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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.

How Blockchain Technology Can Help IT Become The New Hero For Aerospace Business

Thomas Pohl

IT professionals can become the new heroes in aerospace and defense (A&D) companies by using transformative new technologies productively and imaginatively. With so many new and pervasive technologies coming to market, it can be difficult to keep up with the pace of technology change. For example,

  • How do you incorporate these tools?
  • Which ones do you need?
  • How do you choose wisely and avoid letting your company fall behind the competition?

Finding value in the technologies you choose will be the essence of your company’s success. In the A&D industry, weapons systems, aircraft features, and the demand for everything-as-a-service are changing faster than ever before.

In today’s A&D market, the ability to adjust to change is everything. And it’s up to IT to provide the technology and skills that will allow A&D companies to transform themselves and to succeed. The rapid introduction of technology innovations can be overwhelming; the trick is to keep new technology from becoming a distraction.

It’s important to focus on choosing technology based on the value it can deliver to your company.

Blockchain – also known as the Internet of value

Let’s take a closer look into blockchain technology and how it can be applied to the aerospace and defense industry.

In the last year, you’ve probably heard about blockchain technology. But you may not know much about what it is, who is using it, and what they’re using it for in aerospace and defense.

Blockchain is a technology that uses cryptography, peer-to-peer networks, and consensus algorithms to form a “digital ledger” of transactions. Every participant in a blockchain can see those transactions that are verified and recorded in a “connected chain of information.” Blockchain allows participants to conduct business transactions directly with each other, eliminating the need for third parties, through built-in information transparency.

Early uses of blockchain included currency such as Bitcoin and payment infrastructures. A Canadian bank used it with their international transaction processing to reduce it from days to seconds – enabling businesses to perform secure international B2C transactions. A&D companies are looking into the opportunities that this new technology could offer.

Airbus – the search for the right blockchain applications

Airbus has been working to identify business challenges that blockchain can address. These include instances where there is a high cost of trust, a slow process but time-sensitive interactions, compliance issues, high overhead cost for data reconciliation, and multiple parties that need to share data.

“Blockchain is, in essence, a trust-building technology that facilitates exchanges and trust between parties, so it’s natural to be collaborative in the way we work on problem-solving and adoption,” says data science strategist Leon Zucchini at Airbus. To this end, Airbus’ chief technical organisation (CTO), digital transformation organisation (DTO), and information and communications technology (ICT) division have formed a blockchain working group within the company to search for the right application.

Airbus and SAP recently joined the Hyperledger project, an open source collaborative effort created to advance the cross-industry use of blockchain technology.

Blockchain applications in aerospace identified by Airbus include:

  • Supply chain tracking: Using blockchain technology as a shared database with suppliers could help track the quality and compliance of products along the entire supply chain
  • Procurement support: By creating joint, trusted records of exchanges between partners, blockchain could help improve procurement processes
  • Revenue sharing: For services that are provided on a digital platform, blockchain can help distribute revenue fairly and transparently

Lufthansa – generating more transparency in aircraft maintenance

Patrick Goetze at Lufthansa sees a huge potential benefit with blockchain as a neutral information documentation system. With the way information is stored in blocks, which are verified and sealed, the information contained cannot be changed and is saved in such a way that it is visible for everybody. This transparency makes it extremely difficult to corrupt and manipulate the information and is of particular benefit if different companies are working together and therefore using the same data – for example in aircraft maintenance.

After they are manufactured, aircraft components could be registered in a blockchain together with all relevant data, including serial codes. If a component is installed in an airplane, this information can be saved in yet another blockchain. If the part malfunctions, maintenance technicians can use the information stored to review the exact number of flight hours and to decide whether to replace or repair the part. If it is repaired, this information can then be saved in a separate blockchain for the component in question.

Other blockchain application scenarios in aviation include the secure management of certification from aviation authorities and technicians’ job cards.

Blockchain may be the answer for better cybersecurity

When it comes to protecting digital assets, the banking and A&D industries have a lot in common. Both need a safe way to communicate and conduct transactions across the global value chain.

In the A&D industry, however, cybersecurity needs to extend from the Defense Department to the manufacturer to its suppliers and throughout the complete ecosystem. The industry is realizing that blockchain may offer an answer.

