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Digital Transformation In Discrete Manufacturing

Stefan Krauss

Forklifts might be the best example of how technology is shaping the future of discrete manufacturing. Consider these two companies.

  • Company A looks to increase profits by cutting costs and asking employees to find ways to make forklifts cheaper. It seeks to increase market share by offering steeper price discounts.
  • Company B has asked customers, employees, and suppliers whether forklifts will be needed in the next decade. Should the company just be selling forklifts? Should it consider becoming a “warehouse as a service” provider instead, running warehouses for other businesses?

Which company is forward-thinking, recognizing that automation, smart products, and innovation will drive new business models? Which company is considering how to best provide the services that customers expect in addition to the products sold?

The answer is clear. For companies that recognize the pivotal role that digital transformation plays in driving innovation, the future is bright.

CIO role transforming with digital change

For CIOs, digital transformation changes their roles within organizations. The CIO of tomorrow must bring his or her skills and insights on new digital technologies to bear on the rest of the organization.

Instead of staying in traditional silos, transformative CIOs will lead engagements that bring IT departments together to collaborate deeply with other parts of the organization – sales, marketing, research and development, software development, manufacturing, and supply chain.

When successful, CIOs will help organizations rethink business models and business processes. Digital transformation will change how people are hired, trained, and deployed, leveraging the use of business networks and contingent workers to ensure companies are ready for the future.

While technology is enabling companies to reconsider their businesses, the fundamentals remain relevant: how companies can grow the business and improve efficiency. The difference is that digital changes are critical to that growth.

Automakers, high-tech companies offering services

Consider the automobile industry. Nontraditional competitors such as Google, Tesla, and Uber are causing consumers to ask, “Do I need to own a car?” Particularly in urban, congested areas, mobility is more relevant today. What’s important is optimizing the way to get from point A to point B. That demand means rapid flexibility and service. It may mean using different car models for different seasons.

Automakers are responding by thinking about services that eliminate or reduce the costs of taxes and parking. Connected vehicles are placing more emphasis on services rather than horsepower. Consumers, they realize, want services such as pre-ordered parking spots, gas station location services, or prepaid coffee in their favorite drive-through.

High-tech companies are leveraging the Internet of Things in two significant ways. Companies are producing not just hardware, but also pure or embedded software built into products. This means they can offer services in addition to or instead of just selling. For example, a printer company is now giving companies the option to purchase printing services instead of printers. The manufacturer owns and maintains the printers, using embedded software to detect needed maintenance, such as toner replacement, and replaces the printers as needed. It’s selling output, not the printers themselves.

Industrial machines, aircraft companies rethink business models

Similarly, in industrial machines and components companies, the business models are changing. One compressor manufacturer we work with is shifting its business to selling not air compressors, but air itself.

Customers purchase an amount of compressed air, with the company controlling costs via predictive maintenance software. Many call this shift Industry 4.0, allowing manufacturers to have more flexible manufacturing processes that can better react to customer demands.

The aircraft and defense industry has been at the forefront of digital transformation for years, using sensors to track and assess performance and improve safety. With such increased demand for new airplanes and passenger capacity, some OEMs are considering not selling aircrafts and engines, but rather the performance of those machines.

For the CIO of the future, a top-down approach is crucial. CIOs need to consider how to inspire and lead other C-suite executives to an innovative, connected future.

For more on how Innovator CIOs are reimagining business models to uncover new revenue, read the Digital Bridge report on Digital Business and CIO Innovation Imperative

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Stefan Krauss

About Stefan Krauss

Stefan Krauss is the general manager for Discrete Industries at SAP. Together with his team, he is responsible for the integrated management of the industries Aerospace & Defense, Automotive, High Tech and Industrial Machinery & Components – spanning development, solution management, sales and marketing, value engineering, partner management, services and support. The mission of this unit is to deliver industry cloud solutions that help SAP customers sustainably innovate and grow their business, operate safely, and develop their people.

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.

