In the coming years, digitalization will be the key to make Swedish and Finnish process industry globally competitive and sustainable. Success is contingent on industry ecosystems changing how they work together and innovate by focusing on; modular solutions, increased data transparency, and aligned business models.
Introduction
Process industry is striving towards increasing digitalization and automation to make their processes more sustainable, efficient, and fossil free. The potential benefits are many, such as improved production efficiency, reduced environmental impacts, and improved workers’ safety. The time for change is now, rapid development in emerging technologies related to automation, electrification, and digitalization are shifting industry structures and enabling new forms of value creation and innovation.
Yet, implementing digitalization solutions is not easy and many companies struggle with increasing complexity, uncertainty, and unclear business logic. Indeed, digitalization in the process industry extends far beyond technology and requires a large-scale transformation of industrial processes, business models, and ecosystem relationships. There is a large role for specialized SMEs with digital capabilities in AI, analytics, and sensors to catalyze this transformation. Over the last four years, we have been working with all the major players in the Swedish process industry and through our research, we see three key learnings for industry to succeed and realize the full potential of digitalization in process industry.
1) Apply a modular and agile approach for digital solution development.
Large complex systems take too much time to develop. Our recommendation is to break systems down into smaller parts and engage in multiple short plan-execution cycles governed by continuous end-user feedback. Each solution can be viewed as a module within a larger digital platform which value grows as more solutions become available. The benefit is the opportunity to make customized and easily scalable digital solutions by re-combining product, service, and digital modules.
2) Stimulate data transparency within the ecosystem.
As industry shifts to increasing digitalization, there is an increasing need for open data flow between multiple providers and customers to leverage AI and analytics capabilities and enable opportunities for optimizing operations. More openly sharing operational data within a process plan can enable machine learning and concrete benefits such as planning the right machine for the right job, addressing bottlenecks, and facilitate continuous improvement within autonomous and digital solutions. Optimizing the operations of one machine represents only one part of the puzzle, digitalization needs to be at the system level across multiple ecosystem actors including SMEs, large suppliers, and process firms. Leading process industry actors need to stop holding data hostage and recognize that the “sum is larger than the whole of the parts”.
3) Align business models within the emerging ecosystem.
The shape of industry ecosystems is changing as providers of digital technology, connectivity, and specialized SMEs (e.g. AI) assume larger roles. At the same time digitalization challenges existing industry logic to its core as providers take on increasing responsibility for optimizing their customers' performance. Payment will increasingly be tied to outcomes achieved rather than products and services sold. These new business models will increase the complexity of contracting but also enable new and better forms of aligned incentives. Successful companies will recognize that their business model is increasingly dependent on the success of their partners and customers. The question is no longer what is in it for me - it is what is in it for "we".
Closing remarks
Our research group as well as the Digiprocess project has been working with over 30 industrial partners over the last four years to support digital business model innovation in Swedish and Finnish industrial ecosystems. We see process industry as a potential frontrunner in digitalization and ecosystem collaboration, but most industries will follow pursuit. We are advising Kongsberg Maritime in the commercialization of the world’s first fully autonomous shipping operations in the Oslofjord in 2020 and supporting similar initiatives underway in transportation, construction, forestry, and manufacturing industries. The lesson is clear. To truly profit from digitalization requires more than developing and implementing new technologies. Successful digitalization requires complex interactions between technology, processes, people, and business models both within the company and externally in the ecosystem.
David Sjödin, associate professor Entrepreneurship and Innovation, Luleå University of Technology
Main contact and inquiries:
Jani Sipola, DigiProcess Project Manager, Lapland University of Applied Science, +358 50 316 7677, jani.sipola@lapinamk.fi
