise networks.

VTT testing and piloting platform can help

VTT, together with Tampere University of Technology, has developed an open ecosystem platform that will help Company A take their idea and run with it. The platform, called SMACC (Smart Machines and Manufacturing Competence Centre) brings instant access to a 3D printer to test their idea. If glitches arise, help for small or large questions will come from a joint knowledge network. Finally, when the time is right, Company A will have its own collaboration team to help pilot the new solution cost effectively and at speed.

Using the power of partnership platforms, VTT is well-positioned to play a central role in helping business make the shift toward outcome-driven B4B products and services. We want to work like genetic engineers, drawing on our extensive knowledge networks and research, and applying rapid solutions not just to quick fix your business but to transform it over time.

The shift to B4B will be one of the big topics of the Manufacturing Performance Days in Tampere at the end of May. I look forward to taking it up with you there!

Kalle Kantola VTT

Kalle Kantola
Vice President, Research
Smart industry and energy systems
Twitter:
@kallekantola

Does Food Economy 4.0 represent new or old thinking?

During my work career, I have been dealing with hundreds of companies as well as their leaders and owners. At times, it has felt a little silly to be lecturing this target group about the basics of doing business, because, actually, they are the ones who should be teaching me. That group of corporate representatives has naturally included plenty of such business genius that it has left me stunned with admiration and taught me a lot as well. On the other hand, there have also been people who are running their everyday operations with admirable perseverance, but who seem to lack a clear picture of what they should be doing and for whom in terms of business.

In other words, what are the customers’ needs and how they should be served? Companies often refer quite easily to how important customers are to them, but if their potential customers themselves do not feel that the company considers them or their needs important, business will not grow. In the changing world, the foresight regarding customer needs is increasingly important.

Let’s look ahead!

In the early years of the 2010s, I was involved in the running of the Future Shop Club. There we got together with the actors in the trade value chain and discussed the transition within the sector and envisioned what it was leading to in the speciality goods trade. There were actors involved who set out to renew their business activities right there and then. However, there was an even larger number of those who said: “We already have an online shop and, therefore, everything is OK.” Perhaps needless to say, but there are very few of the latter group left still running commercial operations today. The changes brought on by digitalisation and changed consumer behaviour in speciality goods trade have been immense.

Basically, the transition in the trade sector has had very little to do with online shopping. Only very few people understood or believed this at the beginning of the 2010s, even though it did not require much prophesying skills to see the change. All that was needed was to raise your gaze from your own feet and look ahead.

Now the food economy is going through a similar change as the speciality goods sector in the early 2010s

The customers used to the new-age speciality goods trade now expect a similar change from the grocery sector as well. On the other hand, the new smart production and smart logistics practices that are revolutionising the manufacturing industry offer the food industry and its value chain models on how to organise themselves in a new manner that would serve both the consumers and the environment.

VTT’s new Food Economy 4.0 vision of an era of smart consumer-centric food production provides three change paths, which we are actually already taking:

  1. from mass production to personalised solutions
  2. from centralised to agile manufacturing and distribution
  3. from horizontal to vertical food production.

Does Food Economy 4.0 represent a totally new kind of thinking? The answer is no. The consumer-centrism of Food Economy 4.0 means genuine and active dialogue between consumers and trade or consumers and producers.

I myself have grown up on a farm. Therefore, as a child I saw close up how my parents were engaged in genuine social dialogue with the customers of the farm, taking their individual needs into account in production. Then society changed, and cost-efficiency pressures got the upper hand. The interaction between consumer-customers and the operators in the food chain waned away.

In Food Economy 4.0, the interaction is revived again – this time, assisted by digitalisation

The commercial way of thinking about the importance of genuinely catering for the customers and their individual needs dates back centuries. Digitalisation just offers a new way of implementing this better and in a larger scale than has ever been possible before.

The change towards smart and consumer-centric food production is already under way. To see that, all you need to do is raise your gaze from your own feet and look ahead.

The new era means significant changes in the food chain and its business models (see Food Economy 4.0 vision for examples). The basics of business operations – what?, for whom? and why? – will remain unchanged even though the methods – how? – changes. Maybe it is still necessary to remind people about the basics after all.

Jaakko Paasi VTT

Jaakko Paasi
Principal Scientist
Business, Innovations and Foresight

Industrial renewal is upon us – be bold and gain a foothold!

Digitalisation, automation, IoT, AI, blockchain, 3D printing – I could continue the list with quite a few juicy terms. How many times have you read or heard one of these words during the last week? I dare to wager that it was quite a few. Certain themes rise to the surface and remain a topic for discussion, until a new trendy word rises to everybody’s lips. Instead of using inordinate amounts of time and energy around an individual concept or technology, we should shift our focus to the change taking place in the big picture and to what kind of a future we could create with the help of various technological enablers.

New trends force changes upon the current operations

Automation and robotisation alone are not enough to answer the challenges placed on companies by the global market and the increasingly demanding customer needs. Companies have no choice but to draw parallels between their development and, for instance, the following trends:

  • Smart products, production systems, production and delivery chains;
  • Renovation of the design of products and production through digitalisation and automation;
  • Need-based production, real-time delivery chain, distributed production;
  • Robotisation and flexible automation combined with artificial intelligence;
  • Service business with (or without) the help of digitalisation; and
  • Industrial ecosystems and platform economy.

I believe in the claim that the smart products and services of the future will be created in new industrial ecosystems supported by a globally connected platform economy. The leap from today to this vision seems wild, and the ability of companies to see the steps they need to take can be limited, when there is no concrete action plan available. It is therefore gratifying that we can find examples around us where a company’s own desire for development launches a networking project full of growth potential.

