I use early industrial development to understand digital transformation

November 29, 2020

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Jan Madsen

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Right now is probably the best possible time for working with digital transformation. We have only just started and have endless opportunities ahead of us. Digital transformation is a technological transition, that will change many things in our lives and societies, and we need to go back in history to better understand how this could play out. Luckily these technological transformations tend to follow a predictable pattern, and therefore we can learn from history and avoid some of the pitfalls. In this blog post, I dive into what we can learn from the early industrial development in Sweden. 

Technological development in three phases

The iPhone has been around for more than a decade, and we tend to think that we got it all sorted when it comes to “this digital thing”. I am a tech optimist and thus a firm believer in the idea that we have the best ahead of us. The digital transformation has only just begun, and will in the future, make our lives both better and more comfortable. Through reading about earlier technological changes, I realised the digital transformation has much in common with previous technical transitions. 

Historically technological development moves through three different stages and the same with the digital transformation. Therefore we will pass through a pre-digital phase, a mid-digital phase and a post-digital phase.

  1. The first phase is before any significant change and is a period of slow or no development
  2. The mid phase is the period where the new technology is implemented, and we find smarter ways to use it
  3. The post phase is the period following the transition. Here we don’t think or talk that much about the technology any more, it is just there, and the change has happened. 

It is challenging to see the big picture

We can’t see the wood for the trees!

Old proverb

This old proverb is an appropriate and humbling reminder of how difficult it is to see how the development plays out when we are smack in the middle of it all. Therefore it is a good idea to look at how this has played out before. In other words, trying to understand how the digital transformation plays out right now is difficult, simply because we can’t see the wood for all the trees. It is much easier to look back in time, and smile a little when we sit here and think “how little did they understand how this new technology would change everything”. 

To make my point clear, let me take you to one of my favourite places in my part of Sweden – Huseby Bruk

The ironworks at Huseby Bruk

When electricity came to Huseby Bruk

Huseby Bruk is an old ironworks located in Småland. The place is a just one of many examples of a “brukssamhälle”, which is a small community created around either an ironworks or a paper mill. They were the backbone in the pre-industrial Sweden (there you have the phases again), and existed from around 1600 to late 1800s. Many of these small communities were nearly self-sufficient. A wealthy family owned the place, and the workers lived in tiny rented houses on the estate. The estate provided for everything. Children had access to schooling, shops supplied the necessities for folks, and the estate provided work – lots and lots of hard manual labour.

A watermill powered these “brukssamhälle”, hence the location along with the abundant flow of water. The same with Huseby Bruk and walking around on the estate today, you will see how they built dams and all kinds of intricate locks to make the most of the available water. The flowing water and the watermill were at the core of production at Huseby Bruk, just like any other similar ironworks or paper mill at the time. Running water in abundance were the limiting factor for everything. Hydropower operated the sawmill and the hammers in the ironworks. Additionally,  the bakery used it for grinding wheat. Everywhere the same source of energy for all processes: The watermill. 

During the late 1880s, the first of these “bruksamhällle” got interested in “this new thing called electricity”. The first hydropower turbine plants were built, and around the year 1900, the owner of Huseby Bruk commissioned the first hydropower turbine on Huseby Bruk. The electricity came to Huseby Bruk! 

The impact of electricity

Today, knowing what we know about electricity, we can readily imagine how the dawn of electricity would make a massive difference to a production site like Huseby Bruk. The flexibility of electrical power compared to watermills would open a plethora of opportunities. Therefore, the story of how they, in reality, used the electricity at Huseby Bruk (and elsewhere) is bewildering: 

The electricity was used for powering lightbulbs – primarily in the manor, where the owner lived. 

Nothing changed at the core of the production. The new technology was added on the side. Light in the dark winters and everything else was business as usual. And as a side note, the owner had the staff turn off the turbine in the evening when he thought it was time to go to bed. 

What we can learn from this story

The story of electricity at Huseby Bruk is the story of a technological transformation going through 3 phases: 

  1. The pre-electricity phase with no or very little innovation
  2. The mid-electricity phase introducing the new technology, but nothing changes at the core. We add something on the side (light in the winter) but do not understand the impact at the centre
  3. The post-electricity phase is when the new technology changed the production at the core

From what we know today our first priority would probably not be to add lightbulbs! Instead, this magnificent new source of energy should be put into use in the production. Running machines way more efficiently than the old watermill. But that came later, and the story serves as an example of how limited we can be in seeing the opportunities. Later, in hindsight, everything is always easy to understand.

In the post phase, the new technology has moved into the background. It is just there; nobody thinks much of it anymore. It has become a commodity and at the core of our everyday work and being. The following image shows the development of power price in the USA:

It took approximately two decades for power to become a commodity, and thus move into the post phase. In the post phase, the transformation has happened; we don’t even talk about the new technology any more. It is just there, serving us and making our lives easier. The new technology is at the core of everything we do. 

Currently, we are in the mid-digital phase, which is why I am super optimistic about the future when we learn to make use of digital opportunities. The digital transformation has only just begun – with tremendous opportunities ahead. 

Written by Jan Madsen,
founder of Enuda

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