The on-going digitalisation of the economy holds many promises to spur innovation, generate efficiencies and improve services, thereby boosting productivity and economic growth. However, these benefits are accompanied by disruptions. Digitalisation transforms the way companies do business and it changes the nature and structure of organisations and markets, raising important issues around digital maturity.
Digitalisation has transformed the world of business in the last 15 years. New internet-based businesses have been born, such as the internet-based communications company Skype or the music streaming service Spotify. However, the transformation encompasses much more than the traditional ICT-producing sector. The new technology is transforming many existing industries, including manufacturing, industry supporting services, transport and retail.
Advances in digital technologies are embedded in all sectors of the economy and contribute to:
Digital technologies can raise productivity but the technologies are diverse and they are being adopted and diffused at different rates. Today, technological changes are made in a time span that is highly compressed compared with the rate of change in the past. New technologies develop and mature, much faster and more profoundly than they used to. The rapidly developing digital technologies – among them the social media, internet of things, big data analytics and cloud storage – enable unprecedented levels of connectivity for businesses worldwide. To prosper in this new connected environment, new capabilities are required that challenge established norms and blur organisational boundaries.
The transition towards a digital economy changes the way companies do business. Executives in every sector face a large array of digital opportunities. To understand the structural impact of digital technologies and the changing nature of competition in the digital economy, it is important to consider the digitalisation journey that Swedish industry has embarked on. To better understand the deepening impact of digital technologies, the Swedish Agency for Growth Policy Analysis (Growth Analysis) suggests a digital maturity indicator.
There is a need to develop indicators that can show how far businesses in different sectors have progressed in the digital transformation journey, i.e. how digitally mature they are.
This report represents the first attempt to measure the ongoing digitalisation of the Swedish economy at sector level and with regard to business size. The digital maturity indicator combines four components to provide a comprehensive picture of how digitally mature Swedish companies are.
The four components are:
It reveals which parts of the economy are surging ahead and which could be part of the next wave of growth. ICT, retail, other services and manufacturing have achieved a higher level of digital maturity while sectors such as construction, real estate and transport are less mature.
There is a need to complement the quantitative indicator with case studies to gain a deeper understanding of how far different businesses have progressed on their digital transformation journey, i.e. how digitally mature they are. Digital maturity is a combination of two separate but related dimensions. The first dimension is the previously presented digital intensity indicator that shows ICT-usage in companies. Companies maturing in the second dimension, transformation management intensity, create the leadership capabilities necessary to drive digital transformation. Transformation intensity of consists of a) how organisations implement technology based change, b) the strategies used to shape digital business and c) the new digital competence needed to drive change. Digitally mature organisations understand how to drive value with digital transformation. They combine a transformative strategies and careful governance with sufficient investment in new opportunities. However, in many companies, these elements are overly slow or conservative, preventing the company from investing in innovative opportunities.
The cases show digital business is not just something that the organisations talk about in their strategies. The informants describe how the digital transformation affects all aspects of the operation.
The organisations change:
Drawing on the new case study evidence it is clear that digital technologies are fundamentally transforming business strategies, business processes, and organisational capabilities. We observe how a number of companies embed their digital strategy into their overall business strategy. Dawning on the cases we see three type of connection between digital strategy and the overall business strategy. The connection is either obvious, intensifying or limited.
The results extend existing literature on digital competence. The cases highlight that digital business requires new combinations of competences that extend beyond the technology related competences described by OECD in chapter 1. The Husqvarna case illustrate the need for agile competences that are less about technology and more about capabilities to organise and drive processes for rapid change. Sometimes change takes time in traditional sectors and SKF describe the new type competences needed to connect different organisational functions. Broad competences are needed to connect the managing, operational and supporting processes required to understand how to drive value with digital transformation. The goal is not only to connect all machines in production but to offer services to manage the customers operation remotely.
Learning from digital leaders is important. In many companies transformation management is slow or conservative, preventing the company from investing in innovative digital business opportunities.
Serial number: Report 2017:02
Reference number: 2016/011