the data revolution and business

The Data Revolution and Business

INTRODUCTION

SOLITA THINK TANK MEMBERS

DATA CREATES NEW BUSINESS

Nordic companies are looking for opportunities in new data business

Will data become an item of merchandise?

It pays to process data

It makes sense to buy data

Data must be classified – what are you sharing with others?

What hinders data business?

HOW TO GET STARTED

Identify customers’ needs and your data capabilities

Invest in data architecture and quality

How should you organise data business development?

DATA IS TRANSFORMING CORPORATE CULTURE

Data is challenging traditional management principles

Analytics and human sciences are merging

SUCCESSFUL COMPANIES MAKE USE OF PLATFORMS

Competition in the platform economy is beginning

Data is the new currency of the platform economy

You cannot make it alone in the data economy

Does Europe have a competitive platform economy?

IS THE GDPR A THREAT OR AN OPPORTUNITY?

Is legislative reform accelerating the data economy?

Is the GDPR hindering the development of innovations?

Will there be an aftermarket for data?

8 KEY ASPECTS OF DATA BUSINESS DEVELOPMENT

Data is transforming all business

Every company needs a data strategy

Data quality matters

Data must be processed – customers’ needs determine the winner

Understand the symbiosis of data and the platform economy

Management and corporate culture must change

Empathy is key in data business

Don't hesitate, invest!

The Data Revolution and Business

Publisher: Solita OyCopyright: Solita Oy ©2018Contact us at [email protected] more: solita.fi/en/Images: Solita, Petri Mast

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D ata is the core and soul of the holistic world of the future, and the engine of intelligent operations. Companies and organisations are beginning

to realise the key role and value of data. The ongoing data revolution is aptly described on the cover of a May 2017 issue of The Econ-omist. The headline reads: The World’s Most Valuable Resource – Data and the New Rules of Competition. The cover has an image of six rigs drilling for data. These rigs are named Google, Amazon, Microsoft, Uber, Tesla and Facebook.

Our daily lives will change immensely. The transformation is not only about technology – companies’ business models, competence needs and operating methods are changing as well, along with their cultures and manage-ment styles.

Which factors are driving the data revo-lution? Three factors are the most significant.

Introduction

Firstly, all business will become service business. A smoothly running daily life and a good quality of life will be more important than ownership. High-quality services require much more than products do. For this reason, the intelligent use of data is key in providing services – with services, the customer need is significantly more extensive than it is with products. The breakthrough of the Industrial Internet is based on a shift in traditional industry towards service business.

Secondly, technology keeps developing and becoming cheaper. An investment in in-frastructure that cost EUR 10 million in 2007 costs EUR 10,000. At the same time, technological capabilities are increasing. Artificial intelligence, blockchain technology and image and voice recognition have entered the picture.

Thirdly, the triumphal march of platform business has reached all areas of business. New, innovative cloud services are a significant

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part of this trend. In the future, companies will focus on building platform business and making intelligent use of existing platforms. Platforms mean competition for control over the customer interface. Data is the key competitive factor in the platform economy.

Many people are wondering whether data will also generate new business. The develop-ment of new data-based business is currently attracting keen interest in many companies. How can we make use of our existing data resources? How can we collect or buy new data? How can we process existing data? It is impossible to predict what the new business will be like. The development of new, successful business is always a complex phenomenon.

The intelligent use of data is a key strategic development need for most business. New business can only be created through bold, in - telligent experiments: “Companies are not failing

because they are taking risks. They are failing be-cause they stop taking risks,” said Ilkka Paananen, CEO of Supercell.

We brought together leading business ex ec-u tives and researchers to discuss data and the development of new, more profitable business based on data. This Think Tank report is based on these discussions and interviews. We believe that this report will serve as a road map for a new, data-centred world.

PEKKA AHOLA Solita

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Solita Think Tank is a group of top executives, experts and opinion leaders promoting discussion and producing insights on digitali zation of Finnish society,

companies and public sector. Earlier Think Tank reports have focused, for example, on retail, public sector, traffic, IoT and industrial internet.

PEKKA AHOLA is Vice Pre sident, Analytics and Cloud at Solita. Ahola has broad experience in financial management

with large international companies. He served as CFO at Metso Automation and has also worked for Wärtsilä, Nokian Tyres, Sandvik Tamrock and Otis. Throughout his career, his key areas of responsibility have included business analytics and financial and change management.

KATRI HARRA-SALONEN became Chief Digital Officer at Finnair in March 2016. Before that, she served as the CEO of

Umbrella Strategic Advisory, a consulting company she established. She has also worked in Stockholm, serving as the CEO

Think Tank members

of Fjord AB, among other positions. She has been involved in creating a digital world for a long time, and served on the board of directors of Satama Interactive in the early 2000s.

KATRIINA KIVILUOTO is the Head of Agile Data business at Solita. Her previous positions include Director of Marketing and

Customer Analytics with the Pirkanmaa Cooperative Society. She is passion-ate about helping companies grow their business operations and develop new services using data and modern technology. She has broad and varied experience in team-building and strategic brand management, as well as making use of data in business development.

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JUHANI NUMMI has been Senior Vice President, Business Development at YIT Corporation since 2013. He has more than

20 years of experience with various expert and managerial positions in the construction industry and in developing production and services for the needs of modern life. He has a Master of Science degree in technology.

JUSSI OLKKONEN is the founder and chair of the board of directors of the service design agency Palmu. He has broad

experience in designing digital services for various sectors. He is also one of the founders of Ego Beta, Finland’s first service design agency, and the Razorfish office in Finland. His previous positions also include CEO and Partner at the advertising agency Ego.

KARI ONNISELKÄ is managing Director of the engi neering, design and consultancy company Ramboll Finland.Before

joining Ramboll, he served as Head of Global Services and a member of the board of directors with Comptel. He served as Managing Director of Talent Partners in 2006–2011. Before that, he held various managerial positions with Nokia.

PETRI PARVINEN is Profes -sor of Strategic Marketing and Management at the University of Helsinki and

Professor of Selling and Sales Management at Aalto University. He has founded 14 research-driven companies during his career. He is a member of the boards of directors of Mehiläinen, Solita, Kotipizza and Molok.

TIMO SEPPÄLÄ is a Professor of Practice at Aalto University and a research associate at the Research Institute of the

Finnish Economy (Etla). He has served in various global managerial and business development positions with international companies for a long time.

KATI SULIN is Chief Digital and Brand Officer at DNA. She is a member of the boards of directors of LähiTapiola, Kalevala

Jewellery, the Institute of Marketing and Rastor Before joining DNA, Sulin served as the CEO of Head Office Finland, where she was in charge of a growth project focusing on content marketing, and Head of Online Development at Fazer. Sulin also has broad and varied experience with consultative positions in digital business operations in Finland and the other Nordic countries and in Russia.

VELI-PEKKA ÄÄRI is Exe cutive Vice President, Customer Relationships, Information and Digital Services at S Group.

He has held managerial positions with S Group since 2011. His motto is “Vision before numbers”.

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Data creates new business

We cannot say that all Nordic companies are boldly making use of new opportu-nities – there are significant differences between sectors and companies.

– Katriina Kiviluoto, Solita

N ordic companies are begin-ning to realise the multitude of opportunities offered by data. In an intensified competitive situa-

tion, it is important for companies to identify, before their competitors, what type of data business they should be building. At this point, most Nordic companies are only considering the opportunities offered by data. Only a few have taken the first measures.

Naturally, data-intensive companies are leading the way, as they are familiar with the new raw material. For example, companies in the banking, gaming, telecommunications and technology sectors have progressed sig-nificantly in making use of data. The role of data in relation to the business varies greatly by sector. We will not see a national improve-ment in competitive ability until century-old

industrial companies start taking practical measures to make use of data. The Internet of Things and the Industrial Internet keep gen-erating new data and new business models. Data-driven operations and artificial intelli-gence are gaining ground in all sectors.

For an individual consumer, this increase in data does not necessarily mean greater choice.

Choices will be made so easy for people that the consumer will begin to behave in the way in which they are guided to behave. There will be so much data that it will be impossible to process. For this reason, algorithms will make choices on behalf of consumers by filtering the data. In the real world, choices are made quick-ly. Eventually, an abundance of data often narrows our perspectives.