Cashing In On Space Data [VIDEO]

Robin Meyerhoff

If you want to know what’s happening on Earth, the European Space Agency (ESA) has your back. Every day dozens of ESA satellites generate around ten terabyte of data. Billed as “Europe’s gateway to space,” ESA is the largest provider of Earth observation information in the world, constantly monitoring the planet’s security and environment.

Until recently, that information was held under lock and key, unless you were a scientist with clearance to use it. However, in 2007, the European Union (which works closely with ESA and provides some 20 percent of its funding) changed its policy, allowing the agency to make its data freely available to the public.

This change has opened a new world of opportunity for ESA, the EU and businesses. Nicolaus Hanowski, who heads the ESA Earth Observation Programme, said, “When the EU decided a few years ago that all that observation data was free and open, it triggered new possibilities for ESA and the industrial world.”

Particularly with the maturation of Internet of Things, Big Data, and cloud technologies, the commercial sector now has effective ways to access this data and use it in real time.

Space data helps business and society

Here’s how it works: Satellites, drones, and other airborne “things” can transmit data, which is combined and turned into usable information by Big Data solutions like geospatial, real-time, and predictive analytics. Cloud computing makes it possible for the ESA to deliver specific sets of information to organizations that can use it to solve problems like evaluating agriculture land use, managing gas pipelines, and measuring the effect of climate change.

Hanowski explains ESA already has thematic data repositories including coastal, forestry, urban development, climate, and hydrology.  “Our mission is to make the data consumable. We want to the uptake to be as big as possible — and economically influential. We need to understand what kind of data is interesting to commercial organizations.”

Once they understand key topic areas for businesses, ESA can combine its satellite data with additional types of airborne and ground data to help companies bring new digital business models to life.

With the release of an Earth observation analysis service, organizations can now analyze historic and real-time satellite from ESA, which will help businesses better understand current conditions – and predict future situations.

Through an in-memory computing platform, decision makers can predict future scenarios, their probability, and potential actions to take. Farmers, for instance, will not only know about upcoming storms, but also how to optimize water and fertilizer use on their fields based on satellite information. Even better, the farmer can detect imminent onset of the common crop diseases – and start a preventive treatment immediately.

Munich Re, one of the world’s largest reinsurance companies, is one of the first companies using the analysis service. The increasing frequency of natural disasters like wildfires due to climate change pose a huge challenge for the insurance industry. By analyzing real-time and historic satellite data of wildfires in different regions, Munich Re can more accurately calculate insurance risks and costs. Munich Re can use wildfire data to do predictive analysis that estimates the probability of future wildfires and potential damage to people, homes, and businesses, thus minimizing costs for clients.

Dr. Carsten Linz, head of the SAP Center for Digital Leadership, said, “Like many organizations, ESA is going through a digital transformation, and this technology is helping them pave the way by closing the gap between a traditional Earth observation institution and the digital business world. ESA’s mission is to disseminate space data that is relevant to businesses – and was previously only available to scientists and data specialists. Hence, a major part of our work together is to make the information usable, accessible, and secure, which is why the in-memory computing platform and cloud technologies are so important to ESA.”

While commercial data use is a priority for ESA, Hanowski is hopeful that with analytic services, they will be able to help unite scientific and relief communities on pressing topics like smart cities, food security, and water management.

Eventually businesses will use the data to improve efficiency and offer better products, ESA will gain a revenue stream, and NGOs and the public sector can use it to improve people’s lives. In other words, everyone wins.

For more on the transformative scientific potential of data analytics, see The Promise Of The Internet Of Things.

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Robin Meyerhoff

About Robin Meyerhoff

Robin Meyerhoff is the Senior Director, Content Team, Global Corporate Affairs, at SAP, responsible for telling key corporate stories via multiple formats: cartoons, video, infographics, opinion pieces. Lead integrated internal-external approach to rolling out content, including comprehensive editorial calendar, regional coordination and alignment with key business objective.

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.