Leading The Shift To A Digital Business With Determination

Carsten Linz

Part 6 of the “Leading through Digital Transformation” series 

Digital transformation is still a blurry topic of varied definitions and diverse mindsets – but a wealth of potential. Essentially, it is an organizational change that happens when new digital technologies are used to enable innovation and next-generation business models to gain, or regain, a competitive edge.

This view is very similar to how many small and midsize businesses perceive it – namely as a chance to adjust their processes and renew their customer experience. Some are even innovating their operating model or creating entirely new business models.

In a recent study “Digitizing IT: Catalysts for Growth,” The Economist Intelligence Unit (EIU) revealed that 63% of senior executives from companies with annual revenue between US$250 million and US$500 million consider digital transformation to be the highest or relatively high in strategic priority.

Of the top digital initiatives undertaken in the last three years, these ranked highest:

  • Addition of new customer-facing digital channels (61%)
  • Launch of new products or services made possible by digital technology (63%)
  • Promotion of digital collaboration among employees (57%)
  • Prioritization of digital marketing over traditional forms (50%)
  • Application of digital technology to improve internal operations (41%)

From a company-wide leadership perspective, 49% believe their IT department should lead (29%) – or, at least, take an active role (20%) – in managing business model change enabled by digital technology. Surprisingly, though, only 19% see management of business model change as the most critical success factor of their organization’s digital initiatives.

True digital transformation challenges the status quo

There are many cases of initiatives that digitize existing processes, but only a few are adding game-changing customer value. In fact, only 17% of respondents surveyed in the EIU study consider their digital initiatives over the last three years to be highly effective. It appears that many small and midsize businesses make the mistake of just automating what they have, instead of redefining current business processes – no matter if they are strategic for new revenue streams or will likely cease in a couple of years.

As the host of a recent SAP CIO Summit event in Frankfurt, Germany,  I had an inspiring conversation with Peter Gantner, CIO of MAPAL Group. Like many component parts (C-parts) suppliers, the precision tool manufacturer recognized a significant challenge two years ago: How can MAPAL remain relevant in the long-term when the digital quality of its products are becoming increasingly important, at least as important, as their physical qualities? Moreover, how can it ensure the long-term continuance of the company?

To address these concerns, the MAPAL senior management team decided to approach digital transformation holistically based on the three work streams:

  • Digital lean: Geared towards efficiency gains due to digitalization and internal process automation, this work stream includes all activities needed to secure interconnectedness and consistency for significant data throughput. Existing lean programs were integrated into this approach, as well a focus on generating high-efficiency results.
  • Digital twin: To create value-add and differentiating capabilities effectively, MAPAL created a digital twin of the real work stream – created and maintained just like the digital lean version. Aggregating all relevant information for technical descriptions and handling, as well as commercial and lifecycle data, helped evolve MAPAL into a data content provider on top of their traditional hardware business. The digital twin is the heart of the company’s digital strategy to significantly improve the production process. If the machine knows the ideal cutting speed of a tool, the workflow can be optimized towards cutting performance. If the machine is aware of the cycles a tool has already performed, the remaining operating distance can be predicted. The digital twin becomes the prerequisite for meeting the requirements of external partners and process contributors.
  • Digital services: This mindset focuses on the development and implementation of new business services through a platform business model. MAPAL developed an open, cloud-based approach for the efficient handling of their tools and tool-related digital services by building on the vast and growing volume of available master, process, and inventory data generated from every product. For example, the entire lifecycle of their inventory of tools can be tracked and optimized for performance through mobile devices. With this insight, operations managers can determine the best time to regrind their tools. Production site managers can also analyze how and why local production approaches differ from other company sites worldwide – such as which cuts lead to lower tool wear. As a result, best practices can be productized, shared, and rolled out across the globe with real-time machine data.