– Kari Onniselkä, Ramboll

It is much easier for entirely new companies to start making use of data, as they are not burdened by old information systems where

Nordic companies are looking for opportunities in new data business

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Finland is not yet world-class in this respect. We have our work cut out for us. Data business continue to be a development need for many Finnish companies. On the other hand, there are some companies that have already achieved a great deal.

– Katri Harra-Salonen, Finnair

esting in the context of creating entirely new business, products, services and additional features based on data.Using data as a raw material in business can be defined on at least five levels. The most basic level involves a company collecting data but not actually using it for any purpose. On the second level, a company is using data to make a specific operation more efficient, such as accelerating marketing or production. On the third level, the company has combined its data, which used to be stored in silos, and is using it in cross- organisational processes, such as managing the customer experience across the company. On this level, the company is beginning to expand its focus externally. On the fourth level, the company has a fully external focus – that is, it is focusing on areas outside its traditional business. Instead of improving old business, it is looking to create

data is stored in silos. However, even the most traditional sectors are beginning to realise the necessity of making use of data and the op-portunities it provides.

Sectors where the digital customer expe-rience is key are leading the way.

– Veli-Pekka Ääri, S Group

Recently, companies in all sectors, from bakeries to technology companies, have been looking for data analysts.

– Jussi Olkkonen, Palmu What does it mean to make use of data in business? It means a diverse range of things. Companies are using data to further develop their existing business and make them more efficient. Data business is particularly inter-

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A recent study by MIT shows that

companies that are sharing data

through interfaces are generating 13.5%

more in operating profit on average than

companies that do not provide open

interfaces for data.

– Timo Seppälä, Aalto University, Etla

new business. On the fifth level, the company has accepted the fact that its customers’ needs are more diverse than its product portfolio. On this level, the company is seeking to join an ecosystem or, in the best case, create an ecosys tem of its own with key players where the parties can establish meaningful rela-tionships with customers. On the fifth level, it no longer makes sense to protect data in an effort to maintain a competitive advantage. Instead, the company is sharing data within its ecosystem and is using data to enrich the competitiveness of its business.

There are many models for companies to measure their level of making use of data. Such models are provided by Gartner, TDWI and DELTA (Data, Enterprise, Leadership, Tar-gets and Analytics), among many others. It is essential for companies to understand these maturity models from a wide perspective, to consider the aspects of data, organisation, management, goals, technology and analytics competence.

Companies should extensively apply the maturity model that best suits their op-erations as part of the implementation of their data strategies.

– Pekka Ahola, Solita

When a company wishes to make progress and develop new business based on data, they need much more courage and innovation than they would if they were just using data to en-hance their existing operations. The process of creating new business forces companies to examine their traditional business from new perspectives.

Start-ups are based on a problem that the company wants to solve. This approach is possible when there are no existing structures that compel the company to operate in a certain way. When the prob-lem has been identified, the company begins to collect the resources it needs to solve the problem. Traditional companies

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have a great deal to learn from start-ups.


Finnish companies are enjoying a positive vibe. Positive developments are emerg-ing, even in the public sector.

– Veli-Pekka Ääri, S-group

The manufacturing industry, in particular, is under high disruption pressure. Traditional corporate structures are being questioned.

What are the grounds for the future existence of YIT, a company with 6,000 employees and net sales of nearly EUR 2 billion? Business models will need to be rethought. Companies are gradually de-veloping into very complex, hierarchical, dynamic ecosystems.

– Juhani Nummi, YIT

Two major developments are already forcing companies to consider new business and ways of making use of data: The Revised Directive on Payment Services (PSD2) requires banks to open their interfaces to allow any operator to transmit payments or data. Online stores, for example, will be able to transmit payments. Another major factor is the General Data Protection Regulation (GDPR) of the European Union, which will come into effect in spring 2018. It will enable consumers to decide who is allowed to use the customer data related to them.

Not much will happen in a year. After a decade, however, the value chains will be entirely different from how they are today. Everything will be based on more transparent decision-making. The power is shifting towards the consumer.


As previously mentioned, using data to en-hance and further develop existing business

is typically the first stage of a company’s data business. Using data in existing operations and using data to create entirely new business are not at the extremes from one another, nor are they options that exclude each other. Many companies are already using data success-fully to enhance and further develop their ex-isting business, but have to progress beyond the planning or preliminary stage of creating new operations based on data.

Currently, the most significant

benefit of data for us lies in

making our existing operations

more efficient and improving

our customer service. New data

business cannot be created

by dabbling a little in one’s

spare time. A company needs

a strategic decision to invest in

new business.

– Kati Sulin, DNA

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WILL DATA BECOME AN ITEM OF MERCHANDISE?

One key consideration regarding data busi-ness in the future is whether data will be-come an item of merchandise, a saleable product in itself.

It is not likely that all companies and sectors will be selling data in the future.

I don’t believe that it’s relevant for all sec-tors to start selling data. Investments are always required for monetising data and establishing new business. Productisa-tion, product development teams, project offices ... All of this requires investment, and data is not so valuable or high-qual-ity in all sectors that payback would be guaranteed.

– Kati Sulin, DNA

However, data is expected to become a cross -sectoral commodity in the future, even though not all companies will have data-based operations. Data will not need to become a new revenue stream for all companies, but all companies will need to be able to make effective use of data and build new operations based on data.

This is something that no one will be questioning ten years from now.


IT PAYS TO PROCESS DATA

Companies are typically wondering whether they have data that they could sell. This may

be the wrong approach. Selling pure data may sometimes make sense as a business operation, but companies usually benefit more from processing data. Only a few glob-al companies with advanced data business are focusing on selling data. The applica-tion of data and the processing of data into new products and services are usually many times more profitable than selling raw data.

The service design company Palmu has made the same observation. They ran an experiment for a client that involved selling a specific set of data to other companies. The value of this raw data amounted to less than EUR 2,000 per month. When Palmu processed the data by developing a service based on the data, the value of the service amounted to EUR 50,000 per month.

I don’t believe that data will become an item of merchandise, but its application will become a core business operation in nearly all sectors. Selling data in itself can be compared to selling tree trunks, as opposed to processing the wood into furniture, for example. The value of pro-cessed data is many times the value of raw data. Companies that have to sell data will be selling data. Companies that have the ability to process data will not be selling raw data.

– Jussi Olkkonen, Palmu

The Research Institute of the Finnish Economy (Etla) has also provided examples of the prof-itability of processing data. Many data sourc-es are free of charge. For example, Statistics Finland offers free unemployment statistics.

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I don’t see YIT selling data in itself.

Value must be built on the data,

although there will certainly also be

room for the exchange of data.


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It’s clear that artificial intelligence will

change the world more than we believe.

Top designers are saying that bridges will

always be designed by people, as the work

is so difficult. I believe that, ten years from

now, artificial intelligence will provide options

for people to choose from and make more

specific calculations. As a result, 70 per cent of

the work will be done by artificial intelligence.


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Etla collected the unemployment data, as well as the historical data and co-data, and developed an algorithm that predicts the unemployment rate. A little over a year ago, Bloomberg offered to buy the algorithm for a six-figure annual fee. Since then, I have been convinced that an algo-rithm is the only right final format for data, as it can be protected. It is practically impossible to protect services these days, but if an algorithm is integrated into ser-vices, the innovation is protected. This also enables companies to create an entirely different kind of business through patents.


Artificial intelligence, technologies and ma-chine learning are offering an immense range of opportunities for processing data. Data analysis methods, particularly solutions based on cloud technology, have developed rapidly and continue to do so. The analysis of images, videos, voice or free text no longer requires major investments from companies.

Companies should start processing data in an agile manner and examine what new aspects of data will be revealed by artifi-cial intelligence.


Data is the air that we breathe. It’s the wa-ter that we drink. Data is a basic prerequi-site. How companies make use of data and combine their mass data with external

co-data to develop algorithms that help them improve productivity, develop new products, renew their business processes and create new markets is important.


IT MAKES SENSE TO BUY DATA

Engineer-like, product-centred thinking con-tinues to prevail in many Nordic companies. With their data accumulating, companies are beginning to think what they should do to sell data. However, the most resilient and suc-cessful companies approach the dilemma from the opposite direction: What data do we need? What type of data should we buy?

Buying data is often a good way to process existing data. Once a company has realised how valuable and significant data is for its busi-ness, buying data is a natural way to acquire data and enrich existing data.

For the time being, the companies that have managed to buy data have benefit-ted from it more than the companies that have sold data. Companies are focusing too much on the data that they possess and what they could do with the data and how they could sell it.

