Pekka Sivonen is the Director of Digitalisation Strategy and Programmes at Finnish Innovation Funding Agency Tekes. He is responsible for programs such as 5G, Industrial Internet, Smart City, Augmented Intelligence and Mixed Reality. Pekka has a background of 30 years as an entrepreneur primarily in the ICT-sector. He is the Founder of NASDAQ listed Digia Plc and has been ranked as Finland Entrepreneur of The Year in Services by Ernst & Young in 2004, 2005 and 2006.
IMPACT OF THE IOT REVOLUTION
Which industries do you think will be the most impacted by IoT in the near future?
Since we are moving to an era of internet of everything, everything will be connected to everything else. I cannot see any industries that would not see massive impact because of this development. To begin with, the number of internet-connected devices over the next five years is predicted to grow fivefold, from ten to fifty billion devices, in addition, by the end of 2020 1 trillion sensors will have been deployed. As a consequence, the world will be totally different in five years.
Hand in hand with the IoT revolution, we are going to see the roll out of artificial intelligence, augmented reality, virtual reality and blockchain. Most industries will therefore see a massive impact via the combined effect of these technologies being rolled out simultaneously.
LEADING THE CHANGE
Which part in the organisation or whom do you see would be the driving force for this transformation?
I would expect that the Chief Digital Officer’s role will become closer to the role of CEO, because basically the CDO makes the big decisions, and he is wearing the hat of Chief Strategy Officer, and in some cases, we will see CDO’s replacing CEO’s if CEO’s don’t have the capacity and capability to act like one.
This is because the platform economy is taking a bigger role in society. Companies are no longer competitive by just putting a digital layer on top of their existing product. Many of the successful players and competitors in their field are developing internet-age business models at the heart of their product and building layers around the business model including sensors, big data, analytics, and then finally the product itself. So, the products will move towards an era of systemic entities, and systems of systems.
TALENT NEEDED FOR THE CHANGE
What talents, skills and leadership will be crucial in leading and implementing the IoT?
Many of us tend to think of technology as a starting point, but the competences and skills needed are not just technical: Psychological understanding of people’s behaviour, marketing and sales is also a key requirement. The optimal sweet spot of talent would be people with two or three degrees, covering technology, commercializing technology and behavioural sciences.
If we take a closer look at the most successful platform economy players’ approach, they all start by being closer to the end-user, and develop their value proposition based on behavioural drivers.
BUILDING THE PARTNERSHIPS AND ECOSYSTEMS
How do you see the work being organised, and what kind of partner network do you think is needed in the future?
I honestly believe that the speed of innovation needed is so insanely rapid that no single company can compete alone, whatever the size of the company and even if they have massive financial resources. They need to build ecosystems, and open innovation within the eco systems is the key commercial driver.
For many companies this will be a sizeable challenge for their culture. They are often coming from an environment where everything used to be self-produced and self-owned and now need to switch to an open innovation platform. We used to create competitive advantage by keeping things closed and now need to switch to an open environment. Open players will win at the end of the day, and open innovators and open eco systems will be the ones that will prevail in the future.
IOT MARKET IN THE NORDICS
How can we accelerate the benefit realisation of IoT?
Starting from us Finns, we are great implementers of stuff, and we like to follow. If someone else is doing something interesting and we see it’s viable for ourselves, we are masters in implementing, re-engineering and doing things better. But I think now the speed of innovation and development around us and in society is so fast that the demand for stepping in and taking leadership is greater than ever.
We in the Nordics should elevate collaboration to a totally new level and build a new Nordics including the Baltics, creating a new norm, and capitalise on 30 million people with similar values and similar cultures. We can set new standards if we work together jointly with our Nordic and Baltic friends.
How do you foresee this change impacting our everyday lives within next 5 years? 10 years? 20 years?
I expect there will be quite significant improvement in the quality of living due to technology bringing new levels of ease to our lives. I would also argue that it will improve the level of democracy. Digitalisation basically puts the citizen in charge of many things, and they don’t just have the right to vote every four years, but they will be, and already are, players in social media and in their communities, and freedom of speech will also reach new levels with the advancement of digitalisation.
I came up with a formula for this: d=d2 meaning digital improves democracy.
A digital society takes democracy to a new level because people will be more in charge, and in relation to digital health for example, in the future we will be shifting the focus in healthcare from being reactive to using more pre-emptive and proactive measures, taking greater responsibility for personal well-being. If this was a movie, we would not just be watching the movie, we would be screen writing, acting, and directing the movie too. Putting people in charge of their own lives, that’s something that digital enables and makes possible.
EVERY COIN HAS ITS TWO SIDES
What do you see are the biggest risks associated with the large-scale transition of IoT?
Once we have implemented all the technologies we have at our disposal, we are going to see a lot of jobs disappearing. We will witness within the next twenty years the loss of more than 50% of today’s jobs. We therefore really need to take a look in the mirror and ask ourselves if we are the ones that are going to take the hit, or are we going to use the most innovative systems to advance and to help us transfer from the old world to the new one.
In relation to robotization, I will highlight the example of the Valmet automotive factory in Uusikaupunki, which two years ago employed 800 people, before they started to implement 600 production robots. Everybody was of course scared that the robots would replace people’s jobs, but what happened instead was that productivity at the factory went through the roof, so they had to hire 1000 additional people.