Last fall, the U.S. House of Representatives passed a non-binding resolution calling for a national technology innovation policy. It includes language that supports digital currencies and blockchain technology. Rep. Michael Burgess, a Republican from Texas, said at the hearing: “There’s no doubt that blockchain innovations are on the cutting-edge today.”

Are you looking to innovate with blockchain technology in aerospace and defense? Do you want to become the new hero to your business? At SAPPHIRE NOW, you can visit with the SAP A&D experts and see the latest technologies and solutions in action. Learn more about SAPPHIRE NOW and secure your spot today!

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Thomas Pohl

About Thomas Pohl

Thomas Pohl is a Senior Director Marketing at SAP. He helps global aerospace and defense companies to simplify their business by taking innovative software solutions to market.

Five Ways To Avoid ERP Project Failure

Julien Delvat

“To err is human, but to really foul things up you need a computer,” said Paul R. Ehrlich. Gartner adapted the saying to the enterprise in its “Predicts 2016” report: “through 2018, 90% of organizations will lack a postmodern application integration strategy and execution ability, resulting in integration disorder, greater complexity, and cost.” To put it bluntly, many ERP projects are doomed to fail!

The research and advisory group still offers hope for companies that adopt postmodern ERP: “This new environment promises more business agility, but only if the increased complexity is recognized and addressed.”

We have seen our fair share of complex and challenging projects that have “gone south.” Turning them around and putting them back on the right track is frequently the reason we’re called in. I’d like to share with you some of the lessons we’ve learned to help you avoid the predicted IT armageddon.

First we’ll look at what postmodern ERPs are. Then, we’ll see what can be done during implementation to mitigate the risk of an upcoming catastrophe. Last, I’ll show how the right partner can help your organization avoid a doomsday disaster.

Postmodern ERPs

Gartner defines the postmodern ERP as: “a technology strategy that automates and links administrative and operational business capabilities (such as finance, HR, purchasing, manufacturing, and distribution) with appropriate levels of integration that balance the benefits of vendor-delivered integration against business flexibility and agility.”

What strikes me as interesting in this definition is what they’ve missed from it: the deployment options – on-premises or cloud? These considerations are detailed in Gartner’s HOOF Model:

Postmodern ERPs HOOF Model. Source: Gartner

Take a moment to look through this and evaluate where your organization currently sits and where it is heading. With that in mind, let’s look at how to increase the chances for your journey to be successful.

Siloed applications

As described above, one of the keys to postmodern ERPs is the integration of applications provided by diverse vendors, moving away from “monolith mega-suites.” By contrast, best-of-breed applications have a tendency to support integration only with their own tools. For instance, some cloud applications deliver a long list of interfaces (APIs) to interact with their solution, but are limited to read-only interactions. This means that the application will most likely not be able to be integrated into new automated business processes.

In order to help break your corporate silos, you need to avoid recreating them with software. This requires a shift in the mindset from “module” software (CRM, finance, procurement), to a process platform focusing on end-to-end business scenarios.

For instance:

  • Replace “CRM” with “Order to Cash” or “Quote to Cash” processing
  • Replace “Procurement” with “Procure to Pay”
  • Replace “Asset Management” with “Acquire to Retire”
  • Replace “CAD” with “Idea to Offering”
  • Replace “Analytics” with “Record-to-Report”

This will ensure a seamless experience for the end users and simplify your application landscape.

Incomplete scope

The cloud ERP landscape is still heterogeneous. A large number of solutions grew from a specialized scope and expanded into the ERP domain, or from small target customers to larger ones. However, unless a large scope is covered, including Gartner’s main topics – finance, HR, purchasing, and distribution – then integration is increasingly complex and hard to maintain.

As an example, if a professional services company uses an accounting software as its main system of record and combines it with a time and expenses package as well as a payroll solution, some key architecture decisions need to be considered:

  • Where should employee master data be maintained?
  • How should you handle errors and corrections of time entries?
  • How should workflows and approvals be handled?

Without an out-of-the-box integration, these simple questions could easily give nightmares to the most seasoned IT teams.

Cloud washing

Software vendors are now expected to have a cloud option. However, some took shortcuts by simply hosting their solutions, providing remote access, and changing their licenses to a subscription model.

