Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Future Watch: Russia goes digital


Published on

Update of digitalization process in Russia.

Published in: Business
  • Be the first to comment

  • Be the first to like this

Future Watch: Russia goes digital

  1. 1. Russia Goes Digital 2018 Future watch report In cooperation with Higher School of Economics, Moscow. Team Finland Future Watch Report 1 Pavel Cheshev Senior advisor Business Finland Russia
  2. 2. Russia in global digitalization ranks 2
  3. 3. Russia in digital transformation ranks: ”Russia has built on its traditional strengths such as human capital, scientific excellence, strong leadership and security, while its recent focus on digital infrastructure, strategisc planning and regulation has started to pay off.” World Bank • 41st in reaping social and economic benefits from digital transformation • 61st in ICT impact on government efficiency • 88th in ICT impact on accessibility of basic services (WEF Network Readiness Index 2016) • 28th in WEF Human Capital index 2016 • 43rd in International Telecommunication Union (ITU) ICT Development Index 2016 . • 35th in the UN Global E-Government Development Index 2016 (from 59th in 2010). • Over 51% of Russians access public services online. • 81% Internet penetration in the society overall and 86% in business. Daily network audience is 60% of the population. • Over 60% of Russians own a smartphone. • E-commerce market grows 20-30% per year with the forecast of $50Bn by 2024. (UNIDO ”National report on e-commerce Development in Russia” and Morgan Stanley). 3 Russia Goes Digital – 2018
  4. 4. Russia in digital transformation, assessments: 4 Russia Goes Digital – 2018
  5. 5. Factors hindering digital transformation process: - Cybersecurity and digital piracy Expected growth in the number of cyberattacks and leaks of confidential data. By 2021, annual economic damage from cyberattacks worldwide will reach $6Tn, three times more than in 2015 . By the end of 2018, about 66% of IoT networks will be subject to cyberattacks. Accelerated “digital piracy” negatively affects digital transformation. Since May 1st, 2015, Roscomnadzor (Federal telecom and media supervisor) has received over 3.3 thousand complaints to block 29 thousand websites that violate copyrights. - Digital literacy Low level of digital literacy and large gap in digital competencies between different population groups. In 2016 a little more than 50% Russians possessed basic digital skills. In the same time digital literacy is on the positive trend and increased by 6.3% lately. - Shortage in skilled workforce Russia experiences a lack of highly skilled ICT specialists: in 2015–2016 the number of ICT specialists on the market grew only by 3.6%, while annual demand grew by 25%. - Digital technology adoption by business Penetration level of digital technologies in Russian private sector is remarkably low. In particular in manufacturing industry where 55% of companies invest 1% or less of the revenue in the digitalization and only 6% of companies invest more than 5%. - Media control The state’s excessive control over mass media: while state owns only about 10% of registered media in numbers, these are the largest media holdings that reach to most of the national audience. Recent attempts of Roscomnadzor to block Telegram messenger (de-facto a popular media platform) is an example how state attempts to establish control over digital media sector -International sanctions against Russia. Restrictions in supply of modern foreign technologies and solutions are a sensitive barrier for digitalization for a number of Russian industries, especially manufacturing, oil&gas and energy 5 Russia Goes Digital – 2018
  6. 6. Digital State Challenges, Strategies and Initiatives Team Finland Future Watch Report 6
  7. 7. Challenges: Potential for further Russian economy growth through localization and import substitution policies is exhausted. The government sees labor productivity improvement as a single major growth factor for the economy in near future. GDP per person employed in Russia is $52.000/year on average, which is 30-50% less than in OECD countries. For selected industries: $213.000/y in extraction of raw materials, $45.000 in manufacturing, $38.000 in construction and $33.000 in agriculture. Economy Digitalization is considered as the solution to overcome this gap and is announced as top national priority The share of digital economy in Russia grew to 2.1% in 2016, but still is 3-4 times smaller than in developed countries. «Digitalization may add up to 120Bn euro to Russian GDP by 2025, responsible for over 30% of overall GDP growth.» McKinsey 7 Russia Goes Digital – 2018