Subsequently, Mercedes Benz placed a new order and the factory had to upsize by another 1000 new workers, so in two years employee numbers grew from 800 to 3000 jobs, primarily due to robotization, so is this something we should be afraid of? I think this is exactly what we should be doing in many other industries as well: We should pursue a new distribution of work between man and machine, and find new levels of productivity. You need to find new clever and innovative ways of navigating in these rocky waters.
If we look a while back and see what happened in the UK with their National Health Service, several hospitals were heavily affected by poor security related to missing hardware patches, and the attackers were only using 2007 version technology for the attack. If they were using the latest technologies, the impact would have been worse which is exactly what happened at some Ukrainian power plants 2 years ago, when the plants were shut down due to an orchestrated attack performed by professionals.
The vulnerability of society will become a significant risk once we implement things like smart traffic, digital hospitals, and autonomous sea vessels etc. The potential for risk is significantly higher, not just by a factor of two but much, much more. We have not payed enough attention to the security and vulnerability of these systems. And this is something that everyone that is seriously thinking of remaining in business must invest in.
JEOPARDIZING THE SOCIETY 5.0
Do you see any other downfalls that could jeopardise the large-scale usage of IoT?
A second major obstacle on the road is the amount of capable brains and hands needed to implement all of this. As we speak, Europe is already suffering from a shortage of one million ICT professionals. Finland has a shortage of 9,000 professionals and it is getting worse by 3,800 every year. So, in a couple of years’ time, we will have a shortage of 15,000 people.
We didn’t have this issue in the recent past because of what happened to Nokia mobile and Microsoft mobile, but that surplus was already eaten a year ago. The situation will get worse if we don’t do the needed adjustment to our education system which is currently being discussed with academia and the education system. If this is not handled properly, it could be a huge fail.
So, these are the individuals with talents and skillsets that you mentioned earlier?
Yes, we need to have a holistic understanding of the society, as the whole society will be different in the future. We need to have significantly more new ICT professionals and developers, to be educated and trained by our system. But we need the other sciences as well, as we are not just implementing industry 4.0, we are simultaneously planning and implementing society 5.0. New society will be very different because of what’s happening with technology.
TRUSTING THE BUSINESS AND GOVERNMENT
How do you see privacy and GDPR impacting the IoT transformation?
In Finland, citizens have a relatively high trust in public systems. In the future society, data will be the new currency and trust will act as a new central bank. Of course, the new privacy legislation will change many things, and it will cause serious issues for the development paths for many companies, who will be made responsible and accountable for collecting all sorts of data.
In order to achieve a society in the platform economy mode, we need to open as many APIs as possible, because the platform economy starts with the free flow of data. So, there is a fine balance we need to find between having strict privacy laws whilst allowing the move to a platform economy. Finding the right balance where business can still prosper will be a tough question in the future.
So, trust is needed?
Yes, and you can only lose it once. In Finland people still trust the public system, but for example in the UK, people’s trust has been affected by the security breaches in the NHS. In the US, generally speaking, citizens don’t trust the federal government, because of the FBI, CIA and NSA, and the other parties they don’t trust are the social media companies such as Google and Facebook. So, I think if we can play the cards right, we will be having many industries and global cases in our hands. Our healthcare system alone is one of the most efficient in the world. We spend per capita one third or one fourth the money that Americans spend on their health care system per citizen (depending on the US state in question), and now we are digitalising it. We are taking the full benefits of digital and if we put the building blocks in the right places, we will have a global case in our hands, which could bring a lot of new health care business into Finland.
What, to your understanding, separates the winners from the losers in the IoT game?
Digital, generally speaking, is all about ones and zeros, there is no number two or number three, the winner takes it all. Being a winner requires guts, bright minds and an excellent capacity for execution. So be prepared, from which ever business you come from, to be the one who eats the others’ businesses, or be prepared to be eaten. There are no choices in between. It’s all about ones and zeros.
THE EXCITING STUFF
What do you personally regard as the most interesting use of the Internet of Things?
There is fascinating stuff such as smart traffic, which is fundamentally IoT enabled and autonomous sea traffic, also a massive case of IoT and AI implemented together. Being now 55 years old, with the help of modern medicine and technology, I could live up to a hundred years or more. That’s the area I see as being the most fascinating over the next twenty years -healthcare will change more than it has developed over the last 200 years. And we will see a really massive transition from taking care of the sick towards preventive and proactive healthcare.
Our current healthcare treatments are essentially about using a knife or giving pills, but there are other things that promote better health. And the technologies for this are developing very quickly including the usage of AI, biomedicine and genomics -its mind-blowing what’s going to happen.
The amount of computing power that we have in our hands now, for example a modern smartphone with quad core processor, has more power than the moon flights and Nordic air defence systems combined ever had at the time of the Apollo flights. In four years, the same size hardware will be capable of computing everything happening in real time on our local highways.
We will be speaking languages, any language, because of the computing power in our hands, and this is a matter of only a few years. Not today though. And therefore, I feel privileged to live in this time, when so many exciting things are happening in society. And what a great motivation to take better care of our health than to see it all developing.
What’s your personal motivation? What makes you tick?
I really see that the work I’m doing, is exactly what I came to do in Tekes, i.e. to change the course of the country by leveraging the capability and skills of the digital we have already. We are not playing our cards right or at least we haven’t been playing them correctly in the past. I think that’s the ultimate mission for me: To get the country to play its cards right and win the game.
- Switching to an open environment (open ecosystems & open innovators etc) will create competitive advantage but will be a massive step of change and a challenge for most.
- We need to work hard to get security right. The risk and potential impact are ever-increasing.
The author is Joel Särkkä.