Lessons learned from MAPAL

There are many lessons we can learn from MAPAL’s digital transformation approach. First, technology investments should always enable the reimagination of business processes, operations, and business models. Second, strategies may call for better access to real-time, accurate insights; actionable decision-making; or streamlined processes; but ultimately, a scalable, reliable infrastructure is needed to power it all.

Digital transformation does not mean that a company must replace existing business operations entirely. Such a decision will only disrupt cash flow and upset customers. Instead, organizations must assess how emerging opportunities and risks can be addressed through agility, technology-driven intelligence, and ambitious innovation to pave the way to untapped incremental revenue streams and additional competitive advantage.

Based on my learnings from more than 150 CxO meetings on digital transformation each year, I can recognize a successful leadership pattern in a small and midsize business with the ambition to remain a champion over the long term. Separating digital leaders from digital laggards is the combination of making a strategic bet and executing with determination.

The changing role of the CIO

The challenges posed by digital transformation are opening the door for IT leaders to prove what they have known all along: Technology is the enabler, not the motivator. Moreover, as executives scramble to meet the demands of an increasingly digital present and future, the CIO’s value becomes even more apparent. According to the EIU survey, 44% of respondents cite that the ideal role for IT is to help devise and implement a digital transformation strategy.

The sole purpose of IT can no longer reside in the development, implementation, and maintenance of technology. Otherwise, the CIO and his team would only be regarded as a back-office role while others lead the company’s digital journey. By combining so generated technology expertise with the business side of the executive table, CIOs can provide valuable insights and ideas that enable the entire executive team to map the best course for revenue generation and proactive, disruptive innovation.

By embracing entrepreneurial and transformational leadership, CIOs have a unique reason to rise into prominence as they spearhead competitive innovation, create a unique value proposition for the brand, and set a clear road map that delivers the full promise of digital transformation.

To learn how your business can embrace the promise of the digital economy, check out The Economist Intelligence Unit’s recent report “Digitizing IT: Catalysts for Growth.” Be sure to check every Tuesday for new installments to our blog series “Leading through Digital Transformation,” to explore the various leadership roles in today’s growing small and midsize companies.

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Carsten Linz

About Carsten Linz

Dr. Carsten Linz is an entrepreneurial leader with more than twenty years of business experience and a proven track record for driving innovation, growth, and transformation. As the Business Development Officer at SAP SE, he repeatably leads the build-up and scale-out of new businesses. In his role as Global Head of the Center for Digital Leadership, Linz acts as an advisor to other CIOs and C-level executives by showcasing next-generation digital innovation and transformation approaches. He also serves as advisory board member, coaches CEOs of fast-growing companies, and is an active member of the investment committee of Europe’s largest seed stage fund. As senior lecturer, he teaches in executive education programs at top-ranked business schools, publishes books and articles in renowned journals, and is a sought-after keynote speaker. He supports social innovators as advisory board member of Social Impact Berlin.

CIO Strategy: To Improve Employee Engagement, Buy Cupcakes

Manik Narayan Saha

Research clearly shows that highly engaged employees are good for business. People who feel connected to their employer are more productive, generate more revenues, and help the company thrive.

But did you know that IT can contribute to this success? According to new research from IDC [1], companies that develop a strong relationship between IT and the lines of business can measurably increase corporate performance.

IDC compared two types of enterprises: those where IT proactively worked with the business and those that did not cultivate a close relationship. Over three years, the companies with the strong IT-business connection achieved:

  • 90% greater growth in revenue from new product lines [1]
  • 80% greater growth in revenue from established product lines [1]
  • 50% greater improvement in compliance-related activities [1]

Introducing IT Day

These are compelling results that any CIO would be pleased to deliver. Yet creating active engagement between IT and the business can be challenging. Many employees view IT as a mere service provider—one to be consulted only when there is a problem.

How can an innovative, forward-thinking CIO demonstrate to employees that IT is more than just a support function? And how can IT help the company grow, modernize, and create market advantage?