  8. 8. Ministry of Digital Development Created in May 2018 on the basis of previously existing Ministry of Telecom and Media. The change was accompanied with the appointment of a new minister : Konstantin Noskov, replacing Nikolay Nikiforov. The Ministry is responsible for Digital Economy program realization and controls budget and expenditures under the program. One of the first and primary acitivities of the ministry will be stimulating and controlling the development of at least 30 digital transformation strategies for major state-controlled corporations by 2021. These digital transformation strategies shall provide for projects of a total budget value of no less than 0.5Bn USD (over 15M per project, on average). No less then 20 Chief Digital (Transformation) Officers shall be appointed to major state-controlled corporations to manage the a.m. projects and develop corporate digital strategy. Pilot phase of the project was already launched in 2018 with 14 state-controlled corporations involved. 8 Russia Goes Digital – 2018
  9. 9. Federal budget for the program is estimated at $18 Bn for 2019 – 2024 timeframe. 50% will be allocated for information infrastructure development. Digital Economy Program Key stakeholders: Six pillars for the Program: • R&D&I in information technologies • Information infrastructure • E-government • Information security • Normative regulation • Human resources and education 9 Russia Goes Digital – 2018
  10. 10. Over the period from 2017 to 2019, the financing of the NTI projects will reach 380M euro, including 168M in 2017, 110M in 2018 and 102 in 2019. National Technology Initiative National Technology Initiative (NTI) is aimed at the creation of new markets and conditions required for global technological leadership of Russian companies by 2035. on new, networked markets. The key directions of the initiative include both “Markets” and “Technologies” groups. The markets group includes: EnergyNet (distributed power), FoodNet (systems of personalized and networked production and food/water delivery), SafeNet (personal security systems), HealthNet (personalized medicine), AeroNet (distributed network of unmanned aerial vehicles), MariNet (distributed network of unmanned maritime transport), AutoNet (distributed network of unmanned management of road vehicles), FinNet (decentralized financial systems and currencies) and NeuroNet (distributed artificial elements of consciousness and mentality). It is likely that in foreseeable future NTI and the “Digital Economy of the Russian federation” program may be synchronized or even merge. ASI (2014) National Technology Initiative. Available at: 10 Russia Goes Digital – 2018
  11. 11. E-government is aimed to reduce administrative barriers, increase trust and speed up processes by providing public services through an online platform Digital Goverment (e-government) principles of the Service state 2.0: 1. No physical documents left involved, except for a citizen ID 2. GosWEB – the web of state services with the focus on UX and security 3. One-window concept to access all public services. Public services are provided though a unified system (no division on federal and municipal levels) 4. Multichannel communication with citizens. Content policy with the focus on common people (language) 5. Public service frontend is separated from data-processing backend 6. Unified citizen digital profile: Biometrical identification; Cloud based e-signature; Register of powers and concents. 7. Setup and creation of the National system for Data Management (NSUD) 8. State keeps the right to block access to citizen data 9. Standartized typical data retrieval, handling and processing procedures 10. AI in decision making to aid/substitute officials in decision making 11. Automated business processes to solve real-life setting issues 120. Platfrom for business-mediated services provision. Open design standards 11 Russia Goes Digital – 2018
  12. 12. Digital transformation think tanks Team Finland Future Watch Report 12
  13. 13. List of think tanks in Digitalization - Agency for strategic initiatives (ASI) aims at creating conditions for global leadership, building a foundation for long-term leadership, and improving investment climate. One of the most important projects of the Agency is implementation of National Technology Initiative in order to create conditions for global technological leadership of Russia on new, highly networked markets by 2035. - Russian Blockchain association supports projects aimed at the development of distributed ledger technology, distributed databases and their application in commercial, governmental and public structures; conducting scientific research in the area; popularizing blockchain among entrepreneurs and public authorities. Members of the Association have already launched 12 projects based on blockchain and ICO, including crowdfunding platform Decentralized Escrow, educational project UniverBit, tourist portal MAPALA and so on. - AR/VR Association (AVRA) is active in consulting and legal support; education and staff training; global