Nordic digital transformation driven by traditional businesses

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.”

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.