This “cloud washing” is far from the postmodern ERP definition we saw earlier. Robust solutions should offer:

  • Browser-based solutions (no download)
  • Similar user experience across different devices (with responsive design for smaller screens)
  • Multi-tenant or elastic options for improved total cost of ownership (TCO)

Postmodern ERPs should have a cloud-first principle with a consistent strategy for back-end and user experience. Ensure you identify such key differentiators when selecting your solution.

Misalignment to your corporate strategy

“Good ERP is more than just good software. It involves an institutional commitment to connecting people, processes, and resources,” said James Young. We’ve seen countless software purchase decisions that made sense at the level of cost center manager or for a small business unit, but were counterproductive to the overall company-wide strategy.

On a recent project, the CIO of a large company told us, “for security and legal reasons, we have a zero-cloud policy.” However, during the subsequent roadmap analysis, we uncovered a slew of critical Web applications for CRM, human resources, and reporting, unbeknown to him.

Another mistake is to align your IT strategy with a vendor roadmap. On our last roadmap exercise for a multinational consumer products manufacturing company, our analysis concluded that there wasn’t enough value in its main software provider’s current release, and that a better strategy would be to leapfrog this release in 2016 and implement the next major release in 2017, thus reducing the impact of change and improving the chances of value realization.

Go at it alone

As the Gartner report concludes: “It really is time that the significant investments enterprises make in ERP solutions reap real benefits. ERP vendors and [software integrators) must raise their game on implementation approaches, renovating and revisiting their own implementation methodologies for speed and with greater emphasis on the benefits realization activities.”

But let’s face it: simple just ain’t easy! Despite efforts from ERP vendors to facilitate the onboarding of new teams and the standardization of the connectivity of their applications, the integration piece still needs expertise on both applications. Such skills are usually few and far between but are critical to the success of your project.

So, if your future postmodern ERP implementation project becomes scary, “if there’s something weird, And it don’t look good, Who you gonna call?”

To create a Live Business, check out this infographic to learn The Essentials of Process Digitization Excellence.

This article originally appeared in BlueFin Solutions.

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Julien Delvat

About Julien Delvat

With over 15 years’ experience of developing cost management applications at SAP Labs France, coupled with significant experience of architecting, designing and implementing these systems for clients across the globe and industries, Julien Delvat is perfectly placed to offer Bluefin’s customers unrivalled expertise in the colliding worlds of finance and technology. His contributions to the SAP Financials community have been recognized through publications in professional blogs and journals like SCN.com and SAP Expert, as well as multiple speaking and panel opportunities at conferences like SAP Financials, SAP Controlling, Sapphire / ASUG, and SAP TechEd. He is most passionate about his roles as an ASUG volunteer for the Financials community and as an SAP Mentor, working as a trusted advisor to build new communication channels between SAP and its customers.

The Future of Cybersecurity: Trust as Competitive Advantage

Justin Somaini and Dan Wellers

 

The cost of data breaches will reach US$2.1 trillion globally by 2019—nearly four times the cost in 2015.

Cyberattacks could cost up to $90 trillion in net global economic benefits by 2030 if cybersecurity doesn’t keep pace with growing threat levels.

Cyber insurance premiums could increase tenfold to $20 billion annually by 2025.

Cyberattacks are one of the top 10 global risks of highest concern for the next decade.


Companies are collaborating with a wider network of partners, embracing distributed systems, and meeting new demands for 24/7 operations.

But the bad guys are sharing intelligence, harnessing emerging technologies, and working round the clock as well—and companies are giving them plenty of weaknesses to exploit.

  • 33% of companies today are prepared to prevent a worst-case attack.
  • 25% treat cyber risk as a significant corporate risk.
  • 80% fail to assess their customers and suppliers for cyber risk.

The ROI of Zero Trust

Perimeter security will not be enough. As interconnectivity increases so will the adoption of zero-trust networks, which place controls around data assets and increases visibility into how they are used across the digital ecosystem.


A Layered Approach

Companies that embrace trust as a competitive advantage will build robust security on three core tenets:

  • Prevention: Evolving defensive strategies from security policies and educational approaches to access controls
  • Detection: Deploying effective systems for the timely detection and notification of intrusions
  • Reaction: Implementing incident response plans similar to those for other disaster recovery scenarios

They’ll build security into their digital ecosystems at three levels:

  1. Secure products. Security in all applications to protect data and transactions
  2. Secure operations. Hardened systems, patch management, security monitoring, end-to-end incident handling, and a comprehensive cloud-operations security framework
  3. Secure companies. A security-aware workforce, end-to-end physical security, and a thorough business continuity framework

Against Digital Armageddon

Experts warn that the worst-case scenario is a state of perpetual cybercrime and cyber warfare, vulnerable critical infrastructure, and trillions of dollars in losses. A collaborative approach will be critical to combatting this persistent global threat with implications not just for corporate and personal data but also strategy, supply chains, products, and physical operations.


