When asked about his biggest achievements as FLSmidth’s CDO, Mikko Tepponen talks about the following:
“We saved up to USD150 million annually for a customer by providing them with digital and optimization solutions.” Tepponen also says the data collected from FLSmidth’s sites and equipment is “the basis of many of our digital services and solutions, creating a lot of positive momentum in our digital transformation.”
The two statements clearly show that successful digital transformation consists of three factors — digital maturity, tech investments and strong leadership. Mikko Tepponen shares why he’s excited to be FLSmidth’s CDO and walks us through the company’s digitalization and sustainability efforts.
What is the link between digitalization and sustainability in an organization?
Digitalization is an enabler for sustainability from several perspectives. First, you must be able to measure sustainability goals. For example, a company with ambitious targets for the reduction of CO2 emissions. Digital tools are important in industrial settings in terms of collecting data and understanding emission levels.
In industrial settings, the cycle time for replacing equipment or building new capacity in the market is very long. Some of the equipment used is at least 30 years old. In order to work with zero emissions and carbon neutrality, you need to have the technology ready within the next couple of years.
But at the same time, you can already do so much today from an optimization perspective with digital tools. For example, we take a traditional cement plant and optimize it, finding energy savings of 5% to 10%. These will directly benefit the environment, forming a good business case for customers. At FLSmidth, our future rests on two pillars — sustainability and digitalization. They’re very much intertwined and you can’t have one without the other.
Tell us more about FLSmidth’s MissionZero ambition and its milestones so far.
MissionZero is our central ambition in the cement and mining industries. In the cement industry, it goes back to the following questions: “How can we substitute some of the fuels needed in cement manufacturing?”, “What raw material is it produced from?”, “How do we move away from using limestone and clinker into clay?”
Mining is quite a water-intensive and energy-consuming process. How can we use less water and lower the energy footprint within the mining industry? As a technology provider, we’re committed to having all the technology ready and available by 2030, so the two industries can become carbon neutral and emission-free.
What are the greatest challenges and advantages of being a CDO in a company with a 135-year legacy?
We’re very much an engineering company and we’ve built a lot of the technologies that are behind current cement and mining processes. In an engineering culture, people are willing to try and push for new technologies and get excited about innovative projects. That is one benefit of working in a company like ours.
In terms of challenges, I could say it’s the same thing. Every engineer likes to invent and has individual ways of working. This presents an obstacle when driving uniform technology from a process perspective.
The related systems in the back end are not always easy when you have a mindset that everything can be tweaked to be a little different. As a CDO, you want to build a system of uniformity that can be automated and developed further.
What does this legacy mean to FLSmidth’s digital agenda?
Because we’ve been around for a long time, we have great and long customer relationships. A lot of digital innovation happens together with our customers. We also have a large installed base that spans several decades. How do you link into that installed base with technology that is decades old?
As some of it existed before the Internet, it can be upgraded throughout the years. The heritage brings great opportunities because there is plenty of installed base and equipment that can be connected. This can bring a lot of value as we’re a company with a global heritage. We can work anywhere in the world at any time but must keep in mind the history and old systems that are in place.
How exactly is customer co-creation utilized in FLSmidth’s digital transformation journey?
We have a standing rule when developing new digital technology. I think it holds true with a lot of our R&D efforts in traditional and digital spaces. We don’t develop anything unless there is a customer involved in that development. It is crucial, even for a technology company like us.
We call ourselves the best in generating physical equipment and the digital services related to them. Of course, you want to have that end-user input all the time when you’re developing new services. It reduces the time to market, helping us get the right answers quicker.
If you’re successful, you get the first references immediately. If you have the data to back it up, it’s even better. For example, this solution increases productivity by 2% or improves availability by 5%. This allows us to solve challenges and scale solutions out to the market quicker.
There is also a lot happening with our most important customers. They’re tackling the same digital transformation challenges as us. They’re thinking about how to operate their plants more effectively. As some mine sites are located in super remote places, our customers are moving towards autonomous operations. What role can we play in helping them with that technology?
What are the biggest challenges when it comes to integrating digital tools across all business functions?
Many industrial companies such as OEMs and manufacturers of industrial goods have grown through a series of acquisitions, resulting in a mixed landscape of solutions and systems. At the same time, there is the integration of different cultures, processes and ways of working. It becomes a challenge if there is no clear focus on harmonizing your processes.
At FLSmidth, we had a holding company structure that consisted of product companies and small entities. We’re making progress in standardizing global processes and that has helped us in delivering digital tools. There is still much work to be done as our enterprise architecture is quite diverse. For example, we just announced a major acquisition – which is subject to regulatory approvals – of thyssenkrupp’s Mining business, an entity with more than 3,000 employees and many locations around the world. An enterprise architecture and system landscape need to be as lean as possible to manage the additional complexity of acquisition of this magnitude.
How has the CDO role evolved in the past year in terms of leadership and driving tech investments?
At FLSmidth, the CDO is expected to be a catalyst for change as well as a technology leader. Digital organizations are used to working in agile ways and CDOs are tasked with introducing a modern and emphatical leadership style. The CDO role is a balancing act of trying to constantly push their organization a little bit more than they’re willing to. When you get a little bit of pushback, then you know you’re at the right level of trying to drive change. CDOs need to make sure that their organization is ready by taking on new ways of working. It’s an exciting time to be a CDO because I think it’s more vital than ever.
*The answers have been edited for length and clarity.
This translates to creating measured freedom from business-as-usual rules, especially when it relates to funding, contracting, hiring, and reporting. The company can expect significant breakthroughs provided the CFOs know how to exercise their levers to empower and encourage innovation by understanding which rules to relax and which to follow. In this sense, a holistic CFO can validate how ideas outside of the current business logic may be worth pursuing.