July 20, 2015

How Digitalization is Changing the Face of Business

Kim Lindgren

CIO, Tieto

It’s the end of an era and the beginning of another. This is an opportunity to build an entirely new world. If you’re running a business and need to create guidelines for digitalization, this is my advice: think big, and think ahead.

What will a successful business look like in the future? That was the question we started with when we began to reimagine Tieto three years ago. At that point, we decided to revitalize Tieto's corporate culture under the strategic guidance of Kimmo Alkio. We saw before us a world unlike the one we were accustomed to. We realized that in order to create a vision of the future, we also needed to understand how companies would operate in the years to come.

Three years later, it is clear that replacing old technologies with new ones is a relatively small shift compared to the revolution in operating cultures and strategies required for success in the digital age. As individuals and consumers, we are quite ready to adopt new technologies and services that can help us in our personal lives. In the workplace, however, changing standard operating procedures and learning to use new tools may not always be as easy.

First and foremost, successful change requires the courage to abandon legacy operating models and think about the future as a blank slate. Digitalization should not be seen as a mere renewal or update of current business operations. On the contrary, it should be seen as a means to enable completely new operating models. Successful change requires bold, long-term thinking, considered and controlled risks, a common strategic intent and the ability to push the boundaries of your comfort zone—all of which can be quite scary.

Digitalization is advancing and it will change all businesses—are you ready?

Digitalization challenges old operating procedures and business models. While traditional businesses may find this worrisome, you should view the inevitable change as an opportunity that must be grasped immediately. The longer you wait, the more you stand to lose.

1. Changing operating environment

We believe that in the future, the world will consist of various networks or ecosystems (both terms are widely used, though we at Tieto prefer to talk about ecosystems). For these ecosystems to co-operate efficiently, you need new functional solutions that enable efficient collaboration and information sharing both within and among organisations.

These new solutions cannot be based on organisational silos, and they should enable employees to work from anywhere and with any device. The solutions should also be safe, easy to use, cost-effective and simple to maintain. At Tieto, this meant, among other things, transitioning 14 000 employees to using Google services.

Digitalization can also help increase company productivity and efficiency. When companies create all-new solutions from a blank slate, they can simplify their basic IT and run it more cost-effectively. The money saved can then be funnelled into something more useful, such as creating new innovations. Companies that build their IT on top of legacy systems without questioning current models will most likely regret their decisions later. Increases in both costs and architecture complexity will limit their alternatives in the future and slow down any new initiatives.

2. Superior customer experiences

Traditionally, IT has been seen mostly as a tool for developing a company's own functions: streamlining processes, increasing productivity and automating the supply chain. However, the development of new technologies and a shift in consumer behaviour have moved the focus of investment more towards improving customer service and personalising customer experiences.

Digitalization makes it possible to get closer to the customer, and in the best-case scenario, even help them before they even realise they need help. We've dubbed this predictive customer engagement. By analysing customer data, we can increase our understanding of customer needs and thus create ever better services. By combining a deep understanding of customer desires and needs with new insight into ways of improving the customer experience, we have created a strong foundation for new services. Simply moving existing operating models into the digital age mostly leads to confusion.

3. New business opportunities

Digitalization makes it possible to do things in completely new ways. All-new business models are born, such as those that have launched the Sharing Economy. The best-known examples that enable consumers to sell services to each other are globally successful Airbnb (offering lodging services) and Über (a peer-to-peer taxi service).

In the digital era, many of the most successful ideas have been created by an external operator challenging the market without the baggage of operational legacy. In order for more traditional players to succeed, they need to create an organisational culture that fosters innovation. At Tieto, we've taken a couple of different approaches to this: our internal innovation programme SPARK! and internal startups such as Customer experience management and Industrial Internet.

In my experience, every organisation that begins to create an innovation culture will be amazed at how many ideas their own organisation already contains. It's imperative to create an internal innovation process that systematically gathers new ideas from the grass-root level and helps bring these ideas to life.

In the future, IT will be in a perpetually more central role in all areas of business. This means that all organisations need more knowledge and expertise in IT innovations as well as the opportunities they can create. Companies will also need strong partners to build future-proof solutions together—partners who understand both technology and business and have a clear vision of the future of business.

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