Download the executive brief The Future of Cybersecurity: Trust as Competitive Advantage.


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How Digital Transformation Is Rewriting Business Models

Ginger Shimp

Everybody knows someone who has a stack of 3½-inch floppies in a desk drawer “just in case we may need them someday.” While that might be amusing, the truth is that relatively few people are confident that they’re making satisfactory progress on their digital journey. The boundaries between the digital and physical worlds continue to blur — with profound implications for the way we do business. Virtually every industry and every enterprise feels the effects of this ongoing digital transformation, whether from its own initiative or due to pressure from competitors.

What is digital transformation? It’s the wholesale reimagining and reinvention of how businesses operate, enabled by today’s advanced technology. Businesses have always changed with the times, but the confluence of technologies such as mobile, cloud, social, and Big Data analytics has accelerated the pace at which today’s businesses are evolving — and the degree to which they transform the way they innovate, operate, and serve customers.

The process of digital transformation began decades ago. Think back to how word processing fundamentally changed the way we write, or how email transformed the way we communicate. However, the scale of transformation currently underway is drastically more significant, with dramatically higher stakes. For some businesses, digital transformation is a disruptive force that leaves them playing catch-up. For others, it opens to door to unparalleled opportunities.

Upending traditional business models

To understand how the businesses that embrace digital transformation can ultimately benefit, it helps to look at the changes in business models currently in process.

Some of the more prominent examples include:

  • A focus on outcome-based models — Open the door to business value to customers as determined by the outcome or impact on the customer’s business.
  • Expansion into new industries and markets — Extend the business’ reach virtually anywhere — beyond strictly defined customer demographics, physical locations, and traditional market segments.
  • Pervasive digitization of products and services — Accelerate the way products and services are conceived, designed, and delivered with no barriers between customers and the businesses that serve them.
  • Ecosystem competition — Create a more compelling value proposition in new markets through connections with other companies to enhance the value available to the customer.
  • Access a shared economy — Realize more value from underutilized sources by extending access to other business entities and customers — with the ability to access the resources of others.
  • Realize value from digital platforms — Monetize the inherent, previously untapped value of customer relationships to improve customer experiences, collaborate more effectively with partners, and drive ongoing innovation in products and services,

In other words, the time-tested assumptions about how to identify customers, develop and market products and services, and manage organizations may no longer apply. Every aspect of business operations — from forecasting demand to sourcing materials to recruiting and training staff to balancing the books — is subject to this wave of reinvention.

The question is not if, but when

These new models aren’t predictions of what could happen. They’re already realities for innovative, fast-moving companies across the globe. In this environment, playing the role of late adopter can put a business at a serious disadvantage. Ready or not, digital transformation is coming — and it’s coming fast.

Is your company ready for this sea of change in business models? At SAP, we’ve helped thousands of organizations embrace digital transformation — and turn the threat of disruption into new opportunities for innovation and growth. We’d relish the opportunity to do the same for you. Our Digital Readiness Assessment can help you see where you are in the journey and map out the next steps you’ll need to take.

Up next I’ll discuss the impact of digital transformation on processes and work. Until then, you can read more on how digital transformation is impacting your industry.

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Ginger Shimp

About Ginger Shimp

With more than 20 years’ experience in marketing, Ginger Shimp has been with SAP since 2004. She has won numerous awards and honors at SAP, including being designated “Top Talent” for two consecutive years. Not only is she a Professional Certified Marketer with the American Marketing Association, but she's also earned her Connoisseur's Certificate in California Reds from the Chicago Wine School. She holds a bachelor's degree in journalism from the University of San Francisco, and an MBA in marketing and managerial economics from the Kellogg Graduate School of Management at Northwestern University. Personally, Ginger is the proud mother of a precocious son and happy wife of one of YouTube's 10 EDU Gurus, Ed Shimp.