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Nordic digital transformation driven by traditional businesses

More traditional Nordic businesses are fuelling the region's digital transformation, finds report

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The Nordic region’s longer-established companies are playing a more forceful role to advance digital transformation than local digital natives.

According to a new report commissioned by Tieto and conducted by IDC Nordic, digital transformation’s main fuel is not coming from tech disruptors but mature industry players transforming their existing businesses.

Produced from data collated in July 2018, the Towards a data-driven future report surveyed CEOs and senior IT-department chiefs in 300 mid to large sized companies in Sweden, Finland and Norway. It looked at the technology-linked capital investment plans, activities and expectations of companies operating within IT, manufacturing, transport logistics and other core industry sectors.

Significantly, the IDC report observes that Nordic companies are lagging somewhat behind their global peers, and especially the US, in digital transformation.

Providing a timely road-map for Nordic enterprises, the report’s medium-term forecast is that over 50% of the global economy will be digitised by 2021. The predicted outlook is that growth across all industries will be driven by digitally enhanced offerings. Furthermore, organisations will feel a more compelling need to digitalise their offerings, supply chains, and entire business models to remain competitive and relevant.

The weight of visible disruption is increasingly coming from Nordic and global companies that already have a strong market position, said Markus Suomi, Tieto’s chief technology officer. These are companies that can also universally boast an existing customer base, a flourishing partner ecosystem and a high brand awareness.

“Disruptive initiatives from established organisations are often less apparent,” said Suomi. “That said, the impact is at least as profound as that of a digitally native startup.”

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The majority of the Nordic region’s digitally transforming enterprises are currently categorised as digital explorers or digital players. Extensively, these are companies that are not actively engaged in innovating their business models. Instead, they tend to be proactively using digital technologies to bolster efficiency and customer experiences.

The report highlights that IT is playing an expanding and more critical role in the business transformation of Nordic companies. The key technologies driving change range from the internet of things (IoT) to AI-linked machine learning and voice recognition. Fundamentally, these are areas primed for growth and built on more mature technologies like cloud, mobility, and social networking.

Moreover, the Nordic path to digital transformation is being propelled by changes to organisational structures and partner networks. Within this evolving framework, companies are not just involving their senior IT executives more in the business decision-making process, but promoting or recruiting strategically to drive technologies identified as essential to growing their business innovation.

The digital transformation gap with US peers has motivated Nordic companies to invest more resources, in capital and IT expertise. The share of digital transformers is around 16% among Nordic enterprises.

Nordic organisations are generally structured to focus on business optimisation, with many adopting a more guarded approach in their advance unless a real disruptive force is encountered. Although quick to leverage new technology, the report finds that only 7% of Nordic organisations have opted to change revenue models, or effected major revisions to their business models. 

An earlier survey conducted by Tieto found over 70% of the CEOs in Nordic companies believe their current business model will become obsolete in the next five years or earlier. The new report assesses that over 80% of senior executives in Nordic organisations believe the most significant changes are still to come.

Around 85% expect to change business or operational models over the next two years, an indicator that digital transformation remains at the early stage for most Nordic organisations.

AI technology a strategic priority

While social networking and data analytics are rated as the most important technologies to fuel business transformation, AI technology is among the strategic priorities for most companies and industries.

Swedish organisations are marginally ahead of their Finnish counterparts, with Norwegian enterprises following behind.

The cross-border disparity in Nordic digital transformation rates is attributed to several contributing factors. These include the different pace of economic development in the wake of the 2008 financial crisis coupled with variations in industry demographics across the region.

Sweden’s economy recovered more rapidly than was the case for Finland post crash. In Norway, which was not seriously impacted by the financial crash, many companies did not get the same “wake-up call” on the need for digital transformation. Consequently, many Norwegian organisations responded later than counterparts in Sweden and Finland.

The IDC report reveals that Nordic IT chiefs are taking a lead role in the business development of organisations as they adapt to the digitally transformed world.

The Nordic digital revolution

The transforming Nordic digital revolution is impacting all quarters and corners of business and industry. For example an banking/IT consortium that includes Tieto, Nordea Bank, OP Financial Group, Asiakastieto and the financial services provider Privanet Securities, has created a Nordic partnership to develop a new blockchain-based platform that digitalises trading in non-listed company shares.

“The digital platform enables parties to trade reliably and securely using a shareholders’ register that is digitally controlled. It takes care of tax obligations and regulatory reporting,” said Kimmo Lönnmark, CEO of Privanet Securities.

“The model we are using makes the platform globally scalable, and eliminates the need for the manually operated notary business model that traditionally serves as an intermediary between borrowers and investors.”

The consortium plans to start building a global, market-ready platform with customer piloting in 2019.

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