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Disrupt With Digitization

Sven Denecken

Innovation requires reimagined processes – and the CIO needs to lead this transformation.

Enterprises today must be prepared for the transformation that the digital economy is forcing upon them.

Now, you might think, “Another digital buzzword article.” Well, yes, some dismiss it as a buzzword, but the challenge for many has just started. But let’s not look at only the problems; there are opportunities if seized right – and you can win big.

For example, competing for new business, or even exploring a new revenue stream by creating a new business model, are things you need to look out for constantly – and for sure you can learn from startups, because that is what they do: challenge the status quo. In a fast-moving digital economy, the window to capture these opportunities closes quickly; companies that are unprepared to pounce when occasions arise will likely get stuck on the road to irrelevance. In my job as product manager, my team constantly screens such opportunities, as innovation needs to be weighted fast and implemented via co-innovation even faster if there is a chance of success – and it must also be adapted fast if reality kicks in.

Successful companies need to be willing to change: They must assess whether they are truly in a position to reinvent business processes every day, not just every generation. And here is where the modern CIO comes in. Yes, digital officers arise at every corner of every industry, and they are needed ambassadors or agents of change. But today I think we should be clear: If every company will soon be a “software” company (which I very much believe, as data will rule the world) you need a modern chief information (and innovation) officer to help business and the company board of directors to make this change happen.

Here are 3 key lessons we have learned from the CIOs we constantly speak with during our co-innovation work. (Of course, there are also many lessons we learn from CIOs who are not embracing it – but will they still be CIO next year?)

Lesson #1: Four trends to check if you are on track

As I stated earlier, there are four inescapable trends are creating the pressures that shape today’s digital transformation:

  • The empowered customer: Whether your customers are Generation Z consumers or multi-national conglomerates, they all share one vitally important characteristic: Each demands to be treated as a unique segment of one. You have no choice but to meet that expectation.
  • Competitive and regulatory pressures: Transparency is a necessary part of business today, and that means competitors and regulators alike can dissect any business process. Staying ahead of the former and meeting the standards of the latter requires operational excellence and accountability at every step in the value cycle.
  • Globalization: More businesses today must be prepared to go global in order to remain relevant. Expanding into new markets can no longer be done effectively with costly, infrastructure-heavy international build-outs. Enterprises need a pay-as-you-go strategy with scalable capacity, which can be adjusted rapidly to meet market conditions in any region.
  • Technological progress: The tide of innovations and discoveries is unrelenting. Businesses must be agile enough to quickly adopt new strategies, and be steered by insightful, knowledgeable leadership that can sort winning inventions from dead-end novelties.

Lesson #2: Unprecedented levels of business agility

The need for an unprecedented level of business agility to match the rapid pace of innovation and transformation present in business is not restricted to a particular industry. Rather, we see entire markets, including transportation, logistics, and e-commerce, being reinvented on a seemingly daily basis. For any industry in which the production, shipment, and transaction of a product is still relevant, transformation supported by digitization is fast becoming a necessity.

Pressures to reshape the business using a digital template are likewise common across the industry spectrum. Companies — both in the business-to-business (B2B) and business-to-consumer (B2C) worlds — expect personalized interactions as a “segment of one,” which necessitates individualization of products and services, and freedom of choice. The business has no choice but to meet these demands — on the platform the customer chooses — or risk losing customers to a competitor.

The common solution that addresses these pressures is agility, and the way to achieve that agility is with a flexible, digital core at the heart of every organization that can meet the demands presented by increasing across-the-board disruption.

In my presentations I often state why we need to talk about a digital core: As long as something is produced (even if it is a service), as long as something is delivered or shipped, and as long as something will be paid – there is a need for a core. It is as simple as that. Every CIO surely knows that end-to-end processes often start at the edges or with systems of engagement, but they are of limited value if they do not connect with the core – the heart that makes your company run.

Now building on top of this, with a digital core, organizations can do far more than simply meet these pressures at a minimum level of success. They can pivot in near real time to capitalize on innovations in areas such as cloud, Big Data, and business network connectivity to completely transform the business, whether it’s to keep up with the growing influence of emerging topics such as the Internet of Things (IoT), 3D printing, or augmented reality, or to defend against new competitors launching up all around them.