markets integration; market research; unification and regulation of the industry standards; organization of thematic events; popularization of AR/VR technologies; GR. Association is one of the founders of the first in Russia Virtual Reality Laboratory aimed at creation of unique multimedia VR-projects, movies and games in virtual reality. - Russian Association of Robotics (RAR) strengthens Russian robotics market by bringing together domestic and foreign industrial robot producers and integrators, service robots producers, research and educational organizations, software developers. RAR creates on-demand analytical studies in segments of the robotics market, particularly industrial robotics, educational robotics and unmanned agricultural robotics. - Internet of Things Association (IOTAS) popularizes and promotes the development and adoption of IoT/IIoT technology in Russia and CIS by bringing together experts from various industries (telecom, manufacturing, agriculture, transportation, energy, and utilities) . Association has 6 work groups working on: NB-FI, NB-IoT, LoRaWan, SmartCity, Metering, Science & Education. - MSU National Center for Digital Economy. State-supported R&D and education think tank to support national digital economy development. - SKOLKOVO School of Business Digital Transformation Center. Established in partnership with the engineering division ROSATOM corporation. The Center's programs contribute to the transformation of businesses through the implementation of advanced production technologies in a climate of the new industrial revolution and help companies to tap into new markets. 13 Russia Goes Digital – 2018
  14. 14. 14 Digital transformation of industries selected focus areas
  15. 15. DIGITAL HEALTH: TRENDS & DRIVERS Estimated volume of Russian digital healthcare market by 2020: 2-2,4 Bn euro TRENDS (3-5 years timeframe): Nationwide electronic medical record. All public medical units linked to a unified state health care information system (USHCIS) by 2025. “Connected patient” concept. Remote medical help (incl. diagnostics) routinely provided via telemedicine services, regulated by law. Telecom operators, banks and internet companies are active players in provision of digital healthcare services to their clients. They are major investors in digital health startups. Age tech solutions market develops in Russia to serve elder generations, as active age is extended by pension reform and other factors. MAIN TECH DRIVERS (domestic developers available for all listed areas): Big data analytics capitalizing on patients’ data collected via electronic health record, mobile and medical IoT devices AI to support diagnostics and decision making 3D-printing technologies use in prosthetics and tissue/transplant engineering Robotic surgery development MAIN OBSTACLES: Yet underdeveloped legal framework for telemedicine, AI in healthcare, 3D printed biomaterials, etc. Low level of broadband network access for medical facilities outside big cities and in remote areas. 15 Russia Goes Digital – 2018
  16. 16. DIGITAL HEALTH: ECOSYSTEM Internet giants Yandex and Mail.Ru (45M and 80M daily audience) develop own digital platforms for services such as doctor search, online consultation, e-health record, diseases and pharma database, AI-powered bots, etc. Russia’s biggest bank aims to create e-health platform as an open nationwide ecosystem for communication between all healthcare market players and citizens. All domestic telecom operators develop own mobile telemedicine platforms to consult clients and help with finding a doctor. Rostelecom national telecom operator is to equip 14000 medical facilities all around Russia with broadband internet access. mobile telemedicine platform, storage and processing of medical e-records Domestic AI platform for diagnostic and risk analysis of the disease development Digital Pathology SaaS-platform for remote diagnostics and consultation. UNIM Digital Pathology software provides morphological diagnostics in the cloud. NeuroChat. Brain-computer interface to assist handicapped in operating prosthetics and other external devices 3D Biopinting solutions for tissue/transplant engineering. First in the world printed biological tissue. Exoskeleton for medical and social rehabilitation MedArchive. Medical e-record and data storage platform for remote assistance Third Option. AI-powered SaaS-platform for the analysis of ultrasound, X-ray and microscopic images. Large companies: Startups: MedMe is a major strategic investor in Digital Health, co-founded by Invitro group - the largest medical laboratory network in Eastern Europe. SK Biomed cluster unites around 400 health and biotech startups with industry leaders. “Digital healthcare” consortium created in 2018 to unite large industry leaders with startups and smaller developers and coordinate in producing tech standards for the future industry.