Expand your operations with the help of industrial networks

When a Finnish medium-sized machine manufacturer wishes to broaden its offering in order to speed up its growth in the global marketplace, the traditional model is to start planning business acquisitions. It would be more agile to avoid the risks and slowness of acquisitions by establishing a network structure, where a number of companies linked to the sector in question commit to creating a shared offering.

For global customers, this network appears as a seamless entity, while inside it, different actors work according to their own core competencies and deliver their share of the total. In this model, the success comes from working together, challenging each other within the network and obtaining help from select key customers.

Automation streamlines and adapts production

The radical renovation of design, manufacturing and service business with the help of digitalisation builds competitiveness and business opportunities for the industry also in countries with traditionally high cost structures. Robotics offers various solutions for making production more efficient and increasing productivity in the manufacturing industry.

However, it is not a question of robotisation only; an industrial company must be able to increase its agility and flexibility in order to create solutions that maximise the customer benefit. New manufacturing processes and the delivery chains built around them will bring customer-specific solutions up to a level we have not yet seen.

Thus far, automation has mostly been linked to equipment and production processes. However, the real leap in productivity will take place at the systemic level, where the entire delivery chain is examined, boldly questioning the current operating models. Must a company producing products have its own manufacturing capacity, or could it connect to a network of manufacturing plants and commission the manufacturing of the products from the plant that is most optimal to the need? On a longer term, one could think that this kind of a system is self-learning and able to adapt to the production needs of the owner of each brand. Once again, these are major questions from the perspective from the Finnish manufacturing industry; after all, we wish to ensure that we have strong connections to the future network models.

We help companies realise bold and ambitious visions

VTT possesses strong competence in the above-mentioned themes of industrial renewal, and even now, we are involved in enabling the birth of several industrial networks. In addition to technological research and development, we are a natural and competent partner also for the creation and organisation of new ecosystems.

Mika Toikka VTT

Mika Toikka
Vice President, Sales and Business Development
(Smart Industry and Energy Systems)

Together but individually at the same dining table – how is this possible?

At the end of the working day, many of us browse the shop shelves, hungrily wondering what to make for dinner. Despite the huge choice, everyday food tends to vary little in many families.

We would find shopping easier if our mobile phones could tell us what we had in the fridge. It would be even better if our phones displayed recipe suggestions and a shopping list of missing ingredients. And what if an application remembered what flavours you like, or which ingredients are unsuitable for you or family members?

In VTT’s Food Economy 4.0 Vision this is an everyday reality. In the future, food production will become service-based and personalised. Digitalisation – which enables the collection and combination of information on issues such as individual consumer habits, the nutritional content of food and the environmental impacts of food production – is a driver of this development. New kinds of digital services for consumers can be created by combining information from various sources, and connecting it up to devices and products.

Information is a key raw material

Due to the digital transformation, the consumer has an ever greater choice of foods in line with his or her needs, values and expectations. In addition to safety, localism and responsibility, consumers are interested in the health-promoting properties of food. This is reflected in the popularity of blogs, online services and television programmes on the subject. Sensor technologies are also becoming cheaper and the development of smart packaging is helping consumers to reduce food waste due to spoilage.

Food producers must change their product portfolios to respond to the needs of individual consumers. To build comprehensive well-being services, we will need open-minded collaboration between sectors and must combine information from a range of sources.

By combining information, we can create, say, food services that support the well-being of the elderly or people with special dietary needs. In addition, nutrition could be connected to applications, such as activity bracelets, which monitor well-being. At VTT, we are developing the Snacktracker, which guides the user towards a more balanced eating rhythm.

Individualised food does not mean dining alone

The idea of individualised, customised food can conjure up alarming images of algorithm-controlled eating and the loss of human interaction. However, individualised food does not mean dining alone.

Food will still bring people together – individual choices do not mean living in a bubble. Choices are shaped by a community’s values and opinions; customised food can be eaten around the same table. Digitalisation offers new channels for community and sharing, in addition to face-to-face interaction.

Digital services such as HejaHeja and Facebook are among the big names in the creation of social networks. Through online communities, people seek to share their experiences with friends, acquaintances or other people with the same interests. Feedback and encouragement from a social network or experts are a key factor in motivating people to use digital food services.

Appreciation of home cooking and spending time with friends and family is growing. There are food services which promote these by providing personalised meal planning, varied recipes and online home delivery. Finnish services that make everyday life easier include for example Miils, Hellapoliisi and Sannan ruokakassi. Time saved on food shopping can be used for, say, cooking together.

Digitalisation brings us around the same table

Digitalisation brings people together around food, both locally and globally.

Airbnb has revolutionised accommodation services. It is a good example of digitalisation enabling a new breed of service. Similar services are also emerging in the food industry. Last year, Helsingin Sanomat reported on a new startup called Eataway, through which ‘Restaurant Day meets Airbnb’. This is a platform which brings together cooking enthusiasts with tourists and locals in search of good home cooking.

In Finland, Yhteismaa ry, which started out with a communal Cleaning Day event, has come up with an open-air dinner concept. The idea is to tempt people to eat around the same tables. This year’s aspiration is to have people participate all over Finland and make the open-air dinner an annual event.

Customer a participant in the development of future food services

Consumers can directly converse with manufacturers and personalise products and services online. Correspondingly, food producers can use tailoring to create added value for customers. Digitalisation also enables consumers to find information on product origin, production methods and transport conditions.

Online retail and improving logistics solutions are revolutionising the centralised food trade. To benefit from this change and develop consumer-based food services, the food production sector must acquaint itself with new business models.

Kaisa Vehmas VTT

Kaisa Vehmas, Senior Scientist 

Maria Åkerman VTT

Maria Åkerman, Principal Scientist