A digital core is an enabling platform for transformation and innovation, but what are its hallmarks? We find five key characteristics that make up a digital core:

  1. A digital core provides the enterprise with the capability to drive and anticipate business outcomes in real time.
  2.  It integrates the business seamlessly across all value chain processes such as client interaction, administration, production, and research and development.
  3.  The digital core increases efficiency by automating processes and distributing responsibility for customer insights across an intelligent business network.
  4. It increases effectiveness by converting signals in business data into tangible action, essentially bringing Big Data to the size and scale needed to turn insight into action for the everyday user.
  5. The digital core increases enterprise agility by elevating each employee’s view of the organization.

So how can the modern CIO help to disrupt with digitization?

Here is the modern CIO’s plan for success: They prioritize day-to-day operations that were formerly siloed lines of business to have complete visibility into the entire core business of the enterprise. Finance, sales, and manufacturing can then act in concert, basing decisions on the same information in real time. This is where the company wins big, and this is how the modern CIO will drive change for the better and help their company win in the digital economy.

Successful CIOs know that the race to digitization is on. Until recently, many of the clients I spoke with were still questioning the need for digitizing the enterprise. Now, they want to know the most efficient route to get there. And while SAP’s digital core S/4HANA Enterprise Management is certainly a monumental milestone, clients are surprised to discover that arriving at a digital core is not as difficult as it might seem to enable this level of transformation.

A digital core helps any business run faster and simpler, so getting there should not be as complicated as the siloed line-of-business applications and redundancies a business leaves behind.

Want more insight on digitization? See The Digitized Core At The Heart Of Reimagined Business.

Looking forward to your feedback! Follow me for the latest updates: @SDenecken (link to Twitter account).

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Sven Denecken

About Sven Denecken

Sven Denecken is Senior Vice President, Product Management and Co-Innovation of SAP S/4HANA, at SAP. His experience working with customers and partners for decades and networking with the SAP field organization and industry analysts allows him to bring client issues and challenges directly into the solution development process, ensuring that next-generation software solutions address customer requirements to focus on business outcome and help customers gain competitive advantage. Connect with Sven on Twitter @SDenecken or e-mail at sven.denecken@sap.com.

Keys To A Successful ERP Implementation

Larry Perlov

ERP implementation projects aren’t as easy as they look, and they don’t look very easy. Every year, organizations spend millions of dollars to implement different ERP solutions with the hopes that the new solutions will allow companies to scale, reduce operating expenses, or become more effective at serving customers. However, many of these projects fail to achieve the benefits companies envision when they set out on their transformation journey.

In this blog series, I will share the three most important questions to ask before starting an implementation project, so when your organization starts the project it will be well positioned for success.

Why change?

Some implementations are technical replacements; others are grounded in desired business outcomes. Regardless of the type of implementation, if it doesn’t come with clear objectives, it will likely fail to improve a company’s business performance. That’s why any significant project should be grounded in a strong “Why?” – a strong business case – especially when the decision involves an ERP solution that could take significant time and resources to implement.

A good and clear “why” becomes the “true north” for the implementation and provides an ongoing focus for any important decisions or dilemmas throughout the implementation.

To define your “why,” you need to identify the most important outcomes that your business stakeholders want to achieve as a consequence of the ERP initiative. Every organization’s “why” may be different. At the highest level, the “why” for many organizations is usually associated with increasing throughput, reducing operating expenses, improving working capital, or improving compliance.

There are many activities that can help you define your “why” with respect to an ERP implementation.

“So what?” “Who cares?” and “How much?”

The answer to “Why?” must be strong enough to serve as your project’s “true north.” You can more effectively establish this by asking “So what?” or, more diplomatically, “What are the (positive or negative) ramifications of this?”

For instance, if the answer to “Why change?” is “To improve our visibility,” asking “So what?” could expose a higher-level outcome such as “To improve profitability of customers by identifying which products our most profitable customers buy repeatedly and enable us to promote those product to customers who don’t currently buy them.” This feels better and more aligned to the broad category of increasing throughput.

We can further test this by checking “Who cares?” – the answer we are looking for is someone at a senior enough level whose personal business plan for the next 3-5 years is dependent on improving this outcome. If the answer to “Who cares?” is not an executive level stakeholder, you are too low, and you need to ask “So what?” again.

It is also important to quantify these as much as possible; i.e., “By how much would revenues increase if we get this right?” If quantification is not possible, at lease a qualified order of magnitude is very important.

