Thursday, 23rd May 2019

Established companies advance digital transformation more than digital natives

Industry change in the Nordics is not primarily fueled by digitally native companies that disrupt the market overnight, but by established industry players transforming their existing businesses. Disruption increasingly comes from companies that already have a strong market position, an existing customer base, a thriving partner ecosystem, and high brand awareness. These are among the key findings of the new study Towards a data-driven future, conducted by IDC on behalf of Tieto.

“Disruptive initiatives from established organizations are often less apparent. However, the impact is at least as profound as that of a digitally native start-up. It should also be noted that these initiatives may come from companies that are not head-on competitors, but niche players or only present in other countries today,” says Markus Suomi, CTO at Tieto.

IDC predicts that by 2021, more than 50% of the global economy will be digitized, and growth across all industries will be driven by digitally enhanced offerings. This means that organizations are compelled to digitalize the offerings, supply chains, and entire business models to remain competitive and relevant.

Nordic organizations lag behind their global peers in digital transformation

Led by North American companies, the share of digital transformers (29%) is significantly larger globally than in the Nordics (16%). Nordic organizations are focusing on business optimization and progressing cautiously unless a true disruptive force is present. While fast to leverage new technology, very few Nordic organizations (7%) have changed revenue models or made similar fundamental shifts in their business models.

However, transformation brings unprecedent opportunities for efficiency gains and business growth to Nordic organizations. 80% of Nordic executives believe that the most significant changes are still to come, while 85% of the executives expect to change business or operational models, meaning that most organizations are in the early stage of their digital transformation journey.

“Our previous study showed that more than seven out of ten believe their current business model will become obsolete in the next five years or earlier. This study shows that business executives across all industries in the Nordics acknowledge the changes and the impact on their business. Customer requirements and expectations have changed, and new products and services are launched by both existing and new competitors, with the potential to disrupt the market,” continues Markus Suomi, CTO at Tieto.

Nordic organizations are fast to leverage new technology to become more efficient and customer centric but are cautious about transforming their actual business models. The stronger the competition and harsher the economic conditions, the more likely companies are to transform beyond business optimization, and the organizations that see digital transformation as a threat are most likely to develop new and alternative business models.

Maturity level differs in various industries

The impact of change is apparent across all segments. There is a tendency that the change in customers’ requirements and expectations is most evident for Finnish organizations (52%), and least evident to Norwegian ones (35%).

While social networking and data analytics are rated as most important technologies to fuel business transformation, machine learning (Artificial Intelligence) technology is among strategic priorities for most companies and industries. Blockchain is mainly important in selected industries such as transport and logistics and financial services as the use cases are fewer and more difficult to envision in the core business in other industries.

Sweden leads the digital transformation in the Nordics

In the transformation journey, Swedish organizations are slightly ahead of Finnish ones, which in turn are slightly ahead of their Norwegian peers. This is partly explained by the different economic development following the financial crisis as well as the differences in industry demographics.

Technology acumen is key for successful digital transformation

The importance of technology is recognized across the organization, and leaders with an IT background increasingly drive the strategic transformation. Third platform technologies and innovation accelerators are increasingly adopted, and IT organizations are reinvented.

As digital transformation has IT at the very core, technology acumen is paramount for successful transformation. IT executives are not just increasingly involved in decisions but get new roles in the corporate management – either in totally new positions or with significant change in responsibilities. Consequently, IT is increasingly taking the lead in business development as organizations adapt to the digitally transformed world.

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