– Petri Parvinen, University of Helsinki,

Aalto University

However, there are examples of Finnish com-panies that are making smart use of their own and acquired data to enhance and further

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develop their business. Kotipizza is a prime example. It is actively making use of people’s constantly changing preferences in its business. Tried-and-tested production machinery is not sufficient for keeping up with consumers’ needs and wishes. A company also needs various, relevant, up-to-date data.

Imagine you are running a chain of pizza restau rants. If you were offered an in-ternational stream of data that reliably describes how the sale of beverages with pizzas in increasing, would you buy that data? I know I would.

–Petri Parvinen, University of Helsinki, Aalto

University

Online contact lens stores and multi-brand stores are good examples of companies that are successfully making use of purchased data. Online multi-brand stores are buying data on the popularity of products from other fashionable online stores and only focusing on the most popular products.

There are examples of this in many sectors.

For a long time now, Lloyd’s has been exchanging data with Wärtsilä. This data enables it to offer insurance products that would not otherwise exist. In the B2B world, buying data affects aspects that are very deep in the value chain.

– Petri Parvinen, University of Helsinki, Aalto

University

DATA MUST BE CLASSIFIED – WHAT ARE YOU SHARING WITH OTHERS?

Before a company can sell data or build new business based on data, it has to identify its key resources and functions. This information must be determined carefully. The company must identify which data is critical to its business and must therefore remain with the compa-ny. Some of its data can be shared with the companies within its network in a controlled manner. There is also data that can be shared with any third party.

Finnair, for example, has prepared a data balance sheet to better understand the data that the company is surrounded by. It has divided data into three categories. The first category consists of data that the company uses internally. The second includes data that

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the company can share with its partners. The third contains data on which the company can build new business.

Recently, we have been practising how to prepare a data balance sheet. Our first consideration is to ensure that the data is high-quality, accurate and in the appro-priate format. This is a major issue that requires a great deal of continuous work.


When the iPhone was introduced in 2007, it was a closed system. At the time, all of the data contained in an iPhone was considered to be business-critical. Telecommunications com-panies typically managed their value chains in this manner. When hackers broke into the

system, Apple needed to think about how the data collected using the system and the de-vices could be shared with other operators.

Today, after a period of more than ten years of gradual development, Apple offers more than 1,000 free data and programming inter-faces for application developers to develop and commercialise innovations.

When Nokia controlled the mobile Internet value chain before 2007, the entire mobile application market was worth around EUR 150–200 million. Today, EUR 30 billion is paid to developers alone.


WHAT HINDERS DATA BUSINESS?

New business will not emerge if a com-pany does not have an understanding of what it is doing and what the transfer to new business requires. An understand-ing of new business models is created through bold experiments.


Business managers have annual goals that do not encourage them to take risks or be creative. If they take risks or create something new, they will not achieve their annual targets, which seem to be more important than, say, doubling the compa-ny’s net sales over a few years.


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Many companies today are well aware of the importance of making use of data and would like to start building new business based on data. What is keeping them from doing this? Two major factors are hindering development: the companies do not have a data strategy, and the waterfall model does not work in data business.

Most companies are still lacking a data strategy. A data strategy is always specific to the company’s needs and extensively an-swers the following questions related to the solutions, goals and management of data use: What type of data is the company using and for which purposes? Where is its data located? What type of data architecture does the com-pany have? What kind of operational culture is related to making use of data?

Basically, companies have not realised the strategic significance of data for their business. They are not used to seeing data as a stra-tegically important competitive advantage. Because they lack a strategy, they do not know how to integrate third-party data into their own data and how to make use of various data with regard to the customer experience.

Data-centred thinking is always based on the customer’s needs. Without extensive data sources and their use, a company will not be able to gain an in-depth understanding of customers’ needs and wishes. The transfer to data business requires that companies rethink their ways of thinking, in addition to their ways of working. For most companies, the thought of exchanging and combining data with oth-

er companies continues to be strange. They mostly keep their data inside their firewalls.

According to studies, Finnish companies have a very traditional view of data col-lection, which is based solely on their own applications and social media sources. They are not collecting customer data from external application sources.


Companies have not given thought to what type of technology architecture they should build around the collection of their own, siloed data and the exchange of data. Significant data does not come from the depths of old systems. Instead, it comes from new intelligent products and services. The progress of the Industrial Internet will bring new, interesting data resources.

Intelligence is increasingly shifting to-wards products and services. Old enter-prise struc tures will not generate new data business.


The traditional waterfall model of software development, where phases from planning to implementation follow each other, does not work in data business development. Excessive planning is another significant factor hindering data business. The future cannot be predicted with much accuracy in a data-based busi-ness world. This means that companies must

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change their cultures and operating methods significantly.

The new data business environment is complex and difficult to picture for many peo-ple in charge of business. Companies have difficulty adjusting to the necessary changes in opera tional culture and ways of working. In

data business, it is impossible to make compre-hensive ROI calculations in advance. Planning is difficult in general. Simply getting started is the only way companies can learn and develop new data business. No one else has better answers – no one else knows better what step to take next.

Insufficient competence in new areas

is a significant reason why companies

are not making progress in building new

data business. This, however, does not

mean that their existing competence

is worthless. It is a both-and situation,

instead of being either-or.


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How toget started

Our goal at YIT is to increasingly make time for creating services for consum-ers’ daily lives. I believe that numerous new models for living will emerge in the residential construction section. Instead of being homebuyers, we will become consumers of residential solutions. Buying a home will no longer be a given. Major changes will take place in the way we live.


H ow will companies be able to iden-tify completely new business op-portunities that are based on data? How should they go about building

new data business?New data business will not emerge unless

senior management realises the value and po-tential of the data accessible to the company. In a data-saturated world, business models are more abstract than the models industrial

Identify customers’ needs and your data capabilities.

companies are used to. However, stagnation is fatal. Companies have no choice but to gain experiences, learn and draw conclusions. In the best case, the experiments develop into practices.

In most sectors, the transformation is based on making intelligent use of data. The great data revolution will make all industries more customer-focused. To put it simply, all busi-ness will soon mean competition for customer interfaces: when companies know their cus-tomers better, they will be able to serve their customers better.

When a company is considering new busi-ness opportunities, it must study the markets. This applies to all business. The company must gain an understanding of what type of markets it is currently operating in. Will data make it possible for the company to enter a new area within its markets?

Most importantly, however, the company

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must understand the need that it intends to meet by creating a solution. When the com-pany has identified opportunities in a new da-ta-based business area and has completed its strategy work, an agile culture of experimen-tation becomes important.

Data business development does not differ from business development in general.

The same principles apply to all business model development, including the cre-ation of new data business.


Service design makes it easier to determine new business. Service design always begins with an in-depth understanding of the cus-tomer’s needs. Companies must learn to view things from the perspective of perceived cus-tomer value, so that they are not merely digi-tising existing services. Companies should be viewed as capabilities and data sources.

This is a good starting point. With our cus tomers, we have completed exercises that help us view our company from the outside as a collection of data and

Hackathons, start-ups, academic cooperation and

dedicated task teams enable companies to carry

out bold experiments and test new strategies. It

is important to create an atmosphere that allows

failure. If a hypothesis turns out to be true, the

company can proceed at speed. – Kati Sulin, DNA

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capabilities. Instead of looking at the company as a structure consisting of units, we look into the data and capabilities that the company has and how the company could provide services in a new way and shape the industry. The design of new services must begin with data and existing capabilities.


Viewing the company’s situation from the out-side is important. Many Finnish companies lack this ability.

Companies often do not have people who are able to think outside the box. Com-panies are not run that way. The most innovative people are able to increase the company’s business by ten per cent. But where would you find people who are able to change its direction by 180 degrees?


How to get started with data business? There is no one correct answer. To begin with, com-panies must be able to examine their strategic thinking and capabilities.

Readiness is an important factor when we are talking about transformation. In addition to meaning technological read-iness, this also includes operational and strategic readiness. When a company is considering making use of data, it should identify the spots where such readiness exists. The basics must work when we

are talking about building business on data. Companies should not rush with data. They must find a spot or a section where they can get started. In this re-spect, small-scale pilot projects are a good way to test the markets and new operations.

– Katri Harra-Salonen, Finnair In data business, customers are often found outside the existing customer base. According to observations made by Etla, for example, insurance companies offer major potential as clients in many business areas.