As a starting point, look ahead to six to twelve months following the change (go live) and outline any related clear, measurable outcomes you expect to accomplish as a result of the project. These outcomes should align fully with your overarching business strategy and your senior leadership team’s view of what is most important.

Next, ask yourself what the risks and benefits are associated with both making the change and with not making the change. By understanding the potential impacts associated with both making the change and not making change, you will be able to really understand why you should – or should not – implement an ERP solution.

For more about the keys to a successful ERP implementation, please check out our new thought leadership paper: Creating a Recipe for Success: Questions to guide the development of a first class ERP solution.

About Illumiti

Illumiti is a leading systems integration and management consulting company with offices in Canada, the U.S. and Switzerland, serving customers globally. Its team enables customers to realize their vision by leveraging the world’s leading on-premise and cloud-based business applications. Illumiti helps its clients achieve optimized operations in the key areas at the core of their business, by implementing custom-fit solutions from SAP and other vendors faster, at a lower cost, and at a lower risk than other alternatives. Illumiti is a member of United VARs LLP, which is an SAP platinum partner. Illumiti has been recognized as the top SAP reseller for Canada for five consecutive years and is one of the fastest-growing SAP channel partners in the U.S. For more information please visit www.illumiti.com.

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What Support Looks Like In The Era Of The Cloud And The Internet Of Things

Fred Isbell

As we near the end of this year’s spring event season, one thing is clear: Digital transformation is in the air.  The annual SAPPHIRE NOW and ASUG events are now behind us, but people are still buzzing about the sessions, stories, lessons learned, and best practices shared. There’s profound interest in how innovations are adopted, such as running a Live Business, digital boardrooms, and enabling the latest technology.

After listening to customers, practitioners, and analytics throughout the first half of this year, I was inspired to invite the following panel of subject-matter experts for the third installment of a webcast series sponsored by Digital Business Services from SAP:

  • Elaina Stergiades, research manager of IDC Software and Hardware Support Services
  • Michael Rieder, senior vice president and global head of SAP Enterprise Support & Premium Engagements
  • Sei Drake, chief architect of Co-Engineering and Innovation at SAP America

To kick off the conversation, we discussed the rise of the 3rd Platform that IDC says is a factor driving growth of innovations, new business opportunities, and more. Yes, digital transformation is front and center, but with it comes a need for simplification, not increased complexity. And on top of it, there’s an incredible explosion of data from a variety of places, including the fast-accelerating Internet of Things (IoT).

What should businesses do? The idea of tackling these issues and providing the support needed to succeed is reminiscent of Edvard Munch’s “The Scream” painting!

Future of Support-1

According to Elaina Stergiades, the promise of the 3rd Platform and the evolution of solutions that support it are transformational. Moving away from a reactive, manually intensive, and linear process, businesses are steadily adopting a proactive and more predictive model. In fact, this new brave world is bringing great technology to innovate the support process and customer experience, including:

  • Cloud solutions: Delivers wider access to support data from anywhere to share across the entire user experience and with new levels of integration
  • Social technology: Supports collaboration far above traditional hierarchical (and inherently slower) support processes
  • Enterprise mobility: Enables support monitoring anywhere and remote support and resolution without traditional, closed boundaries
  • Predictive analytics: Forecasts issues before they reach crisis level while offering a better and more direct, personal response

Michael Rieder continued the discussion with insightful observations about the market dynamics that businesses are facing. He supported Elaina’s perspective and the need for proactive support for on-premises, cloud, and hybrid environments. He noted that it is critical for businesses to reimagine support by keeping six foundational pillars in mind:

  • Mission-critical support
  • Total cost of ownership
  • Continuous improvement
  • Accelerated innovation
  • Integrated support
  • Business service support

Sei Drake has weighed in on this topic before in his blog post on “How to Prepare Your IT Landscape for the Digital Economy.” From his perspective, the evolution of support is happening against the backdrop of changes in the IT industry and the marketplace. The rise of cloud-based solutions and the growth of the Internet of Things (IoT) are bringing a whole host of new considerations, especially the need for DevOps and co-innovation. We found his suggestions for customers’ considerations quite helpful with examples across several industries.

