August 28, 2017

Digitalization becoming forest industry's new business enabler

Mikael Zachrisson

Senior Business Consultant, Forest Consulting, Tieto Sweden

Allan Flink

Head of Forest Industry Consulting in Finland, Tieto

Digital is evolving from a support function into a forest industry revenue generator in Sweden and Finland, but requires further mindset shift.

Edging from support towards revenue generation

IT and digital solutions have been used in the forest industry for a long time, mainly as enhancing service, production, logistics and network processes. Using IT for innovation and creating new types of business, however, is gradually rising to the same level of importance as other business drivers. IT is more and more seen as a strategic asset instead of a support function. This is the main finding of Tieto’s latest annual DigiBarometer, designed to help predict the direction the forest industry is moving by looking at how trends change over the years.

Yet, there are differences by country and management role. In Finland, top business management sees innovation and business development as their company’s IT focus when compared with efficiency and productivity (60% vs 40%, respectively), whereas in Sweden, those numbers are 5% and 95%, respectively.

The opportunities digitalization can create are understood in many ways, but overall, they are closely related to existing operational models. Clear possibilities are seen in data utilisation, business process automation, robotisation, new products and services. New business models, ecosystems and innovation are clearly weighted less – probably because the value of their outcomes measured by traditional Key Performance Indicators is not clear. This is well illustrated by the figures showing that 47% of those surveyed considered their companies successful in improving business processes through digitalization, whereas only 4% saw success in creating new types of business.

Gradual evolution instead of sudden revolution

In many contexts, it is difficult to show IT’s role in business creation. But if digital can create its own business, measurable revenue and sources of income, its strategic value will become clearer. We need to understand the connection between IT-created possibilities and concrete, measurable benefits.

Digital business is already slowly breaking through. In Finland, Tieto helped create a wood trading platform, a good example of a new, independent business that creates new income. In Sweden, a data-driven wood supply concept makes use of the newest technologies such as laser scan.

The Internet of Things and intelligent packaging are examples of new business in paper, board and wood products.

Culture is important

Top management is an important driver in digital business development. A digitally advanced company is open and positive, considers digital an important item on the board agenda, exploits digital opportunities actively and has plans.

This is happening. Of Finnish respondents, 96 per cent say digital possibilities are recognised in their strategy. In Sweden, close to 80 per cent say real-time planning and data-based decisions are top priority. The more advanced forest companies are currently starting innovation units in different ways, helped by Tieto.

These kinds of new ways of using data to create new business may be small steps. Over time, though, this gradual progress will cumulatively add up to new ways of doing business and showing the benefits of digital with traditional KPIs.

The results of the Finnish DigiBarometer survey in Finnish.

The results of the Swedish DigiBarometer survey in Swedish and in English.

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