  17. 17. DIGITAL HEALTH: CASE DOC+ (startup) CASE: startup DOC+ Russia’s first mobile telemedicine service develops a platform for multistep medical assistance. INVESTORS: Vostok Sweden New Ventures, Baring Vostok, Yandex TECHNOLOGIES: AI&ML, NLP Global digital healthcare companies DOC+ is negotiating partnerships with international market leaders in: DNA sequencing, AI-powered assistance, ML in image recognition & diagnostics and others Clinics Two-way partnership: DOC+ acts as a provider of patient traffic for many clinics (exclusive for some) while referring its customers to the best clinics with discounts when necessary. Insurances DOC+ is one of the main providers of doctor house calls for >80% of insurance market in Moscow. Exclusive for some insurance companies. Main goal - include insurance coverage directly in the client app Laboratories DOC+ partners with 2 largest laboratories (Invitro, KDL) to provide medical tests & analyses for its customers DOC+ Strategically, DOC+ seeks to be an IT-platform integrating all main stakeholders to simplify data management, increase quality & speed and strengthen inter- linkages between players DOC+ the 1st in Russia provided API to integrate several insurance companies and large clinics By uniting consumer and healthcare service providers’ worlds, DOC+ improves quality and personalization of its services Health portals CPA partnerships (DOC+ button to get in-home visit or remote consultation directly from a health portal webpage). Help in brand building (e.g., via online Q&A) General marketplaces DOC+ integrates with online general B2C services marketplaces (Vkontakte, Yandex and others), becoming exclusive or one of the key providers of medical services Telecom operators DOC+ sees great opportunity in getting access to large telecom operators’ customer base through telemedicine service. Telecom operators are interested in growing ARPU through additional services. Medical help marketplaces marketplace is one of the biggest partnerships for 2017. In addition, DOC+ works with, and other online doctor bookings 17 Russia Goes Digital – 2018
  18. 18. DIGITAL FINANCIAL SERVICES: TRENDS & DRIVERS “Fintech Adoption Index in Moscow and St Petersburg made up 35%, leaving behind other major global financial centers.” (EY, 2016) ”Fintech market in Russia grew on 12% in 2018 to 715M euro ”(Deloitte). Banks and financial sector are forerunners of digitalization in Russia. Contrast to many other countries where banks are still traditional, Russia’s major banks such as Sberbank or Alfa are true pioneers in digital development and set the role model for the others. TRENDS: 1) All bank functions/services are in digital space (both back and front office). Minimum or no physical offices. Mobile solutions prevail. All individual clients move to mobile and online products. 2) Digital identity for each client. 3) Banks expand beyond traditional business to become digital platforms for many additional and 3rd party services (healthcare, public services, retail, etc) actively leveraging on user data. 4) Banks become IT companies, shifting to IT-relevant flexible and matrix organizational culture (scrum, agile). 5) Blockchain widespread in bank-2-bank transactions (Masterchain project). 6) Growing pressure on traditional banking from increasing number of peer-2-peer lending platforms 7) AI and Big Data analytics in credit risk assessment of clients. AI replace client support (call centers) and HR function. 8) Quantum cryptography used to secure all financial transactions 9) AI/ML in image and speech recognition to provide secure account access from mobile devices. 10) National payment system (MIR) competes with international (VISA, Mastercard) OBSTACLES: Underdeveloped legal framework and regulation for blockchain, cryptocurrencies and user data protection. Regulatory initiatives are in development stage by the government. Relatively low purchasing power of the population. 18 Russia Goes Digital – 2018