Like the webcasts I hosted before it – Unlocking the Potential from the Internet of Things and Transforming Digital Visions into Reality – this third in our series was another insightful thought-leadership webcast from Digital Business Services. Be sure to view the on-demand replay and share with your colleagues.

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Fred Isbell

About Fred Isbell

Fred Isbell is the Senior Director of SAP Digital Business Services Marketing at SAP. He is an experienced, results- and goal-oriented senior marketing executive with broad and extensive experience & expertise in high technology and marketing. He has a BA from Yale and an MBA from the Duke Fuqua School of Business.

How Much Will Digital Cannibalization Eat into Your Business?

Fawn Fitter

Former Cisco CEO John Chambers predicts that 40% of companies will crumble when they fail to complete a successful digital transformation.

These legacy companies may be trying to keep up with insurgent companies that are introducing disruptive technologies, but they’re being held back by the ease of doing business the way they always have – or by how vehemently their customers object to change.

Most organizations today know that they have to embrace innovation. The question is whether they can put a digital business model in place without damaging their existing business so badly that they don’t survive the transition. We gathered a panel of experts to discuss the fine line between disruption and destruction.

SAP_Disruption_QA_images2400x1600_3

qa_qIn 2011, when Netflix hiked prices and tried to split its streaming and DVD-bymail services, it lost 3.25% of its customer base and 75% of its market capitalization.²︐³ What can we learn from that?

Scott Anthony: That debacle shows that sometimes you can get ahead of your customers. The key is to manage things at the pace of the market, not at your internal speed. You need to know what your customers are looking for and what they’re willing to tolerate. Sometimes companies forget what their customers want and care about, and they try to push things on them before they’re ready.

R. “Ray” Wang: You need to be able to split your traditional business and your growth business so that you can focus on big shifts instead of moving the needle 2%. Netflix was responding to its customers – by deciding not to define its brand too narrowly.

qa_qDoes disruption always involve cannibalizing your own business?

Wang: You can’t design new experiences in existing systems. But you have to make sure you manage the revenue stream on the way down in the old business model while managing the growth of the new one.

Merijn Helle: Traditional brick-and-mortar stores are putting a lot of capital into digital initiatives that aren’t paying enough back yet in the form of online sales, and they’re cannibalizing their profits so they can deliver a single authentic experience. Customers don’t see channels, they see brands; and they want to interact with brands seamlessly in real time, regardless of channel or format.

Lars Bastian: In manufacturing, new technologies aren’t about disrupting your business model as much as they are about expanding it. Think about predictive maintenance, the ability to warn customers when the product they’ve purchased will need service. You’re not going to lose customers by introducing new processes. You have to add these digitized services to remain competitive.

qa_qIs cannibalizing your own business better or worse than losing market share to a more innovative competitor?

Michael Liebhold: You have to create that digital business and mandate it to grow. If you cannibalize the existing business, that’s just the price you have to pay.

Wang: Companies that cannibalize their own businesses are the ones that survive. If you don’t do it, someone else will. What we’re really talking about is “Why do you exist? Why does anyone want to buy from you?”

Anthony: I’m not sure that’s the right question. The fundamental question is what you’re using disruption to do. How do you use it to strengthen what you’re doing today, and what new things does it enable? I think you can get so consumed with all the changes that reconfigure what you’re doing today that you do only that. And if you do only that, your business becomes smaller, less significant, and less interesting.

qa_qSo how should companies think about smart disruption?

Anthony: Leaders have to reconfigure today and imagine tomorrow at the same time. It’s not either/or. Every disruptive threat has an equal, if not greater, opportunity. When disruption strikes, it’s a mistake only to feel the threat to your legacy business. It’s an opportunity to expand into a different marke.

SAP_Disruption_QA_images2400x1600_4Liebhold: It starts at the top. You can’t ask a CEO for an eight-figure budget to upgrade a cloud analytics system if the C-suite doesn’t understand the power of integrating data from across all the legacy systems. So the first task is to educate the senior team so it can approve the budgets.

Scott Underwood: Some of the most interesting questions are internal organizational questions, keeping people from feeling that their livelihoods are in danger or introducing ways to keep them engaged.

Leon Segal: Absolutely. If you want to enter a new market or introduce a new product, there’s a whole chain of stakeholders – including your own employees and the distribution chain. Their experiences are also new. Once you start looking for things that affect their experience, you can’t help doing it. You walk around the office and say, “That doesn’t look right, they don’t look happy. Maybe we should change that around.”

