Tieto Future Perspectives Report

1. Public Future Perspectives How digital disruption is shaping the Nordic business landscape and what business possibilities are emerging? A Nordics study 2017

2. © Tieto Corporation Public In 2016, Tieto conducted the Foresight 2020 study to understand the cross-industry business opportunities projected to shape the future of business into the year 2020. In 2016 and 2017, Tieto conducted the Future Perspectives study to deepen the insights of Foresight 2020 in particular. The Future Perspectives study provides expert thoughts and expectations about how technology-driven opportunities will unfold in the coming half-decade — specifically, how business models and value chains will be affected and what kinds of business possibilities will arise now and in the future. Tieto’s Future Perspectives study was conducted via interviews and a questionnaire survey of 500 executives from a wide variety of industries in three Nordic countries. Data was collected and analysed by the research company Kairos Future. Future Perspectives: Nordic insights on the effects and possibilities of digital disruption 2

3. © Tieto Corporation Public 3 53% 23% 15% 9% Sweden Finland Norway Others 500 Nordic respondents representing a variety of industries Wide industry coverage 25% 15% 12% 10% 9% 9% 5% 5% 5% 4% 2% Other industries Financial services Public services Energy & utilities Manufacturing Healthcare and welfare Media Telecom Retail and wholesale Forestry Logistics 0%to30% Future Perspectives: The scope of the study Source: Tieto Future Perspectives Research 2017

4. © Tieto Corporation Public 4 Future Perspectives: Key findings • 40% of senior executives are not worried about disruption driven by industry innovation coming from insiders and outsiders • Nordic executives are not investing in some technology areas, even though they identified them as containing opportunities. • Digital disruptions create a Valley of Opportunity — which makes becoming a pioneer and early adopter the best approach for success. • Digital possibilities for the future are opening up faster than ever. Future Perspectives: Key insights Traditional industries are merging together to forge new opportunities

5. © Tieto Corporation Public 5 Executive summary THE CAUSE: The speed of digital disruption hits a new gear in the Nordics Nordic executives expect more radical digital disruption in the coming five years compared to the past five years. 72% of these executives foresee disruption coming from outside their own industry. Retail & wholesale, financial services and media industries are seen as the industries most heavily disrupted by new tech players. THE EFFECT: We are in the next wave of business model innovation 82% of Nordic executives believe their value chain will change drastically over the coming years. 72% of executives believe their current business models will be obsolete within the next 5 years. Current business models are anticipated to have shorter lifespans.

6. © Tieto Corporation Public 6 Executive summary THE ENABLER: Culture and leadership are key to new business possibilities The digital possibilities in the Valley of Opportunity can offer huge business potential. The best approach is to be a pioneer or an early adopter. Culture and leadership are the greatest barriers to opportunity domains. WHAT WILL TOMORROW LOOK LIKE? Future digital possibilities for Nordic businesses In the short term, digital surveillance and cyber security look to mature into important opportunity domains. Automation in everything — including production of goods, energy and services — may become a central part of the mid-21st century economy.

7. Public 1 The speed of digital disruption hits a new gear in the Nordics

8. © Tieto Corporation Public 8 Key insights 1. The speed of digital disruption hits a new gear in the Nordics Digital disruption is getting faster • Nordic executives expect more radical digital disruption in the coming five years compared to the past five years. Digital disruption comes mostly from outside • 74% of executives foresee disruption coming from outside their own industry. New tech players are shaking up traditional industries • Retail & wholesale, financial services and media industries are seen as the industries most heavily disrupted by new tech players.

9. © Tieto Corporation PublicPublic We are in a new era of digital disruption

10. © Tieto Corporation Public 10 Degree of past disruption perceived by executives compared to degree of disruption that they expect in the future More radical disruption expected in the next five years Past five yearsComing five years 22% 31% 25% 15% 1 2 3 4 5 6 7 0 5 10 20 30 4% 2% 10% 3% 8% 9% 16% 8% Nonexistent or almost so Very high, rapidly transforming industry logic and competition 18% 29% Source: Tieto Future Perspectives Research 2017

11. © Tieto Corporation Public Rate of increase in the degree of disruption as perceived by executives according to their country Finland Sweden Norway 21% 20% 17% Digital disruption is the new reality in the Nordics 11 Source: Tieto Future Perspectives Research 2017