At the SAP office in Singapore, the IT services team recently organized an IT Day to showcase our capabilities. Our goals: to educate employees on how IT delivers value to SAP and to demo the IT services that help employees work more effectively and efficiently.

Around 200 employees from multiple lines of business attended IT Day, following three tracks:

  • Expert talks that focused on the areas where IT is driving user productivity, cybersecurity, and innovation
  • Expert booths, modeled after the Apple Genius Bar, where employees received immediate service and experienced cool new products
  • Vendor booths, which provided special product offers to employees

To sweeten the deal and attract even more on-site employees, we also offered an afternoon snack of cupcakes, tea, and coffee. All 200 cupcakes were devoured in less than an hour. Employees were also eligible to participate in prize drawings.

Enabling productivity through IT

On the IT team, our goal is to enable SAP to transform into a digital enterprise using the best-in-class solutions, products, and services available in the market. Especially in the current era, IT can have a tremendous positive impact across the entire company by enabling the right technology for the organization.

From a strategic perspective, this meant focusing on two key aspects of the enterprise:

  1. Digitalization of enterprise business processes for efficiency – simplifying, automating, and massively scaling out existing business processes to meet the new demands of the digital economy. This meant upgrading our existing processes to support new business models such as volume business and subscription- and consumption-based billing. At the same time, the IT team is constantly thinking about how new technology can make a difference – for instance, using machine learning to significantly increase automation levels at our shared services organization.
  1. Digitalization of personal workspaces for higher productivity: Another key goal of the IT organization is rapidly enabling the SAP workforce to be agile, efficient, and productive so that the value each employee brings to the company multiplies exponentially.

At the IT Day, attendance was higher than anticipated, and the feedback was very positive. We offered sessions where employees learned how collaboration tools can help them be more productive working in virtual teams, and demonstrated in action the machine learning technology I mentioned above.

By actively engaging with our customers proactively, I think the IT services organization took steps toward increasing employee understanding of how we support their efficiency, productivity, and satisfaction. As the research shows, a strong IT-business partnership with engaged employees is a competitive advantage—so those cupcakes were definitely a worthwhile investment.

A great resource for CIOs is available at the SAP Technology is Live hub where there is a rich library of research and insights into the most relevant topics in the world of IT and digital transformation.

[1] IDC Perspective, “Six Priorities and Behaviors of Successful IT Organizations,” doc #US42251116, January 2017.

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Manik Narayan Saha

About Manik Narayan Saha

Manik Narayan Saha is the regional CIO for SAP Asia Pacific and Japan. Based in Singapore, Saha leads a global multinational and multicultural IT organization. As part of the SAP Senior Leadership team in APJ, he represents IT Services to more than 25,000+ employees in the region. As companies rapidly move to a digital agenda, Saha works closely with SAP’s leadership team in APJ to execute on enabling SAP as the digital enterprise. Saha is a member of the Insead Alumni Network and a Regional Ambassador of the Insead International Directors Network for Singapore. Saha received his degree in Computer Engineering from Nanyang Technological University (Singapore) and has a Masters in Applied Finance from the Singapore Management University.

Open Source Is Inspiring Digital Transformation

Thomas Di Giacomo

Today, many companies face the challenge of preparing their IT infrastructure and processes for digital transformation. IT environments that have grown over many years cannot adapt to digitization requirements in one swoop. This is often evident when companies outsource certain applications to new IT infrastructures – such as (hybrid) cloud scenarios – while other workloads continue to run on the existing IT infrastructure.

To ensure everything functions smoothly, any new solutions deployed must support integration or at least be compatible with legacy systems while enabling migration over time. Open source software is becoming an increasingly common way for businesses to make their digital transition successful.

Bridge between old and new

Open source software is considered the engine of digital transformation. This is because:

  • Open source software is not bound to proprietary license costs.
  • It is always up to date, and often more innovative and forward-looking than proprietary solutions.
  • Open source software is carried and further developed by a global community of developers and numerous manufacturers.
  • Having multiple expert eyes on the open source code also ensures that security gaps are discovered and closed quickly.

