August 30, 2018

Competition for raw material drives Swedish forest industry’s digitalisation even if strategies are lacking

Mikael Zachrisson

Senior Business Consultant, Forest Consulting, Tieto Sweden

Tieto’s Forest Industry IT Barometer 2018 is the fourth consecutive annual report on digitalisation and IT developments in the Swedish forest industry. Fewer than half of forest industry companies have a digital strategy, two in five have no structure for innovation, and the race for raw material necessitates more efficient connection building towards forest owners.

Fewer than half have a digitalisation strategy

Digitalisation is a hot topic at management level, but fewer than half of the survey’s respondents (43%) have a business strategy for digitalisation. A slight increase from the previous year is visible, though, and we anticipate the trend to continue.

Large companies, understandably, are in the lead as far as strategies go, although the gap is slowly closing. Small companies are perhaps more risk-averse and thereby more inclined to pick proven practices from other players than taking the initiative in an unknown area.

Nevertheless, copying what works for other companies is no guarantee that the same works for your company, which is why it would be good for every company to formulate the digital strategy and initiatives from their own point of view.

Innovation seen as interesting, yet challenging

Today, the forest industry, by and large, is doing well. Funds are available for innovation, and the interest in the area is high. The big few are leading in this area as well, working with nimble, small startups for quick results.

In contrast, smaller companies, around 40 per cent of the survey respondents, do not have a specific structure for digital innovation. We see this as a major issue – they would probably benefit from a more structured way of working on innovation, including proven methodologies such as Design Thinking or similar. To remain relevant in an industry in a constant flux, it is important for the smaller and mid-size players to step up their pace of innovation to prevent being left behind.

Digital opens doors to commercial opportunities

A high percentage of forest industry companies are optimistic about digital opportunities, although most of their interest is focused on increased productivity and efficiency instead of innovation.

One especially important area, which places second right after using real-time data for increased efficiency, is user experience.

More and more forest owners are living and working in cities, becoming somewhat alienated from tending and cutting their forests. The forest industry is facing a purchasing dilemma: how to get a sufficient influx of high-quality raw material from less and less interested sellers?

Solutions already exist or are emerging for visualising and communicating what is happening in the forest, but interaction with the forest owner needs to take a huge leap forward to point out what the owner can benefit by managing the forest in a certain way and selling the wood, or, conversely, lose by not doing anything.

Another area with great benefit potential is the B2B aspect. For the pulp industry, for example, it is important to know the dryness of the raw material, essentially meaning how long it has taken for the material to arrive from the cutting site to the woodyard. This information is available from harvesters, but lost on the way. The gaps caused by missing links in the digital chain must be filled to make the information accessible and usable.

Yet more cost-efficiency is within reach in transport. When one truck transports timber for different companies, it at worst needs three separate transport systems. Exchanging transport information between all actors in the ecosystem could be solved through a central, digital data repository accessible to everyone. This will enable economies of scale through a consolidated industry transport resource.

What is the next digital breakthrough?

In the light of the survey findings, Swedish forest industry companies are predominantly aiming at increasing efficiency, even though they might benefit more from placing their bets on innovation – especially around how to secure a steady flow of raw material – in the present market situation. The image below shows the areas the industry is now focusing on.

To find out other interesting results of the Digibarometer survey, also read our previous blogpost Sweden’s forest industry focusing strongly on efficiency, with IT management as innovation driver.

For a more complete view of the state of the industry, download the entire Forest Industry IT Barometer 2018 here.

To complement it, you might also find the article Digitalizing the forest and paper products industryuseful.

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