If a marine engine has been sold to a

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company that provides shipping services, information about an accident at sea can be transmitted directly to the insurance company from the ship. This means that the compensation decision has already been made by the time the crew reaches the harbour. There is no need for on-site analysis. This saves a great deal of time and work.

– Timo Seppälä, Aalto University, Etla INVEST IN DATA ARCHITECTURE AND QUALITY

A company must identify its current type of data architecture. How fragmented is the data across its systems? Should the company build a solution that provides it with a comprehensive view of the data sources accessible to the company?

Companies are beginning to realise the role of data as a key competitive factor. However, their data may be in poor condition. A company might want to make use of data by means of intelligent algorithms, but its data resources are not of a sufficiently high quality. Does the com-

pany have the courage to invest in improving its data to such a degree that it will be possible for the company to develop new, interesting business based on the data?

A company can make the best use of its data when its data resources have been com-bined. Currently, the data is often located in silos, and the company is not able to significantly benefit from it. Consistent data is particularly important in the development of IoT business.

The quality of data will improve once a company starts making use of the data. Data that is being actively used by a large group of people is usually in good condition. An operating model where a company decides to improve the quality of its data before proceeding is not recommendable. Getting started requires that the data is of a sufficiently high quality.

Many companies already have a large number of internal data sources. Making use of external data sources is more difficult for them. The value of data increases when the data is combined, processed and shared.

There are many good questions to deter-mine the quality of data. These include:

Many companies have been discouraged

after finding out that their data is siloed

and of a poor quality.


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Do we have a 360-degree view of all customers that is widely used within the organisation? Are we able to serve cus-tomers and understand their behaviour via multiple channels? A company has already made progress in making use of data if it understands the quality of its data and also knows which key data it is lacking.


HOW SHOULD YOU ORGANISE DATA BUSINESS DEVELOPMENT?

The operative management must decide whether to establish a new unit for the new business operation or create an entirely new operation. Separating a new business opera-tion from existing operations is often sensible, particularly in very traditional corporate cul-tures. In such cases, it is important that the new unit be allowed to operate freely and make independent decisions.

Creating new data business as part of core operations is usually difficult in com-panies whose structure and business are based on the continuous optimisation of existing business. Companies are often op-timised for their core operations, which they have been carrying out for a long time. The responsibilities and powers of decision are al-located accordingly. A data business model is very likely to differ considerably from such a company’s traditional business model. For this reason, the new business operation will

not be successful unless it is separated from the company’s core operations.

In terms of data business, the old organ-isational structure often loses its signif-icance.


In the Nordic countries, companies tend to establish product development units for new business. The problem with this scenario is that the existing operations often overpower the new business. Recently, Nordic companies have taken to establishing or acquiring start-ups, in which case it is important to foster the start-up culture.

A key question is how to manage the friction between the existing and new business.


I believe that organisations are developing in a direction where they have several organisational cultures. They have cells that are capable of creating value for customers. The old industrial approach where a company only has one way of operating is becoming history.


Having just one way of gaining insight into new business opportunities is not usually enough. There are many ways to generate new ideas, and many companies are applying several

25

approaches simultaneously. It is important that a company does not become too wrapped up in its industry in its thinking.

To gain insight, we need many types of instruments. At YIT, we carefully screen our opportunities to cooperate with start-ups. In addition, we have internal discus-sions and consortia for cooperation. I don’t think any company can afford to go for broke in this respect. Instead, they must be attuned to opportunities in many directions, such as scientific communities. Cross-boundary models are winners. A company that only relies on its existing network of subcontractors will not be able to develop sufficiently.


China has created controlled pockets for cap-italism. Hong Kong and Shanghai are special economic zones, with rules that differ from those of Mainland China.

Because the rules of the system of a vast country could not be changed in one go, China wanted to create separate, controlled experiments that have their own rules and cultures. Similarly, trans-formation may be dangerous in a large company, which is why it may be a good idea to develop new business separately.


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Data is transformingcorporate cultureNew data business cannot be created without good management and a change in corporate culture.

27

P rogress in data business requires a culture of experimentation. Changes in corporate culture are by no means minor changes. However, they are a

prerequisite for new business.

The corporate culture must be changed first. Companies must understand that imitation is the opposite of innovation. Fine-tuning old business is not enough.


In the future, corporate culture will not be about how things are done in a company. It will be the goal towards which all em-ployees are working. Organisational mod-els will change in successful companies. New companies arising from digitalisation will have more teams, groups and cells that are doing things in their own way. The ultimate goal is what everyone will have in common.


Traditionally, our industry does not have a strong culture of experimentation. We are already talking about it, but taking action is an entirely different thing.


It’s either-or: a company either has a cul-ture that allows change or not.

– Kati Sulin, DNA

Traditional Nordic companies excel at min-imising their costs. Creating new markets and carrying out experiments has always been more difficult for them. However, in recent years, some companies have boldly set out to create new types of business. The success of Nordic gaming companies has helped industri-al companies realise the opportunities offered by new operating models and business logics.

We often rely entirely on a specific busi-ness operation and cling to markets that

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have stopped growing. It takes courage to carry out experiments outside your own sector.


DATA IS CHALLENGING TRADITIONAL MANAGEMENT PRINCIPLES

Key challenges include bridging the gap between line management created for traditional production and the princi-ples of data business. How can we make business executives understand the new opportunities? We need good examples.


New data business will transform manage-ment completely. Many popular management princi ples have already become obsolete. Old theses and ways of working should be discard-ed. The requirements for technological and social understanding are high. Managers must be willing to learn continuously.

Being a manager will be highly demand-ing in the future. For example, managers must have an in-depth understanding of what the platform economy means and of the opportunities it offers. This calls for continuous learning. There is no other

way for managers to gain insight and a new understanding.


Digitalisation, globalisation, a sense of com-munity and the sharing economy are major phenomena that are having comprehensive effects on culture. Each company must ask itself how it can meet the requirements relat-ed to these phenomena by means of making use of data. Companies should invest in the future. Investing in the future will be even more important when all sectors become more tech-nology-centred.

This will require managers to give up power, be open and have teamwork skills.

In a traditional classroom setting, the teacher would stand in the front and have control over the entire classroom. They would determine what everyone should do. The world of the future will not be like that. People must be willing to share data. There is still a great deal of management that is based on someone knowing more than someone else.


In today’s complex business world, success-ful companies are based on teamwork and the idea that cooperation genuinely makes a company more intelligent. Data plays a major role in this respect. Data should be able to flow as openly as possible within a company, to ensure that everyone can make use of it and build new things based on it. Work is inefficient if data is not available.

At YIT, for example, managers’ understand-ing of new business opportunities has been increased by means of examples related to construction site operations and occupational safety. Surveillance cameras attached to em-ployees’ hard hats have been used to collect

You have to break yourself, or

you will be broken. In this world,

companies that have a clear

vision and a concise strategy –

two pages rather than a hund-

red – will succeed.


29

valuable data about construction site environ-ments. Cameras have been used to observe safety at work and compliance with personal protective equipment requirements. These observations have also increased understand-ing in general and provided the company with ideas of how to better manage the resource pool and increase efficiency and productivity on a construction site.

Good examples enable us to increase under standing among managers. With respect to ways of thinking, bridging the gap between technical experts and other employees is essential in the first place.

It enables us to develop solutions that create added value for our customers.


The three traditional management principles – give orders, control and mend – have been replaced by three new rules: inspire, be inspired and innovate. Trust and courage are significant aspects of corporate culture.

Storytelling is a key change management tool. All senior managers must be familiar with the basic stories.


ANALYTICS AND HUMAN SCIENCES ARE MERGING

What type of competence do companies need to succeed in data business in the future? Companies in various sectors have already been hiring data analysts for a long time. The competition for the best experts in new tech-nologies is intense. There are not enough data scientists for everyone.

A scarcity of technology experts is a reality in many companies. When companies at the forefront of digitalisation are doing things no one else has done before, there simply are no experts. There has not been enough time for the required competence to be created. Experts in modern technologies are relatively young.

Data analysts with business insight are the most critical success factor for companies.

– Kati Sulin, DNA

Managers should be able to

openly admit that they cannot

know everything.


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Finding the best talent and creating a new culture is the most difficult aspect of the shift towards data business. This is also about the division of work.


On the other hand, new data business and innovations cannot be created by relying solely on engineers and technology experts. Technology and data must not become values in themselves for companies. In an organisa-tional culture, the potential benefits of data business must be understood on many levels.