Digital transformation with open source: a team effort

In order to have a successful digital transformation, companies can’t just dive into the realm of open source software without knowing how to use it effectively for their business and in tandem with their existing IT environment. That’s why it’s important to have a dedicated development and operations (DevOps) team in place for effective communication and collaboration between product management, software development, and business operations.

With DevOps principles, companies can implement agile working methods and continuously improve their products. At the same time, effective collaboration in DevOps teams reduces and possibly eliminates traditional silo mentality and simplifies communication between development, operations, and quality assurance (QA). This makes employees more flexible and promotes innovation.

On the technical side, companies need transparent, measurable tools that enable maximum automation and change – like the software-defined data center/infrastructure or OpenStack cloud – both of which originate from the open source environment. This enables automated testing and incremental development, which is why containers and software-defined infrastructure (SDI) also deliver the foundation for DevOps. This example also illustrates that DevOps would not be conceivable without the open source environment.

Rely on the right partner

Many companies have IT environments that have been operating for decades. So during any digital transition, it’s crucial to have an effective DevOps team partnered with the right open source and enterprise Linux provider to help create a suitable infrastructure environment and serve as a bridge builder into the digital age.

Enterprise open source and Linux providers can help create the necessary preconditions for digital transformation of an enterprise IT environment for the following reasons:

  1. They have expert knowledge of open source software.
  1. They have been instrumental in closing the gaps between open source solutions and established systems since 2000.
  1. They have been working with the underlying innovative development methods of open source approaches for years, which gives them a deep understanding of DevOps principles like continuous delivery.

Companies with legacy IT environments cannot realize the benefits of digital transformation immediately – and they don’t need to – because step-by-step migration to DevOps, cloud native applications, and cloud infrastructure is possible. Companies should rely on the right partner to ensure that the migration – which can take years – runs smoothly.

Learn more about partnering with an enterprise open source and Linux provider.

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Thomas Di Giacomo

About Thomas Di Giacomo

Dr. Thomas Di Giacomo is Chief Technology Officer at SUSE. He holds a PhD in Computer Science from the University of Geneva, and has over 15 years of experience in the IT industry serving in various global leadership roles in engineering and product innovation. He has expertise in open source platforms, development, and support of global information systems and technologies applied to various industries such as telecommunication, hospitality, and healthcare.

Diving Deep Into Digital Experiences

Kai Goerlich

 

Google Cardboard VR goggles cost US$8
By 2019, immersive solutions
will be adopted in 20% of enterprise businesses
By 2025, the market for immersive hardware and software technology could be $182 billion
In 2017, Lowe’s launched
Holoroom How To VR DIY clinics

From Dipping a Toe to Fully Immersed

The first wave of virtual reality (VR) and augmented reality (AR) is here,

using smartphones, glasses, and goggles to place us in the middle of 360-degree digital environments or overlay digital artifacts on the physical world. Prototypes, pilot projects, and first movers have already emerged:

  • Guiding warehouse pickers, cargo loaders, and truck drivers with AR
  • Overlaying constantly updated blueprints, measurements, and other construction data on building sites in real time with AR
  • Building 3D machine prototypes in VR for virtual testing and maintenance planning
  • Exhibiting new appliances and fixtures in a VR mockup of the customer’s home
  • Teaching medicine with AR tools that overlay diagnostics and instructions on patients’ bodies

A Vast Sea of Possibilities

Immersive technologies leapt forward in spring 2017 with the introduction of three new products:

  • Nvidia’s Project Holodeck, which generates shared photorealistic VR environments
  • A cloud-based platform for industrial AR from Lenovo New Vision AR and Wikitude
  • A workspace and headset from Meta that lets users use their hands to interact with AR artifacts

The Truly Digital Workplace

New immersive experiences won’t simply be new tools for existing tasks. They promise to create entirely new ways of working.