  19. 19. FINTECH: ECOSYSTEM Bank #1 ($13Bn revenue). Digital pioneer: iImplementation of in-house agile culture (Sbergile); laboratories for R&D in blockchain, Big Data, AI, IoT and Robotics. Russia’s biggest data center 30 MWt and 5 Exabyte. #1 Digital bank in the country, reported as world’s biggest 100% online bank (no offices). Launched in 2008 Top-5 bank. Modern IT infrastructure. The first to test blockchain in interbank transaction (with Sberbank). Russian Quantum Center. Startup developer of quantum computing technology in Russia. Investor pool includes Gazprombank. Top-3 Bank, focus on corporate clients. Blockchain in factoring. Investor in RQC quantum cryptography tech. Owns Digital VC fund DigitalHorizon. The first 100% online bank focused on individual entrepreneurs and self employed (freelancers) clients Russia’s largest electronic payment service with 30M accounts. 40% Russians use YM at least once a year. Joint venture by Yandex and Sberbank 20M accounts and 150K payment terminals. The first E-payment service launched in 1998 . 36M accounts, used by 34% of Russian making online payments. ML for visual recognition technology startup. Face recognition product for banks (account access) Wells Fargo among clients. Invested by Sberbank and Sistema VC. Develops AI-powered chat bot to replace call centers in client support. Russian Fintech association, unites key stakeholders. Focus on coordinating digital twins, blockchain and open API development for the industry National payment system. 11M cards emitted and 381 bank connected. 19 Russia Goes Digital – 2018
  20. 20. FINTECH: CASE SBERBANK Key strategic priorities for 2018-2020 The best client service and ecosystem Technological leadership New quality of people in effective teams a) In financial sphere b) In other areas of the client's activities reliability and efficiency new integral platform contemporary collaborative work culture, Sbergile Teams instead of hierarchy new competences data-driven company security innovations Strategy 2020: Integrate digital technologies into all products, services and processes of the bank as well as in the development of effective management culture and staff training enabling the bank to compete with global technology companies. Going beyond banking business (i.e. developinr Russian “Amazon” in JV with Yandex. TECHNOLOGIES: AI/ML, blockchain, cloud computing, Big Data analytics, cybersecurity, VR/AR, robotics, biometrics. Own R&D centers and teams. Europe’s top-3 data center. 20 Russia Goes Digital – 2018
  21. 21. DIGITAL TRANSPORT: TRENDS & DRIVERS Moscow - one the world’s fastest growing car sharing market. 12M drives in 2018 (100% growth from 2017). 5 major companies, >13,5K cars and 60K daily users. Total revenue of the companies providing digital solutions for transport industry has increased by 14.5% and reached 500M euro in 2017. Russia deals with very underdeveloped road infrastructure, especially in highspeed roads. This is bottleneck for further economy grows as logistics expenses are much higher then in developed or most of other developing countries. Russian megapolices suffer from world-record traffic jams due to insufficient road network coverage. DRIVERS: 1.) E-commerce in Russia expected to grow by 30%/year to $50Bn by 2024 (JP Morgan), catalyzed by the competition between recent superventures of Yandex/Sberbank ($1Bn deal) and Alibaba/Mail.Ru/Megafon ($2Bn deal). 2) Yandex - IT giant and digitalization leader in map&navigation services, taxi and p2p ridesharing, food delivery. The only IT company of such scale and diversity in Europe. 3) Logistics problem slows down Chinese goods export to Russia and beyond. New Silk road shall address the issue with 8500 km road from Western China (2300 km in Russia). 4) Heavy city traffic. Moscow is #1 city in Europe with estimated 16 mln population and >4mln registered cars/trucks. Road network density 8.7% of city surface (2 times less than in EU, 3-4 times to US). #2 in global traffic jam ratings in 2017. 5) State active involvement in PPP models in construction of toll roads as a sustainable solution for quick infrastructure development. 6) ERA-GLONASS – satellite enabled traffic emergency system. Connection is obligatory for all cars (passenger and commercial) produced or imported in 2017 or later. 7) Investments in unmanned vehicles by Yandex (taxi and delivery services) and Kamaz (cargo trucks manufacturer). Already piloted in closed test grounds (Skolkovo, Kazan). TRENDS: 1) ERA-GLONASS becomes standard in all cars and becomes the backbone for a unified digital platform of the transport complex (ECPTK) – Russian ITS. 2) 50% Of all new roads built will be toll. By 2030 Russia will have 12000 of high speed roads, 75% of which are toll and equipped with ITS. 3) 5G enables ITS development. Toll roads and megapolices become test beds for digital solutions in transport. 4) Goods from Western China are transported through Russia to Europe by new Silk road corridors (auto and railroad). 5) Unmanned vehicles enter test phase on ITS-ready sections. First pilots on Scandinavia highway between S.Petersburg and Helsinki. 6) Car sharing market in megapolices will double, reaching saturation level at 1 car/500 citizen (Moscow). Market consolidation in car sharing (1-2 operators left out of 5) 7) Moscow is a role model for other Russian big cities in terms of traffic policy. Congestion charge introduced to enter the city center. 21 Russia Goes Digital – 2018