What other types of expertise must com-panies have to succeed in the data economy?

The best synthesis is achieved in com-panies that combine analytics with cre-ativity. An entirely data-driven approach is never the way to go.


The most important aspect is to under-stand how people create value. Data is useless without empathy and an under-standing of people. People are not turn-ing into robots. All capabilities ultimately serve the company’s ability to create value for its customers.


In Finland, senior managers have traditionally regarded the human and social sciences as “soft sciences”. This may change completely in the new era of data. For example, the story of Apple is based on a love of beauty. Google and Facebook are first and foremost social inventions.

The combination of creativity and ana-lytical thinking is a decisive success factor.

In our time, I find that soft sciences have become the hardest sciences. In Finland, we tend to associate innovativeness with engineers and Tekes, the Finnish Funding Agency for Innovation. This is a national problem. In fact, inventiveness is more of a thing of sociologists and psychologists. Above all, success stories are about social innovations that also involve cutting-edge technology.


In the world of business, it is very important to understand how people create value. All capabilities ultimately serve the companies’ ability to create value for their customers, both B2C and B2B.

At YIT, we have set out to solve the prob-lem by hiring people with a background in math ematics and information technology and putting them in contact with business people. Finding the perfect data analyst is like trying to find a unicorn. We know that we will never be able to find a won-drously multi-talented expert. Instead, we are fostering teams that are capable of excellent performance.


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Successfulcompaniesmake use ofplatformsCompetition in the platform economy is beginning

33

We are entering the era of the platform economy, where the operational logic is entirely different from traditional business models. This is a challenge for companies, as only a few business executives are genuinely familiar with platform business.


P latforms are emerging everywhere, in every sector. Platforms are a sig-nificant driver of development and keep strengthening the role of data

in business. What are we actually talking about when we talk about platforms and the platform economy?

Platforms as such are not a new phe-nomenon. For example, current chains of stores can be seen as analogic platforms. Many of the most traditional companies are platforms or businesses making use of platforms.

A bakery uses a chain of stores or, say, a market place as a platform. From the perspective of platforms, many compa-nies can be seen as places of trading or infrastructures, or as platforms for making use of data.


Ecosystems originate from the world of ICT, but their role will grow stronger in other sectors as well, as the world is becoming more and more complex. Eco-systems are powered by and centred around platforms. This new world will transform traditional value chains and business models.


New digital platforms are often markedly more cost-effective than traditional business models, and also are a better way to serve customers, as all parties’ operations are centred around making use of data. Digital platforms are scal-able and allow for personalised services. In addition, data always leaves a digital footprint. On the other hand, traditional analogic plat-forms have their benefits, such as face-to-face interaction between people and the opportu-nity to touch and see products. For this reason, the future will be multi-channel.

When a pet shop offers a digital service that also enables other companies, such as veterinary practices and companies providing care services, to offer their services, the pet shop is involved in platforms business.

Similarly, a healthcare company offering new opportunities for other companies also

In the platform economy,

the biggest company is

not necessarily the winning

company. The winner is the

company that captures the

consumer’s heart.


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to measure consumers’ healthy lifestyles. The results – that is, the customers’ behaviour – has a direct effect on insurance services. LähiTapiola combines these elements into a package.

Many people think that platforms are gigantic operators, such as Google, Amazon and Apple. In developing platforms, it is important to make intelligent use of existing platforms. This can mean using the AWS infrastructure as a tech-nical platform or using Google Play or iTunes to distribute mobile applications. The number of such platforms will increase considerably in the future.

In the future, platforms of various sizes will emerge continuously. Today, compa-

serves as a platform, and construction com-panies or S Group can be seen as platforms as well.

Our construction projects are platforms of sorts, although not very digital ones. We network with various stakeholders: the authorities, designers, suppliers and consumers. I believe that, in the future, current business models will be replaced by competence pools, and companies will network around these pools.


LähiTapiola Mutual Life Insurance Company cooperates with various parties that are able

Mehiläinen is an example of

a company involved in growing,

data-driven platform business.

– Petri Parvinen, University of Helsinki,

Aalto University

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nies are trying to base their operations on three or four platforms. In reality, the opportunities are much more numerous and diverse.


New EU regulations will also accelerate the platform economy in the near future. New directives will force banks to open up their in-terfaces. The threshold for other operators to enter the financial sector will be lower.

In terms of platforms, the link between the real world and the digital world has been quite thin up until now. Airbnb and Uber are combining physical and digital environments to a considerable degree. I believe that, with the introduction of PSD2 and MyData, the competition for everyday interfaces will become fierce: who will be able to combine all payments and logistics locally? The competition is only beginning. This is a prime example of the platform economy.


DATA IS THE NEW CURRENCY OF THE PLATFORM ECONOMY

What is our business operation in actu-ality? How are we serving the custom-er? How are we partnering with other players? What is our position in the value chain? Who else could benefit from our data? Each business executive must ask themselves these questions every day.


The definition of a platform is extensive and remains unclear to many managers.

A traditional company operates in a straightforward manner: it acquires the ma-terial, manu factures the product and delivers it to the cus tomer. In his book Platform Scale: How an emerging business model helps start-ups build large empires with minimum investment, Sangeet Paul Choudary compares the tradi-tional business model to a pipeline in which a company uses raw materials to manufacture products to be delivered to customers. This creates a clear value chain that ends with the customer.

In platform business, companies are not man-ufacturing anything. The idea behind platforms is enabling cooperation and creating added value. In the platform economy, business mod-els enable various players to create value and engage in sharing and exchange. The business operation of the company that develops the platform is to create a set of services that enable

In the future, platforms of various

sizes will emerge continuously.

Today, companies are trying to

base their operations on three

or four platforms. In reality, the

opportunities are much more

numerous and diverse.

– Jussi Olkonen, Palmu

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the various parties to cooperate. Instagram, for example, is a business model

offering people a place to present their images and discuss them with viewers. Instagram and Spotify are examples of business models in the platform economy that enable producers and consumers to cooperate, in addition to merging their roles.

Sangeet Paul Choudary has examined and compared platforms from three perspectives: 1) network, place of trading, community, 2) infrastructure, and 3) data.

Not all platforms make use of all of the three dimensions, but the most suc-cessful ones always do. For example, a pure software product is practically only a platform for infrastructure, as well as being a platform for a community of us-ers to some extent. However, there is no common data.


In platform business, the ecosystem is both a warehouse and a supply chain. Expansion is always driven by networks. In the platform economy, companies’ focus shifts from money towards transactions. The idea behind plat-form business is enabling social and business transactions that effectively bring added value.

Data is the new currency of the platform economy. HR is replaced with guidance by the community. A company’s repu-tation is the new quality control. Data science replaces process optimisation on platforms. According to Choudary, these are some of the principles of the platform economy.


In the future, most value chains will include digital platforms. In the platform economy, companies can be divided into operators that run and manage platforms and companies making effective use of platforms.

The phenomenal growth and perfor-mance of Supercell, for example, would not have been possible without such plat-forms as iTunes or AWS.


Currently, companies generally have too nar-row a view of their business.

When a company is seeking added value for its operations through data, it must also consider whether the data could bring added value to other operators. This is the point where we enter the plat-form economy. If you have a good algo-rithm or good data, you should not sell them. You should build a platform where other operators can use your algorithm through interfaces. You will accumulate new data in return, and other operators will improve your algorithm. This will fur-ther boost your platform.


YOU CANNOT MAKE IT ALONE IN THE DATA ECONOMY

Today, it is impossible for companies to know what it is exactly that their customers want. No two consumers have perfectly identical phones. Each smartphone is configured dif-ferently and is unique.

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Today, it is impossible for companies to know what it is exactly that their custom-ers want. No two consumers have per-fectly identical phones. Each smartphone is configured differently and is unique.


Platform business are based on the fact that an ecosystem is always better aware of cus-tomers’ needs than any individual company. An ecosystem makes it possible to collect more comprehensive customer data. For this rea-son, it is difficult for an individual company to compete against an ecosystem. Eventually, the individual company has no option but to join the ecosystem. With the progress of digitalisation, customers’ individual needs are becoming

38

more and more specific. The company with the best customer data typically dominates the customer interface.

Companies must change their business logics to consider other operators. This enables other operators to participate in the market. This type of situation is called a multi-sided market.


From the customer’s perspective, the platform economy means combined resources.

