Why a dematerialized future is worth striving for
The year was 1982. The year before, I had bought my first moped and I used it to drive from my grandparents’ summer place to my first summer job – where I spent several weeks picking strawberries. This year I had a different summer job. Again on my moped, I delivered mail and packages to the clients of a small accounting firm. I was also responsible for assembling a bunch of bookshelves for all the old accounting papers and ledgers, and labelling and structing all the files – or at least, as well as I could. I vividly remember how hot and stuffy it got up there in the attic, when the summer sun started heating up the roof. Even though this was just a small accounting firm in a small town, for me the rows and rows of binders and files seemed to go on forever.
Fast forward almost 40 years, and here I am thinking about how that type of work is no longer needed. These days, documents are all digital, and the labels and bookshelves in the attic have been replaced by virtual folder structures on a cloud server somewhere.
Why am I talking about my old summer jobs? Well, together with my Ericsson IndustryLab colleagues Patrik Hedlund and Sepideh Matinfar, I recently concluded a rather interesting research project about the future of enterprise – and this research certainly drew parallels with some key takeaways from my previous work. Intrigued? Let’s dive in!
Imagine walking through the doors of a typical enterprise in 2030.
Well maybe it doesn’t even have doors. Once inside, you quickly realize that artificial intelligence (AI) and data mining is enabling white-collar employees to be faster and more productive. The businesses themselves have transformed into agile enterprises by boldly going where they haven’t gone before –they have evolved their business strategies and operations to be better prepared for the constantly shifting needs of their customers. Last but not least, most enterprises are showing significant CO2 reductions driven by dematerialization efforts, such as selling digital products and services instead of physical products, or by moving data and applications to the cloud instead of having their own servers.
Digitilization versus dematerialization?
Let’s leave the future for a moment and get back to the present. Digitalization is probably amongst the most used buzz words in business these days – it has been for quite a while, and rightly so. By digitalizing processes, activities and even offerings through the use of information and communication technology (ICT), productivity and profitability has already increased for businesses all around the world. So why not just stick to the concept of digitalization? Why bother with the introduction of yet another concept? The reason is simple – digitalization is a technology-based solution, while dematerialization is more of a target with concrete benefits. Nevertheless, digitalization and dematerialization are closely related, and most dematerialization we can see today has been achieved through digitalization.
In the IndustryLab report ‘Dematerialization path to profitability and sustainability,’ we describe dematerialization as a process that consumes less resources but still increases the value. Simply put, enabling enterprises to ‘create more with less.’ Dematerialization is perhaps most easily understood in the area of office work and/or service business (for example, replacing paper documents with online dittos), or when comparing how music used to be sold as physical items (such as LPs and CDs) but today is generally sold as a subscription service (such as Spotify or Apple Music).
However, companies in the manufacturing or even mining business can also make significant gains through dematerialization. ‘The BLISK case,’ as described in a case study report from Ericsson IndustryLab, is a very good example of how ICT, mainly in the form of 5G, can be used to reduce the amount of rework and scrap, thereby increasing yield and lowering costs significantly. Essentially, creating more with less!
So, are these benefits just hypothetical, or could we actually see any real difference when comparing current businesses and how successful they are? Well, in the report we took a closer look at the top one-third of the surveyed enterprises that had reported the most progress in their dematerialization efforts, in order to find out how these companies differ from the rest.
Dematerialization front-runners showed higher profitability, were more agile when it came to responding to a changing world and were better at innovating. Additionally, a whopping 62 percent of the dematerialization front-runners said they wouldn’t have a physical office by 2030, because everybody would be working remotely. In comparison, only 43 percent overall said the same thing. Getting rid of the entire office building would certainly be a significant dematerialization step.
Amongst all the surveyed decision-makers, 68 percent agreed the willingness to transform is of very high importance to the success of companies by 2030. In addition, 68 percent believed access to powerful data analytics and data mining capabilities would also be very important by 2030. Data analytics capabilities will be key to helping companies learn from experiences, experiment and ‘fail fast’. As the pace of work life and business increases, this will also result in companies becoming more innovative. These objectives were further emphasized in our interview with Rick Lievano, Worldwide Director of Industry Technology Strategy, Microsoft, who told us that:
"You have to adapt to whatever it is that the situation calls for … [Enterprises] need to evolve, become more ﬂuid, more agile. They need to be able to turn on a dime. They need to address a changing landscape."
In fact, the surveyed ICT decision-makers agreed that leveraging cloud, AI and cellular technology would allow them to better adapt their enterprises to the evolving needs of customers. They believed this would be key when moving forward.
Decarbonization through dematerialization
There is one more really good reason for talking about dematerialization rather than just digitalization, and that reason is environmental sustainability.
Digitalization of businesses using ICT solutions have the potential to not only decrease the need for material – both within the ICT sector and other sectors – through the substitution of physical products with services and digital products. It also enables remote working, and decreased travelling and commuting. In a 2015 report, ICT’s potential to reduce greenhouse gas emissions in 2030, it was estimated that ICT solutions on a global level could reduce CO2 emissions with up to 15 percent.
Approximately six in 10 decision-makers agreed that cloud infrastructure, selling software and services rather than physical products, and using online training courses and documents, were key contributors to the dematerialization that is already happening at their respective enterprises. Nearly half of decision-makers agreed that improved productivity and profitability were key benefits of dematerialization and around 40 percent said the same for sustainability. This should be seen as a win–win situation that benefits both enterprises and the environment. In our study it was clear there was a collective insight that businesses need to continue their evolution to become more sustainable and better prepared for tomorrow’s challenges.
Going forward, no one will need to work in a warm, dusty attic, storing and cataloging binders and contracts. Through dematerialization, businesses will not only decrease their environmental impact, but also boost their profitability. The only thing that really belongs in that attic are the old and unsustainable business practices of the past.
Read the report: Dematerialization path to profitability and sustainability.
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