  22. 22. DIGITAL TRANSPORT: ECOSYSTEM “Russian Google” IT giant has major impact on transport industry, digitalizing maps&navigation, taxi, food delivery and retail industries. Develops own unmanned vehicle program. 4th in global airlines digitalization index (Bain and Co). Digital committee as an independent decision-making unit. Actively leverage big data analytics in marketing&sales. Plans to switch to AI-powered prognostic models in 2019. Together with NAMI car design bureau develops an unmanned electric city bus program, as well as own unmanned truck program. Pilot vehicles under tests, production phase planned for 2022. Russian railways invest euro 2Bn in digitalization by 2020. Aiming to reach 70-75% level of electronic ticketing and use predictive analytics to improve traffic efficiency. Co-develops future unified digital platform of the transport complex (ECPTK) with RT-invest and ERA-GLONASS responsible for ITS program on federal roads and toll road construction. Developers of Platon, truck toll collection electronic system. Part of Rostec holding. WayRay - Russia’s most praised AR in transport startup. $18M investment from Alibaba and Porshe. National Technology Initiative think tank includes three WGs on aerial, marine and land transport with clusters of companies united around it ERA-GLONASS satellite enabled traffic emergency system. Connection is obligatory for all cars (passenger and commercial) produced or imported in 2017 or later. Interoperability with eCalls (EU). Samocat scooter sharing platform expanded from Moscow to Helsinki and won the local transport authority tender in 2018. Provider of 5G infrastructure for ITS in cooperation with Nokia networks (announced JV in 2018) Leading developer of electronic navigation and ship management systems and autonomous marine solutions. RoboCV, named one of the best AI startups in Europe turns forklift trucks into autonomous robots 22 Russia Goes Digital – 2018
  23. 23. DIGITAL TRANSPORT: CASE AEROFLOT New strategy in 2017 with strong digital component: one of the key 5 strategy points is becoming industry leader in digitalization Digital technologies are perceived as a source of competitive advantage on international markets. Aeroflot has appointed Digital transformation committee, as an independent decision-making unit. This role shall be taken over by a CDO in the near future. The company's digital development program involves the following pillars : - 100% automation of all business processes, run on a limited number of integrated software platforms (SAP, Sabre, Lufthansa systems) - Active leveraging on Big data analytics in marketing and sales. Introducing own system (ASKAR) with elements of AI for market and client analytics, service personalization and increase of client loyalty, search for look-a-like clients, improvement of sales and rate policy. Reported to have brought additional 12M euro revenue alerady in 2017. Plan for 2019 is active implementation of AI- powered prognostic models in business development. - Launch of AMOS (Aircraft Maintenance Information System), integrated with SAP. Contributed to 3-4% savings in aircraft mantainance expenses (about 2M euro/year). Each Aeroflot aircraft spends flying a minimum of 12h/day and the company is among 5 most punctual globally. - Active leveraging from integrated IoT solutions on the ground, inside the plane and used personally by staff (crew tablets, etc). As a result, Aeroflot was placed 4th in the global airlines digitalization index by Bain&Company in 2017 (behind Singapore airlines, Quantas and Delta). 23 Russia Goes Digital – 2018