Fawn Fitter is a freelance writer specializing in business and technology. 

To learn more about how to disrupt your business without destroying it, read the in-depth report Digital Disruption: When to Cook the Golden Goose.

Download the PDF (1.2MB)

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How Disruption Will Cause The Insurance Industry To Change

Joe Pacor

Digital transformation is changing our world, and the insurance industry cannot sit idly and avoid these changes. It’s expected that the digital customer experience will drastically drive insurance profitability in the years to come. Over 50% of insured clients won’t recommend an insurer that doesn’t have digital interaction options. An overwhelming 61% of customers prefer to track their claim status digitally instead of contacting the insurance company or agency through more traditional means. It’s estimated that 79% of insurance executives recognize the need for innovation, but are having problems with daily operations. Over 60% see both opportunities and threats in the digital transformation process. At the same time, 74% of insurance executives feel they don’t have the necessary skills to drive the needed changes.

How does your company adapt to such a changing landscape? One common way approach is updating existing business models. Many companies have already been successful in driving digital transformation through a wide range of channels. Online-only insurance solutions and faster approval times are emerging in some companies. Others are turning to e-aggregator platforms to  keep their business afloat while changing company practices and assets to the digital economy.

Here are a few examples of promising companies and how they’re innovating to meet disruption.

Esurance

Esurance started in 1999 as an online-only business. With over five million customers, it has seen rapid growth since its beginnings. And because the insurer started out with a direct insurance digital approach, it is ahead of the game in terms of digital transformation since many competitors are still struggling to move away from their agency-based model.

Though it’s not available nationwide, it has become available in 43 states, which is still significant growth for a company that is not yet 20 years old. Esurance offers much lower rates, due to its direct insurance approach that cuts out many middleman expenses. As one of the first direct insurance companies, it is still catching up to competitors for customer service, but may very well be an example of future insurance company operations.

Haven Life

When it comes to fast approval, Haven Life has Big Data science down perfectly. This MassMutual spin-off claims it can approve most customers for new term life insurance in about 20 minutes. The company bases its decision on motor vehicle records from the state, prescription drug information, a customer questionnaire, and other data available to the company. The quick decision process will make the company much more popular among individuals seeking insurance policies under $1 million. As the system is based entirely online, it reduces agency costs significantly.

Moneysupermarket

In the UK, a newer e-aggregator platform helps customers compare prices and purchase insurance online. Moneysupermarket provides fast access to other online services as well. It was launched in 1999 as a digital-only solution that compares mortgage rates. In 2003, the insurance portion of the platform began with a mission to save at approximately 10 million households at least £200 through competitive shopping.

The company streamlines the process by having the prospect fill out a single form. That information is then used to pull quotes from multiple insurance companies. The prospects can compare the different policies to see which one is the best fit for their situation. They can then either select and purchase at that time or come back at a later time to finish the process. The company benefits by seeing additional sales at a much reduced cost compared to traditional marketing channels.

The role Big Data plays

Insurance businesses are also forming new business networks to provide a more tailored product to clients. As an example, State Farm and ADT provide a paired offering that protects connected homes through a single service. This helps customers reduce the number of businesses they must work with. At the same time, both companies benefit with increased business as customers turn to the network for simplicity.

Meanwhile, the Internet of Things is creating a new level of hyperconnectivity and data harvesting behind the scenes. Insurance rates currently based on a doctor’s visit will instead draw information from wearable devices, workout records, and pharmacy records. Rate reductions for self-driving cars will be based on the percentage of time the car is driven by a human versus driven autonomously.

With all these changes disrupting the industry, remaining flexible and connected makes all the difference. Is your company ready to meet the changes digital transformation is causing? If you aren’t, it is time to look at options to become more agile.

Learn more about how we can help you meet the challenges of disruption head on today. Please download our Insurance White Paper “How Insurers Can Prepare for the Digital Revolution” today to see what SAP has to offer. We will work with you to develop an insurance business that’s ready to meet the needs of the digital world.

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Joe Pacor

About Joe Pacor

Joe Pacor is senior director, Industry Cloud Marketing-Insurance at SAP, responsible for driving the growth of SAP's value proposition as a technology provider, trusted business partner, and thought leader for the insurance industry.