I participated Indmeas’ customer seminar and listened to a presentation of Stora Ensos digital functions. Marko Yli-Pietilä, the director of Stora Enso Smart operations, showed us the model of the company’s digital development in his interesting presentation. The big companies have had challenges in finding the appropriate function models what it comes to digitalization. Stora Enso seems now to have found a promising model.
The digital development is a part of IT functions at Stora Enso. Digital project differs from an IT project because a business case is not demanded in the planning phase. Experiments are encouraged this way. Business case is needed in the pilot phase, when the decision to continue is made. Everyone who has ever prepared investment decisions knows how difficult it is to build up a business case, where you can just estimate the effects in euros. I want to congratulate Stora Enso for taking a brave step forward, and wait similar daring moves from other similar companies too.
Speed, the courage to fail and the experimental culture belong to the nature of digital projects. You have to get started quickly, admit the fails and do several experiments. When the so called “silver bullet” is found, it can be scaled quickly and cost effectively. Stora Enso calls the first phase ‘defining the value’ –phase (which includes a high risk), and the second phase ‘producing the value’, where the risk is more controlled.
Defining value and producing value
Stora Enso’s digital project is steered by a road map kind of tool, which is divided in two phases: in the value definition –phase the company is looking for a big amount of ideas, experiments and failures. They have a budget of 10 million euros for defining the value. Producing the value -phase or scaling phase aim aggressively for saving costs or producing more revenue. According to Yli-Pietilä, 20 projects of 100 seem to be ready for scaling. Two projects of these have a high value. Stora Enso’s model solves three central challenges in the digital development:
- The best way to find the potential is to quickly create a ”minimun viable product” and test whether it flies.
- The law of capital investments applies in the digital development: the brave investments are tested, and testing and failures rise up ideas that are ready to be scaled.
- Money works as a propellant in the digital development. If you don’t invest, you don’t get any results either.
The development projects are led with the help of portfolio share
The development projects are divided in four portfolios, and are steered with the help of them. One of the portfolios is reserved for creative projects which brings revenue, and the rest three aim for increasing the efficiency (digital customer experience, transparent delivery chain and intellectual production). Divided portfolios emphasize in an interesting way how the Finnish forest companies have traditionally been led by efficiency more than by topline. This fact is proved by the information about that the biggest portfolio is the intellectual one, which includes 80% of all development projects.
Stora Enso is using Microsoft solutions and partner network in their digital processes. The role of partners is crucial, and partners do not necessarily need to be in Microsoft ecosystem to be able to do projects for Stora Enso.
Digitalization changes production
Digitalization turns products to services and services to divided ecosystems and platforms. Automation and artificial intelligence take care of the guidance. The meaning of data is essential. Stora Enso wants to control all data by itself and their partners take care of developing applications.
Data and ecosystems are crucial and self-evident parts of the digital system. The difficulty factor increases significantly when you add immaterial things like intelligence and feelings to the system. The digital development generates additional services around itself. How can you for example digitalize the maintenance of drownies in a way that minimizes the work done by people?
Digitalization changes the conventions in the production, project after project. It will be interesting to see what kind of end products Stora Enso’s digital line finally produces: how much is it possible to enhance functions and will it generate solutions that increase even the upper line in the income statement?
This blog post was originally published by Indmeas on 15 June, 2018.