June 19, 2018

Sweden’s forest industry focusing strongly on efficiency, with IT management as innovation driver

Mikael Zachrisson

Senior Business Consultant, Forest Consulting, Tieto Sweden

Tieto recently carried out The Forest Industry’s IT Barometer 2018 survey in Sweden for the fourth time. The barometer is an annually recurring report on developments and trends within digitalisation and IT for the Swedish forest industry. The report is aimed at decision-makers and key individuals within the sub-sectors of forestry, wood products, pulp & paper and bioenergy.

We clearly see that the forest companies have a positive approach to digital business opportunities in a number of areas. Yet, even though digitalisation is discussed at management level in companies to a growing extent, less than half of the respondents have formulated a business strategy for digitalisation. The trend, however, is positive, with a slight increase from the previous year in the proportion of companies with a formulated digital strategy and we anticipate this to step up.

Forest industry being led by efficiency

In a 2017 Radar multi-sectoral study, an average of 50 per cent of Swedish companies said commercial development and innovation were their main IT focus. Reflected against this, the Swedish forest industry’s score of 19% indicates it still has some ground to cover.

Respondents predominantly see more value in the digitalisation of processes in existing operations than in identifying new digital products and commercial opportunities. An overwhelming majority, 81 per cent, prioritise productivity and efficiency over innovation and commercial development.

This year also saw the Finnish forest industry continue to adopt a more proactive approach to IT as a tool for business development than Sweden. Almost one in three Finnish respondents said they are focusing on innovation and commercial development.

Image 1 Country comparison: proportion focusing primarily on innovation and commercial development

IT management drives innovation

The Swedish study reveals interesting differences among roles. While business roles prioritise productivity and efficiency to a greater extent, a much greater focus on innovation and commercial development among IT managers is the clearest trend over the years. In this year’s study, there is a marked difference in perception between IT managers and other roles. IT managers have clearly interpreted their role in more innovative and commercial terms.

Image 2 Percentage of management focusing primarily on innovation and commercial development

Efficiency or innovation?

The interesting question is why there is such a wide difference in role-based perceptions. It is clear that IT development takes a different course depending on priorities.

One explanation might be that the forest industry is a traditional, mature industry with a huge amount of fixed assets, upfront investment and pressures to use their investment profitably for the next 20 or 30 years. Furthermore, there are well-established and functional processes that have been successful for decades. This operating environment is understandably a driving force for heavy focus on productivity improvements, which the business roles might see as the quickest and safest wins.

One reason for the divergence could be that the different roles read different things in efficiency and innovation. For example, assured and enhanced future wood procurement from a huge number of private forest owners will require whole new business-to-consumer type services, which might very well qualify as efficiency for some, innovation for others.

As IT management is clearly assuming a more business-oriented role, it may also be that they have more incentive to position themselves in their organisations as forward-looking. They also lead their practical workdays in the midst of a disruptive IT world, which constantly feeds them with views of what is happening in other industries and what is possible with data-based innovation.

Today, the forest sector experiences a strong tailwind on the road to future bioeconomy. Both forestry and the forest industry are no longer seen as environmentally problematic, but important active parts of the solution to the climate challenges. This might well turn the IT focus more towards innovation and business development on a larger scale in the years to come.

Even so, Swedish forest industry companies might do well to look into their strategies and, in particular, how the strategies are adopted within the organisation. No matter whether you call it efficiency or innovation, the challenge is to bring everyone on board to ensure the entire company is heading in the same direction and towards common goals.

For a more detailed view of the situation, download The Forest Industry’s IT Barometer 2018 here. To complement it, you might also find the article Digitalizing the forest and paper products industry useful.

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