  24. 24. DIGITAL ENERGY: TRENDS & DRIVERS ”Energy intensity of Russian GDP is still about 2,5 times higher than in OECD countries. GDP energy intensity reduced by 11% from 2007 to 2016. The target is set to reduce it by further 40% to 2020.” MAIN DRIVERS Russia has large room for improvement in GDP energy intensity (49th place in the world). Digitalization can provide significant impact on energy savings. Collecting energy data through industrial IoT solutions (sensors, etc), analyzing it and building predictive models helps in detection of energy losses and ideating potential solutions. Digitalization of electrical energy and creation of “Internet of energy” for electricity producers, transporters and consumer drives energy industry digitalization as a whole. ASI association provides foresights for the industry and supports pilot projects (first in smart grid), for example in S.Petersbug and Ufa region. Growing number of renewable energy production sites (supported by the state) increases competition and diversity and accelerates the shift toward digital energy industry. TRENDS 1) Wide application of digital technologies: IIoT (sensors), Big data analytics, Digital twins (power plants and networks), AI (load and peak prediction) and Blockchain (market regulation and transparency) in both energy production and distribution. 2) Digital electrical energy pilots will become the role model for the whole industry digitalization 3) Energy systems architecture and management principles will change from hierarchical to distributed and flexible structures, allowing easy introduction of independent producers and flexible adaptation to consumer and market needs. 4) Energy consumption model will be changed to allow more flexible regulation in order to be more sustainable and address peak consumption issues. 5) From “take it or leave it” to consumer-centric distribution with transparent and flexible tariffs and open market with equal access rights. 6) Renewable energy production (solar, wind, thermal) turns from exotic to widespread in Russia. 24 Russia Goes Digital – 2018
  25. 25. DIGITAL ENERGY: ECOSYSTEM One of the first companies in Russia to appoint CDO (chief digitalization officer) and develop digitalization strategy. Active user of technologies like IIoT, big data analytics, AI, digital twins, cloud computing, AR/VR and robotics. Rosatom has automated and digitalized all processes for a nuclear power plant lifecycle that allowed the company to start leveraging from predictive analytics in forecasting energy production, consumption peaks and mantainance breaks. The major producer of hydroelecrical power in the country (and 3rd in the world for installed capacity). Develops predictive analytics systems to combine with their coordinated power output regulation system that reacts on network power frequency. is a startup developing blockchain-enabled platform for creating, piloting and running new business models over the distributed energy market with decentralized billing One of the world’s largest electric power grid companies. Owns 2,3M kilometers of network and 500K transforming sub-stations. Announced 17Bn euro digitalization program to 2030 aiming to switch from hierarchical to distributed network model. Zyfra is Russian-Finnish developer of industrial digitalization technologies, in particular IIoT and AI, also for energy industry Fortum is the leader and forerunner in wind and solar energy production in Russia aiming at creating 1GWt portfolio of installed capacity. Сurrent profolio includes 8 heat&power plants, 3 solar and 1 wind farm. Total Fortum power capacity in Russia – 5GWt. Skolkovo energy cluster unites >350 startup companies with a network of large industrial partners EnergyNet initiative unites digital energy leaders and develops industry foresight roadmap to 2035 25 Russia Goes Digital – 2018
  26. 26. DIGITAL ENERGY: CASE ROSSETI ROSSETI is one of the world’s largest power grid operators with 2.3M kilometers of electric lines and 500K transformator sub- stations under management. The state owns 88% of the company, which employs over 200 thousand people in all Russia. Just recently, ROSSETI announced strategic development priorities to 2030, including the following goals: market capitalization growth to 20Bn euro (from current 2,2 Bn), decreasing energy losses from 9,05% to 6,5% of transmitted power, shortening time required for new customer connection to the grid by 30%, CAPEX and OPEX shall also decrease by 30% by 2030. To accomplish these goals, digital development program was proposed that will require investments estimated at 17Bn euro for the whole period of the program (up to 2030). ROSSETI calculated project NPV equal to euro 1Bn by 2030 (at 