The platform economy means competi-tion for control over the customer interface. Companies with the deepest understanding of customers’ needs and wishes will thrive. A relevant question is which companies best understand the customer on a conceptual level and are able to build a value chain based on this understanding.

What if a parish were a platform? A sys-tem that participated in people’s major life events on many fronts. This would enable parishioners to help one another.

What if the parish provided them with the necessary resources? If I were asked to give a two-hour talk to unemployed people once a month, I would be happy to contribute as a taxpayer, provided there was a well-functioning charitable system based on a platform.


Many companies are still not discussing value creation. Instead, they are thinking about the value of their data in terms of old-fashioned business logics.

Apple has enabled various operators to determine together what kind of value they want to create for customers. As the ability for such a discussion is often lacking, companies are trying to sell the data cake to customers before it has even been baked.


DOES EUROPE HAVE A COMPETITIVE PLATFORM ECONOMY?

Have European companies found the co-operation model required for the new world of business? What are the opportunities of-fered by the platform economy in the Nordic countries?

For the time being, only a small group of significant operators in the platform economy have emerged in the Nordic countries and Europe. So far, Europe has not fared well in the platform economy. The Nordic countries and Europe should develop rules for the platform economy, in addition to increasing its compe ti - tiveness.

Companies have been quite timid in terms of the platform economy. Compared with

The key question is how compa-

nies will lower the threshold for

third parties to enter the market

and access their customer

base. In the platform economy,

companies understand that, as

individual companies, they will

never be able to understand

their customers well enough


39

the global market, the platform economy seems to be the Achilles’ heel of Europe. It would be extremely important for us to find good ways to benefit from the EU’s single market, for example. In my opinion, this is crucial for Europe, considering that the platform economy is the future.


International platforms for various industries, such as retail trade, could be created in the Nor-dic countries. A lack of data is not the obstacle. It is a question of having the understanding and courage to make use of new business models.

An understanding of platform business is the only resource that is lacking. There are no other obstacles to Finnish or Nordic success.


The Finnish company Kiosked has success fully implemented genuine el-ements of the platform economy in is production. The Finnish Government pub-lished a report on the platform econo-my in 2016. In this report, Kiosked was mentioned as a leading Finnish company in offering programming interfaces and tools for third parties – a platform as part of a new system.


Even though only a few platforms have emerged in the Nordic countries, platforms related to health and well-being are already being developed. Companies involved in well-being technologies, such as sports watch-es, should actively seek partnerships with gyms and healthcare clinics. Under Armour, a company specialising in sports performance products, acquired MyFitness Pal. Nothing is

preventing Finnish companies from making similar bold decisions and joining forces with companies in other sectors. This is largely a question of which segment companies feel that they belong to.

The implementation of the GDPR is nearing, which is forcing companies to improve their interfaces, break down their silos and see their business boldly beyond traditional boundar-ies. In Finland, the financial company OP, for example, is building hospitals and developing new business around housing and mobility.

The possibilities are endless. Occupational healthcare, for example, could serve as a platform for a diverse range of well-being and healthcare services. Or why hasn’t anyone yet come up with a platform re-lated to single- family living?


Considering the prices of technology today, creating a platform does not necessarily re-quire significant investments.

Companies have access to all the tech-nologies that they need. They have to determine which technologies they need in their business environments.


41

Is the GDPR

A Threat oran opportunity

T he implementation of the EU’s General Data Protection Regula-tion (GDPR) is nearing. The GDPR will require a great deal of work and

attention from companies. One of its major aspects is the MyData principle, which will force companies to view their business in a completely new way. Each individual will con-trol the use of their data. They will be able to decide which companies – if any – are allowed to use their data.

The purpose of this principle is to empower individual consumers to decide on the use of their data, in addition to enabling the beneficial use of data.

MyData means that consumers can trans-fer their purchase histories from one com-pany to another. For companies, it will

be interesting that consumers can allow third parties to access their data. This is a major development, considering that data is companies’ most valuable asset. It is quite similar to a situation where someone tells you to transfer all of the liquid assets on your balance sheet to a competitor.


However, no one is yet able to tell what MyData and the GDPR exactly mean in practice. The GDPR will have a major effect on new data busi-ness. The regulations are strict, but practical interpretations are not yet available.

When a company offers a good service that meets a consumer’s expectations, the consum-er is usually willing to provide data. As long as the service is considered to be good, data is not a problem. The logic behind digital services reads:

42

give us data, and we will let you use our service.How will the GDPR change people’s attitudes

towards providing data?

Tähän asti kuluttajat eivät ole piitanneet tuon taivaallista, mihin heidän tietojaan käytetään. Kun kuluttaja on halunnut palvelun käyttöönsä, hän on vastannut kaikkeen ’kyllä’. Jossakin vaiheessa ihmiset havahtuvat tilanteeseen, että heihin liit-tyvä data on arvokasta.


Companies have different opinions about what the implementation of the GDPR in May 2018 will mean to them. Will it be an obstacle, a hindrance or an opportunity?

IS LEGISLATIVE REFORM ACCELERATING DATA BUSINESS?

The GDPR will bring more opportunities than threats. Of course, it means a great deal of work, but it will also provide access to new sources of data. When innova-tively combined with open traffic data, for example, these changes will create interesting new opportunities. The key challenge will be to steer companies’ thinking from a data-centred approach towards creating the kind of customer value that people are willing to pay for.


According to experts, the GDPR will intensify the competition for consumers’ data. Com-panies that are able to process the data into the most interesting and attractive services are likely to win the competition. Consumers want to provide their data to the companies

that best serve them. A company that serves its customers better and more considerately than its competitors will probably also gain access to data that was initially provided to its competitors.

The General Data Protection Regulation protects individuals, but it also makes data more accessible and allows people to decide for themselves.


Most people think that the GDPR means that, after signing in to a website, they will find a Show MyData function on the screen. However, the regulation has much more extensive effects.

Up until now, from the perspective of start-ups and service developers, the available data has included payment transaction data provided by credit card companies, as well as Google’s data via Google Play and Apple’s data via the App Store. Uber and similar services are based on these. Now that all data in all compa-nies is becoming accessible, service de-velopment will be much more convenient. Companies will know how an individual mows their lawn, for example. This will all constitute an angular coefficient for the entire digital trend.


The General Data Protection Regulation will lev-el the playing field within the EU, which is good for companies. It will also increase a general understanding of data, which may accelerate new business.

At DNA, we have decided to view the GDPR as an entirely positive

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development. To be successful in the future, companies will need to be able to interpret the regulation and integrate it into their business in a natural manner that enables consumers to experience that they are getting added value, better service and transparency. When applied appropriately, the GDPR can accelerate customer acquisition, for example. Conversely, a company may lose business if customers feel that they are left alone or being fooled.

– Kati Sulin, DNA

In practice, the General Data Protection Regu-lation of the EU will require companies to carry out end-to-end analyses. Each company must review their entire data-related process in de-tail. This requires extensive preliminary analysis: What data are we receiving? What data do we really need and would like to receive? How are we processing data? Where is our data located? What rights do we have to access data?

In addition to customer data, the regulation concerns employee data. This will have effects across the company.

In my opinion, this is an opportunity for transformation. When all companies have ensured that their data meets the re-quirements, we will be better positioned for the platform economy. I believe that European companies will benefit from the regulation, because they need to go through major motions. It will be like a diet or fitness programme, and the compa-nies that persist will gain a competitive advantage.


In other words, the General Data Protection Regulation of the EU may well generate healthy data business. Trust between consumers and companies will grow stronger, because trans-parency will increase and consumers will al-ways be on top of things.

All business are based on trust. A good busi ness is about respecting the con-sumer. I believe that the regulation will lay a stronger foundation for new types of business, as the rules will be the same for all players.


Many companies are optimistic: when a service provides value to a consumer, they will autho-rise the company to use their data.

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Consumer protection is important. If a service offers me real value and I feel that I will be provided with better advice and service, I’m willing to provide information about myself. Consumers will allow com-panies to access their data if companies make their daily lives easier and more pleasant and inspiring.


At its best, the MyData principle will make customers more attuned to their own needs: Do I want organic products? Do I wish to monitor my carbon footprint? Companies will offer the tools but will not judge.


IS THE GDPR HINDERING THE DEVELOPMENT OF INNOVATIONS?