12. © Tieto Corporation Public 12 Rate of increase in the degree of disruption as perceived by executives in various industries Digital disruption in most industries will accelerate 12 Source: Tieto Future Perspectives Research 2017 6% 10% 12% 18% 19% 23% 25% 26% Media Public services Logistics Healthcare & welfare Retail & wholesale Energy & utilities Financial services Manufacturing

13. Public of Nordic executives state that the new technology based start-ups will be the most important drivers of change for their industry. 44%

14. © Tieto Corporation Public 14 74% foresee disruption coming from outside their own industry Actors that executives expect to be key drivers of domains of disruption within their industry Established markets leaders from within the industry Established companies coming from other industries New technology based start-ups Others 44% 28% 26% 3% Percentages are rounded off Source: Tieto Future Perspectives Research 2017

15. Public Global insights from the Tieto Foresight 2020 study: Digital disruption breaks traditional industry boundaries

16. © Tieto Corporation Confidential Digital disruption breaks industry boundaries Ecosystems will drive future competitiveness E-Learning Digital health management Smart health monitoring homes Cyber security Digital payments Real time Retail On demand manufacturing Digital supply networks Factory of the future Virtual Reality Smart Home Smart Traffic Smart Grids Distributed Generation Digital public services Autonomous logisticsFinanci al Services Digital trust Optimization through IT Retail & Wholesale New entrants Growing importance of customer experience Knowledge management Mass customization Manufac- turing On demand economy (incl. 3D printing) Sustainable production Optimization Competition from East Forest Structural changes in demand Increasing consumer influence 3D printing On demand economy M2M / Industrial internet Consolidation and optimization Media Personalization & Customer Experience Rise of On Demand Informed patient customers Healthcare & Welfare Aging population Internet of everything Public sector Stronger citizen influence Open public data uptake Digital identification Shrinking tax payer base Energy & UtilitiesRegulation & subsidies Changing customer demand (control) Telecoms Logistics Next generation retail Domotics / Home Automation Value added services Customer Experience Entry to new industries Source: Industry Foresight 2020, Tieto 2016

17. © Tieto Corporation Public 17 Actors expected to be key drivers of domains of disruption, according to their industry Tech start-ups are the main drivers of digital disruption 22% 22% 6% 32% 10% 22% 31% 34% Media Public services Logistics Healthcare & welfare Retail & wholesale Energy & utilities Financial services Manufacturing 50% 42% 56% 44% 56% 36% 41% 36% Established markets leaders from within the industry Established companies coming from other industries 17 Source: Tieto Future Perspectives Research 2017

18. © Tieto Corporation Public 18 Major changes to value chains broken down by country 38% 34% 51% 24% 32% 27% Established companies coming from other industries New technology based start-ups Sweden Finland Norway Disruption by tech-startups is most evident in Sweden Source: Tieto Future Perspectives Research 2017

19. Public 2 We are in the next wave of business model innovation Digital disruption is the new normal in the Nordics — but what happens now?

20. © Tieto Corporation Public 20 Key insights 2. We are in the next wave of business model innovation Many business models will become extinct • 72% of the executives believe that their current business models will be obsolescent within the next 5 years. Value chains will transform • 82% of Nordic executives believe their value chain will change drastically over the coming years. Current business models are anticipated to have shorter lifespans.

21. Public Value chains will merge across industries, putting an increasing emphasis on continuous innovation

22. Public of executives believe their value chain will change drastically over the coming years. 82%

23. © Tieto Corporation Public 23 Traditional value chains will experience structural changes Expected structural change in the future of value chains The industry value chain will be redefined The industry value chain will merge with another industry The industry value chain will remain unchanged Other 58% 23% 18% 1% Source: Tieto Future Perspectives Research 2017

24. © Tieto Corporation Public 2424 Value chains across all industries will be affected Major changes to the value chain, broken down by industry 23% 21% 21% 22% 21% 28% 21% 15% Media Public services Logistics Healthcare & welfare Retail & wholesale Energy & utilities Financial services Manufacturing 44% 58% 68% 53% 67% 60% 37% 65% The industry value chain merges with another industry The industry value chain will be redefined Source: Tieto Future Perspectives Research 2017

