No shortcuts to digitalisation

Digital technologies have added intelligence to machines and devices, changed internal company processes and created new business. Digitalisation has given rise to great expectations, but also great insecurity. One thing is for sure – you can’t avoid digitalisation.

matti sommarberg

The dean of Tampere University’s Faculty of Management and Business, Matti Sommarberg, says we should calm down about digitalisation. According to him, digitalisation is fundamentally similar to any other technology.

“Digitalisation in itself is of no use to anyone. The question is how and why digital technologies are implemented. Digitalisation has been a hot subject around ten years, but in reality, digital technologies have existed for more than 50 years already.”

New impetus for innovation

Industrial and technology companies have moved into a whole new era with digital technologies. However, the objectives pursued with digitalisation are basic operation principles. Companies aim to do things faster, more cost-effectively or to focus more on quality. In the beginning, digitalisation meant simply replacing the drawing boards of designers with computer-aided design programs (CAD).

“Nowadays, the possibilities offered by digital technologies have almost no limit. Modelling according to system design principles, for example, enables the simulation of device operation before those devices even exist. The durability of components, future maintenance needs and the device’s lifecycle can all be forecasted in the planning phase,” says Sommarberg.

With digitalisation, planners can utilise innovations such as the so-called swarm intelligence:

“VR/AR technologies, for example, allow the participation of maintenance personnel and machine operators in product development. Visual models also enable other people than the designer to understand the device being designed,” says Sommarberg.

Digitalisation as a part of strategic management

When the conversation turns to digitalisation as part of a company’s strategy, Sommarberg gets very excited. As an example, he mentions a model where business is managed according to three horizons.

In the first horizon phase, the company works to maintain its current core business. In the second horizon phase, the company invests in new upcoming business functions. The third horizon is about creating a foundation for radical innovation, even when it comes with uncertainties.

“The key to horizon thinking is that a company should be managed in all three horizons. In reality, over 80 percent of all activity falls easily into the first horizon and the rest, all too often, into the second. The third horizon tends to be forgotten altogether. This also applies to the utilisation of digital technologies in companies.”

“The winners of the future will be those who work towards success taking a conscious risk, but maintaining consistence,” says Sommarberg.

“Operating in the third horizon comes naturally to innovative companies. Research cooperation with universities, for example, is an excellent way to support a company’s innovative activities, because producing new information is one of the universities’ core missions. Through this kind of cooperation, a company can also build thought leadership in its own industry,” notes Sommarberg.

The key to success: work

Despite all the hype, digitalisation is not a magic wand that opens the doors to success. On the contrary.

“I believe that a company must work really hard to get the best benefits from digitalisation. To achieve success, we must understand the basics of digital technologies and their use to a certain extent. Most importantly, however, we must identify the things that can be achieved in business operations,” says Sommarberg in summation.

In addition to sufficient insight, this requires the ability to take risks and let loose.

“An important dimension of digitalisation is definitely the culture of experimentation associated with it. When implementing new technology, it must be accepted that the impacts have to be clarified by testing them. On the other hand, a culture of experimentation leads to better understanding of digital technologies in the organization as a whole. You learn more by getting your hands dirty than by sitting at seminars.”

Sommarberg points out that there are no shortcuts.

He says, “There is no such thing as succeeding overnight. Success is always preceded by years of work. In one night there is only enough time to tell the world about your achievement and maybe gain an important competitive advantage in the industry.”

The three horizons model as a part of strategic thinking

  • Horizon 1: Business operations will be developed to maintain the current market position.
  • Horizon 2: Development of new business operations. For example, utilising maintenance data for new services via the Internet.
  • Horizon 3: Investing in risky future possibilities, for example, the use of artificial intelligence.
    (Adapted: Baghai, Coley & White. The Alchemy of Growth. 1999.)

Moore’s law and clock speed

To the general public, digitalisation is a modern phenomenon, but actually it has existed for decades already. The expansion of digital technologies is not a coincidence, either. Instead, it is based on laws proved by economics.

“When talking about digitalisation, the development of technical properties should obviously not be underestimated, but in addition to them, the most important explanation for the expansion of digital technologies is the so-called Moore’s law. According to this, performance grows exponentially as the price diminishes. What used to be possible only for large companies is now within everyone’s grasp,” Sommarberg says.

A practical example of Moore’s law in action are smartphones. A computer that used to fill an entire room and cost a fortune, now fits into anyone’s pocket.

“At the moment, it’s interesting to see how artificial intelligence integrates slowly into devices as technology prices go down.”
Another concept relating to digitalisation is clock speed and its change.

In the past, it took decades to transfer modern technology from one industry to another – the properties developed for formula cars, for example, expanded slowly to regular cars and then to trucks and working machines.

“Nowadays, the clock speed of technologies is on a completely different level. Technology developed for consumers can expand directly to industrial applications, such as game technologies. Science fiction is no longer fiction,” Sommarberg says.


TEXT: Marianne Valta
PHOTO: Okko Sorma