11% discount rate) and IRR equal to 13%. The core of the program is switch form centralized hierarchical model of energy supply (generators vs consumers) to horizontal model with distributed generation and energy storage (smart grid). ROSSETI than plans to build an IoT ecosystem on top of the smart grid reaching every customer to be able to collect process and transmit any signals or commands, thus ensuring very flexible, responsive and agile netwrok management. Investments will be required in a number of IoT solutuions including smart meters, operated remotely to reduce losses and protect from unathorized consumption, telemechanical solutions for sub-stations to allow fully remote control and management. Cybersecurity is also an important integrap part of the project to protect from user data leakages and hacker attacks. Big data analytics and predictive models of energy consumption will provide the basics for sustainable business development and growth. 26 Russia Goes Digital – 2018
  27. 27. Russia Goes Digital Conclusions: 1. As Russian state controls over 70% of the economy, it naturally plays the main role in promotion of digital transformation in state-controlled corporations. “Digital economy” national program has been developed for the purpose and it is the major driver for digital transformation in such corporations. 2. While most of the state-controlled companies are pushed by the government, the majority of forerunners in digitalization are private companies, pro-actively developing digitalization strategies and products based on modern digital technologies. The most notable ones, setting the role model are: Yandex (Digital transport, e-health, e-commerce), Sberbank (maybe the only exception of a state-controlled digital leader; Fintech and e-health), Telecom operators (MTS, Megafon, Beeline, Tele2: in 5G, e-health, fintech), Zyfra (IIoT, Big Data and AI for industry), Mail.Ru (e-commerce, e- health), Tinkoff (fintech). 3. Digitalization status of different industries vary significantly. B2C market - focused service industries are the first ones to undergo digital disruption, as it is a matter of survival one very competitive markets and met with immediate positive response from individual clients. This can also be justified by the number of startups in each industry. The most digitalized are: banking, telecom and retail industries, followed by transport which is in active digitalization phase right now. Digital disruption of healthcare in Russia has just began and will accelerate over the next 3-5 years. Digitalization of energy industry is yet in its early (planning) days, but we may expect drastic changes there within the next 5 years.
  28. 28. Russia Goes Digital 28 Conclusions (continued): 4. Setting up digital committees and appointing Chief Digital (Transformation) Officer seems to be the first step in dealing with digitalization trend for most of the companies and may serve as a good indicator. As follows from the recently published survey* the amount of large companies with CDO appointed grew from 5% in 2017 to 18% now (300 companies interviewed). Other 28% of companies are actively search for a CDO to hire, while 29% indicated no need in CDO and 25% do not know what it is. 5. Currently 35% of Russian companies (from 300 surveyed) already have a digital transformation strategy and 26% are planning to develop it in near future. 6. There is a trend in demand for educating, consulting and outsourcing of “digitalization” for the top management of businesses in Russia. Two research&education centers on digitalization were formed in 2018 in MSU and Skolkovo School of Business with the purpose to educate and provide strategic consulting to business and public authorities. 7. The state will continue to stimulate appointment of CDO’s and digital strategy development development, in particular in state-controlled corporation. Fourteen such companies have been already selected for a pilot that will be analyzed in 2019. The list includes Aeroflot, Gazprom neft, Alrosa, Kamaz, Russian Railways, Rosatom, Rostelecom, Russian Post and others. *
  29. 29. HEATMAP Interest to digital technologies from various industries in Russia B2B services Transport Retail Telecom Construction Insurance Manufacturing Education Oil & Gas Healthcare Consulting Entertainment Media Banking IT & Software AI Blockchain ML NLP Robotics Drones Image Recognition Computer vision 29 Russia Goes Digital – 2018