The nearing implementation of the General Data Protection Regulation of the EU will also mean challenges and requirements for com-panies. In large corporations, data covered by the GDPR may be located in dozens of data-

bases that are not interconnected. How will they be able to organise this data and display it to consumers in accordance with the regulation?

Naturally, the GDPR will hinder companies’ business for a while. They must review many aspects and access information systems to ensure that the data is ap-propriately documented. They must also ensure that their partners’ systems are appropriate and train people to under-stand their new roles with regard to data. Over the long term, however, all play-ers will benefit from the new rules. The regulation is about companies making use of data fairly and equally, and about customers understanding how their data is used for their benefit.

– Kati Sulin, DNA

Some companies and experts consider the General Data Protection Regulation to be nothing but a hindrance. In the United States, legislation has developed in a different direc-tion over the past ten years. Many find the US legislation to be more flexible than the GDPR.

Consumers should somehow be made to realise that

all of their data is out there somewhere and is extremely

valuable. People will become aware of this sooner or later.


45

I’m afraid that the new legislation is going to have a negative effect on European innova tion operations. It will hinder the creation of European innovations for the new platform economy. I have discussed the regulation with companies, and they see it as a burden rather than a benefit. Legislators should be listening to com-panies. We cannot implement limitations that prevent European companies from successfully competing against other companies.


At its worst, the General Data Protection Regulation will discourage companies from digital development and make them overly cautious.


WILL THERE BE AN AFTERMARKET FOR DATA?

The General Data Protection Regulation of the EU will offer new business opportuni-ties, as consumers will be able to decide who has access to their data. New bro-kers will certainly emerge on the market. Nectar is already packaging the benefits for consumers in Great Britain.


The purpose of the GDPR is to ensure data privacy for customers. They have the right to be forgotten if they so wish. It will be interesting

to see whether operators will emerge on the market that get the best deals for a customer on behalf of them if the customer is not interest-ed in shopping around for offers. Based on the offers collected by such operators, customers will decide who has access to their data.

This may also have side effects.

At its worst, the aftermarket for data could resemble blood donation services in the United States, with poor people selling their data to get money. People struggling to get by will want to give their data away.


Consumers will soon realise that companies have vast amounts of data about them and that this data is valuable. An aftermarket for data is bound to emerge. In addition, brokers who will help consumers with their data for a commission are likely to enter the market.

It’s hilarious to think that there could be stands at supermarkets and shopping centres where people could exchange their data for, say, a dinghy. The com-pensation would vary according to the data source. Undoubtedly, many people who couldn’t care less about their data privacy would be willing to sell access to their data for a year, for example.


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8 key perspectiveson developingdata business

DATA IS TRANSFORMING ALL BUSINESS

Today, the amount of data generated in two days is equal to all the data created in the world until 2004. The amount of data has increased and continues to increase exponentially.

We are living in an increasingly data-driv-en world. There is no future for companies that are unable to make inventive use of data. Data helps companies make better decisions, automate their processes and make their pro-cesses more efficient. Above all, companies are developing entirely new types of business based on data. The rapid pace of the changes will come as a surprise to many companies.

The application of data will be a core busi-ness operation in nearly all sectors in the future. For this reason, a separate strategy is needed

for data business. New business cannot be created as a by-product of other operations. In all cases, the senior management must make a decision to cross boundaries and take new paths.

The extensive use of data will be possible for all companies, as technology will continue to develop further and become cheaper. The availability and price of technological solutions can no longer be used as an excuse for not moving forward and boldly making use of data.

New data business in all sectors are cur-rently driven by cloud solutions, sensors, artificial intelligence and blockchain tech-nologies in particular.


01

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8 key perspectiveson developingdata business

EVERY COMPANY NEEDS A DATA STRATEGY

When a company’s business is viewed from the data perspective, the old structure, goals and operating model of the organisation may lose their significance. To some extent, new ways of thinking are provoking the old model and strategy to be replaced.

Something is wrong if data is not raising intense discussion around the company’s current strategy.


Companies that have linked the use of data to the core of their business will be successful. The ability to use data diversely and inventively is probably the most significant competitive

factor. Nevertheless, many companies cannot just abandon their old business. Initially, many traditional companies must be able to create new business alongside maintaining their old models.

Strategy documents with hundreds of pag-es are a thing of the past. A company’s strategic vision must be clear and concise. Above all, its strategy needs to be inspiring, so that the company will be able to attract the best talent. The competition for top experts is intensifying.

A company’s data strategy must indicate how and why the company will use data to make better decisions, improve the efficien-cy of its processes and build new business. The strategy must also address how data is acquired and collected. Which technologies are key? What is the company’s competence potential?

02

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The ability to make use of data is one of the most important intangible factors affecting the value of a company. In the same manner in which a company is known for its brand or ex-pertise, it will be evaluated based on its ability to make use of data effectively and innovatively.

In the future, companies will not be talking about data strategy. The fact that data is an integral part of the business strategy will be a given, as will be the fact that the data perspective is always considered extensively.


Kodakisation is a greater phenomenon than uberisation. The world is changing drastically, and very rapidly. No one can

close their eyes and wish the changes away.


DATA QUALITY MATTERS

If data were a product sold at supermar-kets, it would not be kept in the freezer sec-tion. Instead, it would be sold in the vegetable section. Data is a fresh product – a valuable one. The fresher data is consumed, the more valuable it is. Customers’ situations and needs often change rapidly. For this reason, the commercial opportunities provided by data should be used immediately. What if your competitor has better data integrity than your company?

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Data quality matters. Outdated data may steer a company in the wrong direction. Unessential, insignificant data may expose the company to unnecessary risks. With the General Data Protection Regulation of the EU soon coming into effect, a company’s data must be well-organised and carefully categorised.

Connectability and traceability are im-portant aspects of making use of data.

If data is processed in Excel or poorly other wise, its cold chain, if you will, is broken.


High-quality data is transparent. In addition, data usually improves with use, when an exten-sive group of people is using it actively. Companies must adopt a much bolder ap-proach to making use of external, up-to-date data sources and combining their data with third-party data. Companies should cease to see data as something that they have accu-mulated in their information systems over the years. From the perspective of new business, data generated by new services and products is more relevant for companies. The development of the Industrial Internet is facilitating this trend. Companies that are highly advanced in making use of the Industrial Internet keep reusing the data generated by

devices or services and combine it with data from other sources. The Internet of Things and the Industrial Internet keep creating new factual information for companies to use in their product development and new service- based business models. Intelligent products and services that are con-nected to the Internet provide companies with real-time visibility into their internal processes and customers’ actual needs. This will make their operations considerably more efficient.

DATA MUST BE PROCESSED – CUSTOMERS’ NEEDS DETERMINE THE WINNER

Will your company content itself with selling wood? Or would selling designer furniture be a more attractive option?

In the future, data will be a saleable product. However, not all corporate or sectoral data will be valuable or interesting. It will not pay for all companies to sell data. However, some com-panies’ data may become extremely valuable.

Companies should prepare a data balance sheet, meaning that they should separate data suitable for different purposes: Which data is critical to their business and should therefore remain with the company? Which data can we share with our partners in a controlled manner? Which data is open to all and can be shared freely with other parties?

04

Companies must learn to categorise, buy, sell and process data, as new business and mar-kets will not be based on conventional busi-ness and industrial structures.


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However, the data economy will not be based on selling raw data. By inventively combining data from various sources, companies must be able to develop new products, services and additional features – to create new business. When a company processes data, its value for the company will multiply.

Companies should see data business more boldly and extensively than simply thinking that data will become a saleable product. The increase in data is a massive underlying force that will change practically everything about traditional business, including business thinking, value chains and business logics.

Companies are too hesitant about mak-ing use of various data sources. In addition to making use of their own data resources and social media sources, they should collect data more boldly from services provided by third parties. Companies need to enrich their own data.

Even though data in itself will not become an item of merchandise in all sectors, com-panies will need very different types of data

for deve loping new services and additional features, for example. This is why data will be traded.

UNDERSTAND THE SYMBIOSIS OF DATA AND THE PLATFORM ECONOMY

When a company adopts a data-centred approach to its business, the platform per-spective will become stronger in the process. Data business are not the same as platform business, but investing in data business will inevitably strengthen the platform perspective. With time, platforms will emerge everywhere, in every sector.

When value chains turn from pipelines into platform-like structures, the oppor-tunities to make use of data will increase. The pipeline model accumulates very little data. ERP systems contain pipeline-like data about orders and deliveries, but not much information that would increase customer insight.


