Taneli Tikka has an unusual job description. As the head of industrial internet at Tieto Corporation, the largest IT services provider in the Nordics, he is not only leading on the company’s key growth areas but managing it as a startup.
This “internal startup” model is what attracted Tikka to join Tieto in May 2014. With a background in several successful startups, as well as being on the boards of stock listed companies, the former serial entrepreneur saw it as an opportunity to combine his experience from both worlds.
“The cases where a large company renews itself on a very ambitious level are quite rare,” says Tikka. “One of the reasons I wanted to get involved in this is that the model we use has all the chances to succeed – it’s not a ‘set to fail’ structure which sometimes marks projects in large companies.”
In practice, Tieto’s industrial internet unit acts autonomously inside the company and operates separately from some of the corporate policies that apply to the rest of the organisation. The unit, which employs 32 staff, has its own product development, sales and customer delivery, all the way to reward systems and accounting practices.
“I’m like the CEO of a startup, and report to the startup board which is chaired by Tieto’s CEO [Kimmo Alkio],” explains Tikka. “All major decisions on how the startup operates are done by the board. This resembles the board governance of a startup and not the quarterly planning or business plan processes typical for corporations.”
Speed and agility
While the model is largely the handiwork of Tieto and Tikka, it hasn’t been built out of thin air. It’s based on the ideas of “systems thinking”, a management theory that focuses on the relationships between different parts of a system, as well as the “lean innovation model” coined at Stanford University, which promotes flexibility, speed and adaptation.
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The model is not only new for Tieto, which employs more than 13,000 people and has net sales of approximately €1.5bn, but similar cases are hard to find elsewhere in Finland, or even the Nordics as a whole.
Tikka hopes this will change, as he believes the benefits of the model are clear. It not only speeds up operations and brings agility, but can also be used to positively influence organisational culture.
“It raises interest internally. People like to follow it and would like to see it succeed. As such, it can be used as a tool for cultural reform,” says Tikka. “Naturally, there are also benefits for customers. The obstacles that large companies often face can be avoided and the unit can act as a kind of a rapid deployment special force that quickly meets customers’ demands.”
Tikka recommends the model to any company, but also offers a word of caution. It requires commitment from the top management, as well as skills to juggle two different systems – the normal corporation system and the agile startup – inside one company.
“Being able to lead one system with your left hand and another one with your right hand requires know-how and leadership – but it’s possible if you have the determination,” he says.
“It’s here, it’s now, it’s big”
It’s not a coincidence that this agile startup mentality has been put to use in Tieto’s industrial internet business – a sector the company defines as “the integration of physical machinery with smart processes, big data and advanced analytics”.
“Industrial internet is an obvious growth market. The attitude is: ‘It’s here, it’s now, it’s big’,” says Tikka. “The type of demand and market traction in this sector and our model go hand in hand. We can act quickly, grow fast and answer customers’ needs in an agile way.”
I predict that what has happened to social media will happen to the industrial internet
Taneli Tikka, Tieto Corporation
Accenture estimates that the industrial internet of things (IIoT) could add $14.2tn to the world economy by 2030 by improving productivity and reducing operating costs. In the analysis, the Nordics are considered to have the most conducive environments for IIoT, together with the US, Switzerland and the Netherlands.
Tikka predicts that the next wave of growth for Finnish companies will happen through industrial internet applications and believes the change can already be seen.
Finnish welding equipment manufacturer Kemppi (Tikka is a board member) is an example, he says. Kemppi’s welding machines can show, in detail, the end-to-end manufacturing process of a single weld. This includes automatically gathering data not only on who did the welding and when, but what kind of welding wire was used, from which patch and who supplied it.
“No one else has a similar product and this can already been seen in Kemppi’s strategic advantage. For example, companies that weld gas pipes on the seabed can’t afford it if a wire manufacturer in China announces a defect wire batch. It’s a big problem if the company doesn’t know where the defected wire was used and has to pull up the whole pipe,” explains Tikka.
“If these companies don’t have transparent data [on the welding process], the risks are enormous. They can’t really use any other machinery than Kemppi’s.”
What Tikka would like to see change is the thinking that the industrial internet is only about intelligent machines and computers attached to these machines. He advocates that intelligence needs to be integrated in all business operations.
Tikka has created a “sense, think, act” approach to describe the industrial internet as a process of collecting data from sensors and systems, analysing it and finally acting on the acquired insight.
“This should be seen as a transformation equivalent to the internet. In the same way now that the internet and all its abilities are coming to industry, it will change everything and there won’t be any going back to the old,” says Tikka.
“Companies should think of industrial internet as a major strategic issue. The pie is now being cut and it is up to the companies to decide what kind of slice they are after. ”
The clock is ticking
While Tikka is happy to recommend the internal startup model to anyone, he sees the industrial internet as a revolution no company can afford to ignore.
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“Industrial internet will lead to the restructuring of value networks in all sectors,” he says. “Some operations and tasks will disappear completely. If companies don’t react to this, the probability is high that they will be left behind.”
This might happen sooner than many think. Tikka paints a picture where, in five years' time, the industrial internet has become the new norm.
“I predict that what has happened to social media will happen to the industrial internet. We talk about it now, but in the not-so-distant future we’ll notice that the industrial internet has become the same thing as industry. It’s part of how everything is done and not something different any more but business as usual,” says Tikka.
“If companies today decide to take on full-speed building of their digital future, it’s realistic to assume it will take about five years. I believe by around 2020 these things will pretty much be part of everyday life.”
Photograph by Peter Forsgård.