25. © Tieto Corporation Public Watches OTT content on tablet Records a video blog 25 An example: how the value chain of the media industry is evolving The map below illustrates the flow of money between actors in the value chain for a person setting up a business, and it highlights the potential of different activities in the future. LowMediumHigh Estimated level of disurption New payment, monetization models Automated production, distribution and marketing Increase in visual / video communication Self-service re-bundling Person wakes up Reads a subscribed to newspaper Arrives at work Drives to work listening to radio Has several phone calls during the day Collects advertising from post box Buys product on sale, as seen in newspaper advertising Watches linear TV Writes a blog post Media house funded by advertising and subscription Reads a book Retailer investing in TV and Print advertising Source: Industry Foresight 2020, Tieto 2016 Listens to (and watches) personalized media content via car infotainment system Video-conferencing, via same device but different providers Digital signage and beacon technology delivers targeted ads based on big data analytics Video-conferencing, via same device but different providers Generates revenue from ads Produces novel content Targeted marketing distributed digitally Accesses a media content aggregators’ platform for personalized selection of sources and content Investing in e.g. affiliate promotion model Watches customized personal content Content selected automatically through big data analytics Primarily re- distributes automatically collected content Funded by advertising and a freemium content model

26. © Tieto Corporation Public 26 Major changes to value chains broken down by country 58% 60% 64% 24% 22% 21% The industry value chain merges with another industry The industry value chain will be redefined Sweden Finland Norway Almost 2/3 of all executives expect their value chain to be redefined Source: Tieto Future Perspectives Research 2017

27. Public Most of today’s successful business models will have shorter lifespans.

28. Public of Nordic executives state that their business model of today will be obsolete within the next five years. 72%

29. © Tieto Corporation Public 29 Media Logistics Healthcare & welfare Retail & wholesales Energy & Utilities Financial services Manufacturing 3.1 3.5 5 3.7 4.8 3.5 3.1 4.3 Public Services The lifespan of a business model is shrinking further Years Source: Tieto Future Perspectives Research 2017

30. Public 3 Culture and leadership are the key to new business possibilities Digital disruptions create a “Valley of Opportunity” — domains with huge potential for companies who recognise these possibilities.

31. © Tieto Corporation Public 31 Key insights 3. Culture and leadership are the key to new business possibilities The Valley of Opportunity presents uncharted business possibilities • The digital possibilities in the “Valley of Opportunity” can offer huge potential. • Leaders acknowledge the opportunities, but do not invest in them. Leadership and culture needs to develop — or innovation can falter • Nordic executives identify culture (51%) and leadership (50%) as the greatest barriers to seizing opportunities. The Nordics are early adopters of disruptive technologies.

32. © Tieto Corporation Public Estimated time horizon for significant impact 2015 2025+ 2020 Estimated time horizon for significant impact2015 2025+2020 Digital payments On-demand manufacturing Autonomous logistics Digital supply networks Real time retail Digital Identification Cyber security Digital public services Smart Traffic Factory of the future VirtualR eality E-Learning Digital health management Smart health monitoring homes Distributed Generation Smart Grid EUR 10–20 billion EUR 50–100 billion EUR 100–200 billion Estimated global market value* EUR 20–50 billion * The majority of the opportunities identified in this report comprise a mix of separate markets and technologies, and thus exact market values are therefore difficult to specify. The market value bands identified have been calculated by adding together market sizes for separate components belonging to each of the domains. EUR >200 billion Source: Industry Foresight 2020, Tieto 2016 Foresight 2020 excerpt: 16 previously identified opportunity domains

33. © Tieto Corporation Public 33 New business possibilities are born from digital disruptions • Under-utilized opportunity domains with huge potential — especially as businesses and whole industries continue to digitalize. • Companies who can seize opportunity domains in the Valley of opportunity at an early stage are likely to be big winners. • Companies should be ready to invest as soon as a valuable opportunity presents itself. What is the Valley of Opportunity?