If a company has a good algorithm or good data, it should not sell them. It should seek to build a platform where oth-er operators can use its algorithm through interfaces, for example. The company will accumulate new data in return, and other operators will improve its algorithm.

The platform economy always aims for deeper, more sophisticated customer insight. Companies no longer keep their customer data to themselves. In the platform economy, the various parties give away their exclusive rights to their customer data. Companies understand

No major global company that is

highly advanced in collecting data

is selling data. The data economy

is not about trading in data – it’s

about applying data. The differen-

ce is the same as that between

companies selling logs of wood

and those selling furniture.


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If a company sets out to create

data- driven business and change its

entire business logic, the senior man-

agement’s mind-set must change.

Otherwise, data analysts will not be of

much use.

– Kati Sulin, DNA

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that they will not be able to serve their cus tomers well enough on their own, based on their own customer data alone.

Evolution means that current operations must continuously be supplemented by additional services, new features, bet-ter transparency and a more real-time approach. Increasing, diverse data will make this possible.


MANAGEMENT AND CORPORATE CULTURE MUST CHANGE

Business executives have not yet genuinely and deeply understood what the data transforma-tion means. They keep talking about agility, and companies want to be resilient. However, agility calls for a drastic change in corporate culture. With regard to agility and its development, the gap between formal speeches and practice continues to be immense.

Industrial companies and old companies have a large number of established positions of power and ways of working. Annual plans

and budgets are prepared in the same way year after year. New business are often hin-dered by the fact that new projects are simply not supported. When a company drastically changes its operating model or the direction of its business, the managing director must sponsor the project.

New technology is not enough for a com-pany to engage in new business. Culture and management are the most significant factors.

Managers must have the tenacity to study and learn, and they must believe in the power of experiments, again and again. They must also be able to admit that they cannot know everything, and to delegate decision-making power. Man agers must not keep information to themselves. Instead, data must be allowed to flow freely across the organisation. Good managers need to be open and have team-work skills, in addition to being capable of ab-stract thinking.

For example, only a few business executives understand the true meaning of the platform economy.

A manager creates favourable conditions, provides guidelines and tries to see far into the future. A modern manager is a service professional.

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A competitive edge comes from creativity.

An understanding of people is what companies

currently need the most.


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I’m impressed by how deeply and insight-fully Reijo Karhinen sees the current sit-uation of his company and its industry. He walks the talk, is always to the point and captures the essence of business. It’s very convincing.


I often encourage my team by stating that we are all experts in everyday living. It’s something we all can relate to.


Creating new business models is one of man-agers’ most difficult tasks. The worst possi-ble pitfall for managers is to think that their particular industry will avoid disruption.

EMPATHY IS KEY IN DATA BUSINESS

Focusing excessively on data or technology is never a good strategy, not even in the data economy of the future. Hiring talented data analysts is not enough to save a company. Companies need good data strategists and analysts. Above all, however, they need em-pathetic employees. Data is useless without

empathy and an understanding of people. Companies that understand how value is cre-ated will be successful.

In the future, the competition will be about who can create the most value for people, with the smallest resources. But value is subjective. For some people, value is something that brings back mem-ories. For others, it means saving time or money. Some people find value in being better off than their neighbours.


In the future, artificial intelligence may be able to deduce how people create value. For the time being, however, it is not capable of doing so, which is why companies need a human touch and human sciences.

Companies that are able to create models of consumers’ daily lives and chal-lenges – and develop solution-based models that make people’s daily lives eas-ier – will be successful. This calls for insight. The winners will be the companies that provide the best solutions to people’s daily challenges. In terms of management, draw-ing a line between B2C and B2B companies

The world today is so complex that successful

companies are based on teamwork, which enables

them to genuinely increase intelligence.


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will become increasingly difficult. Eventually, companies in all sectors will need to be able to understand people’s daily lives and create models based on that understanding.

A genuine understanding of value cre-ation and behavioural sciences will always give a company a competitive advantage. Artificial intelligence will be able to help companies in this respect, but is not likely to ever com pletely replace people.


STOP HESITATING, START INVESTING

Companies must get off to a good, agile start with their data experiments. The only way to learn about data business is to engage in data business.

Companies must also have the courage to make “unwise” investments. Too much ratio-nality is a threat to success. Companies must have the courage to carry out experiments that sound crazy, stupid or irrational. Rationality

alone will not lead to disruptive inventions. This bold approach is linked to a culture

of experimentation. Changes will never take place unless a company has a culture that allows employees to try new, unprecedented things without the fear of scapegoating.

The management must be able to create a culture of courage where bold experiments and failures are permitted.

If it turns out that the unconventional ideas do not have wings, they can simply be for-gotten.

The company must also have state-of-the-art technology and must be able to use it insightfully, but its corporate culture is ultimately even more important.

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Crazy ideas are usually disruptive.


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08 STOP HESITATING, START INVESTING

Summary

EMPATHY IS KEY IN DATA BUSINESS07

MANAGEMENT AND CORPORATE CULTURE MUST CHANGE06

DATA IS TRANSFORMING ALL BUSINESS01

EVERY COMPANY NEEDS A DATA STRATEGY02

UNDERSTAND THE SYMBIOSIS OF DATA AND THE PLATFORM ECONOMY

05

DATA QUALITY MATTERS03

DATA MUST BE PROCESSED – CUSTOMERS’ NEEDS DETERMINE THE WINNER

04

8 key perspectives ondeveloping data business

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Conclusion

I t’s flummoxing that companies have better accounting for their office furniture than their information assets.” This apt quotation is from Douglas Laney, VP, Distinguished

Analyst at Gartner. Data projects are always strategic. How-

ever, investments in making use of data rarely make suitable proposals to the Board of Di-rectors, let alone meet the requirements for payback times. The end result of data projects is difficult to plan in advance, which is why it is often difficult to get approval for such projects.

Many companies already have the will to implement data projects. At the same time, however, there is uncertainty about how this new production factor should by handled and by whom. Intangible assets are nothing new for companies, as they are dealing with trademarks, licences and patents on practi-cally a daily basis. Over the past ten years, the value of intangible assets on balance sheets has doubled.

Whether or not data is itemised on the bal-ance sheet, it should be included in the compa-ny’s intangible assets. It must be managed as a valuable production factor, and its current and future value must be evaluated, in addition to monitoring changes in its value and recording depreciation according to need.

Determining the value of data is more dif-ficult than determining that of a traditional investment. A good way to start is to assign ownership of data development work to an individual employee. Unlike the United States, Finland has only a few professionals with the title Chief Data Officer. To get started, a com -pany can examine the current state of its data, select a few use cases and carry out agile experiments in using data.

In such experiments, it is important to measure the ROI for both the data and the operation by comparing operations implemented using data with those implemented without using data. It will be easier

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to get approval for investments when they can be justified clearly. On the company level, a balance sheet value could be determined for data – at least mentally.

The strategic value of data is something companies should seek. This value explains the impressive market capitalisation of Am-azon, Facebook and Google. With regard to these companies, the markets deem the value of their data, algorithms and outlooks to be more than four times higher than their actual traditional value.

How would you like the weight of data to be in your company’s value creation in the future?

However, assigning a strategic role to data and making use of it are not enough to change the game. The company must also invest in good business and service design. Data and design constitute a seamless whole when a company wants to win customers with its data-intensive services. Solita and the service design agency Palmu merged recently. As a company, we are also aiming to improve our data services.

Data must not be mystified. It is only a new raw material that companies are learning to

process with an unprecedented set of highly advanced tools and technologies. New ex-pertise is needed, of course, but having an open mind is even more important. Companies must have the courage to get started. They must also have the tenacity to go on when they encounter problems. You are the leading expert when it comes to your company’s data and making use of it in your particular sector. This is only the beginning of a new world. You don’t have find the solutions on your own – the world of data is a team effort.

It is not an easy path. Keep in mind that failing and getting lost at times are just ways to come out of the dark as a winner. Enjoy your journey!

KATARIINA KIVILUOTO Solita

Solita is a digital transformation company driven by data and human insight. We create culture, services and tech solutions that help us reinvent businesses and society for the better. Our services range from strategic consulting to service design, digital development, data, AI & analytics and managed cloud services. Established in 1996, Solita employs 700 digital business specialists in Finland, Sweden and Estonia.

solita.fi/en | @SolitaOy

https://solita.fi

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the data revolution and business

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