34. © Tieto Corporation Public Nordic executives are increasingly willing to invest in the opportunity domains 32% 30% 23% 23%20% 20% 18% 10% 11% Media Logistics Healthcare & welfare Retail & wholesale Energy & utilities Financial services Manufacturing Public services Telecom 34 Source: Tieto Future Perspectives Research 2017

35. © Tieto Corporation Public 35 Nordic leaders are missing out in the “Valley of Opportunity” • Telco enabled ecosystems • Factory of the Future • Smart grids • Distributed generation • Virtual reality • Smart health monitoring systems • On-demand manufacturing • Real-time retail • Smart traffic • Autonomous logistics • Digital health management • E-learning • Digital supply networks • Digital public services • Digital payments • Cyber security Valley Of Opportunity Industry-Specific Society-encompassing High investment readiness Low investment readiness Source: Tieto Future Perspectives Research 2017

36. © Tieto Corporation Public 36 Percentage of executives ready to make significant investments in their chosen opportunity domains, according to country Finland Sweden Norway 24% 17% 18% Finnish executives pursue competitive advantages from opportunity domains Source: Tieto Future Perspectives Research 2017

37. Public of those who stated that digital public services would be relevant for their industry in the future showed a high willingness to invest in this opportunity domain. However, only 18% of those interested in smart health monitoring showed a high interest in investing. 52%

38. © Tieto Corporation Public 38 Percentage of executives that cite various factors are essential for exploiting new disruptive opportunity domains Culture and leadership are essential for utilizing new business opportunities Technology Leadership 51% 50% 23% 22%14% 13% Culture ProcessesAmbition Ownership 0% - 60% Source: Tieto Future Perspectives Research 2017

39. Public Culture and leadership can also be the greatest barriers to opportunity domains.

40. Public of executives consider culture as the most important barrier to exploring technology-driven opportunity domains. 51%

41. Public Being a pioneer is the best approach to utilizing these opportunity domains and building competitive advantages.

42. Public of executives aged 30–39 preferred to be early adopters or pioneers. And 61% stated that their business had taken this strategic posture. 67%

43. © Tieto Corporation Public A forward-leaning strategy is preferred in order to deliver future success The wide gap between reality and desired state as a pioneer State that their own organization is a pioneer or early adopter Believe being a pioneer or early adopter is the ideal strategic posture 40% 31% 20% 40% 26% 32% 47% 28% Media Logistics Public services Retail & wholesale Energy & utilities Healthcare and welfare Manufacturing 58% 48% 68% 73% 65% 56% 50% 53% Financial services 43 Source: Tieto Future Perspectives Research 2017

44. Public of pioneers considered culture the most important barrier to change. Conversely, only 38%of late followers listed this as a key challenge. 62%

45. Public 4 Future digital possibilities for Nordic businesses How will the business models of the future look and what possibilities will emerge?

46. © Tieto Corporation Public Telecom companies have more detailed data about the citizens of the Nordic countries than their government do. More than half of all companies employ cyber security firms to protect their data. Digitally monitoring supply chains at least 12 months in advance is the industry norm, which ensures on- time and appropriate deliveries. Digital disruptions on the horizon 2020 2025 30% of the top 50 retail chains feature virtual reality stores, allowing customers to try products via VR. 50% of customer service in Europe (call center activities by voice or text) are performed by software. It becomes possible for industries to custom-order a computer component from a factory and receive the first shipment the following day. MOOCs (massive online open courses) completely replace conventional corporate training for most major companies. More than half of senior citizens (over 65) use a digital health monitoring device on at least a daily basis. More than 10% of Nordic households produce and sell excess energy to the grid. How do Nordic executives see the future unfolding? 46 Source: Tieto Future Perspectives Research 2017

47. © Tieto Corporation Public 47 Fleets of autonomous taxis will be cruising the streets to pick up passengers in the Nordic countries. Digital disruptions on the horizon 2030 2035 30% of all home-based elderly care is supported by smart homes monitoring the status and activities of individuals. Energy loss due to transmission and distribution of energy falls to less than 1%. The official land registry of a Nordic country is stored in a block chain for the first time. 3D printers outnumber humans in most modern factories. Traffic lights become obsolete in at least one of the Nordic capitals. Beyond 20 years from now A Nordic state adopts Bitcoin or a similar cryptocurrency as its official national currency. How do Nordic executives see the future unfolding? Source: Tieto Future Perspectives Research 2017

48. © Tieto Corporation PublicPublic What is your next move? Will you be the one defining tomorrow’s business opportunities or following the pioneers. The choice is yours.

49. Public Ahmad Qureshi Head of Tieto Digitalization and Strategic Development Ahmad.Qureshi@tieto.com Raghunath Koduvayur Head of Strategic Marketing Raghunath.Koduvayur@tieto.com Päivi Huuhtanen Head of Digital Communications and External Affairs paivi.huuhtanen@tieto.com