VR avatars that look and sound like their owners will soon be able to meet in realistic virtual meeting spaces without requiring users to leave their desks or even their homes. With enough computing power and a smart-enough AI, we could soon let VR avatars act as our proxies while we’re doing other things—and (theoretically) do it well enough that no one can tell the difference.

We’ll need a way to signal when an avatar is being human driven in real time, when it’s on autopilot, and when it’s owned by a bot.


What Is Immersion?

A completely immersive experience that’s indistinguishable from real life is impossible given the current constraints on power, throughput, and battery life.

To make current digital experiences more convincing, we’ll need interactive sensors in objects and materials, more powerful infrastructure to create realistic images, and smarter interfaces to interpret and interact with data.

When everything around us is intelligent and interactive, every environment could have an AR overlay or VR presence, with use cases ranging from gaming to firefighting.

We could see a backlash touting the superiority of the unmediated physical world—but multisensory immersive experiences that we can navigate in 360-degree space will change what we consider “real.”


Download the executive brief Diving Deep Into Digital Experiences.


Read the full article Swimming in the Immersive Digital Experience.

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Kai Goerlich

About Kai Goerlich

Kai Goerlich is the Chief Futurist at SAP Innovation Center network His specialties include Competitive Intelligence, Market Intelligence, Corporate Foresight, Trends, Futuring and ideation. Share your thoughts with Kai on Twitter @KaiGoe.heif Futu

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Jenny Dearborn: Soft Skills Will Be Essential for Future Careers

Jenny Dearborn

The Japanese culture has always shown a special reverence for its elderly. That’s why, in 1963, the government began a tradition of giving a silver dish, called a sakazuki, to each citizen who reached the age of 100 by Keiro no Hi (Respect for the Elders Day), which is celebrated on the third Monday of each September.

That first year, there were 153 recipients, according to The Japan Times. By 2016, the number had swelled to more than 65,000, and the dishes cost the already cash-strapped government more than US$2 million, Business Insider reports. Despite the country’s continued devotion to its seniors, the article continues, the government felt obliged to downgrade the finish of the dishes to silver plating to save money.

What tends to get lost in discussions about automation taking over jobs and Millennials taking over the workplace is the impact of increased longevity. In the future, people will need to be in the workforce much longer than they are today. Half of the people born in Japan today, for example, are predicted to live to 107, making their ancestors seem fragile, according to Lynda Gratton and Andrew Scott, professors at the London Business School and authors of The 100-Year Life: Living and Working in an Age of Longevity.

The End of the Three-Stage Career

Assuming that advances in healthcare continue, future generations in wealthier societies could be looking at careers lasting 65 or more years, rather than at the roughly 40 years for today’s 70-year-olds, write Gratton and Scott. The three-stage model of employment that dominates the global economy today—education, work, and retirement—will be blown out of the water.

It will be replaced by a new model in which people continually learn new skills and shed old ones. Consider that today’s most in-demand occupations and specialties did not exist 10 years ago, according to The Future of Jobs, a report from the World Economic Forum.

And the pace of change is only going to accelerate. Sixty-five percent of children entering primary school today will ultimately end up working in jobs that don’t yet exist, the report notes.

Our current educational systems are not equipped to cope with this degree of change. For example, roughly half of the subject knowledge acquired during the first year of a four-year technical degree, such as computer science, is outdated by the time students graduate, the report continues.

Skills That Transcend the Job Market

Instead of treating post-secondary education as a jumping-off point for a specific career path, we may see a switch to a shorter school career that focuses more on skills that transcend a constantly shifting job market. Today, some of these skills, such as complex problem solving and critical thinking, are taught mostly in the context of broader disciplines, such as math or the humanities.

Other competencies that will become critically important in the future are currently treated as if they come naturally or over time with maturity or experience. We receive little, if any, formal training, for example, in creativity and innovation, empathy, emotional intelligence, cross-cultural awareness, persuasion, active listening, and acceptance of change. (No wonder the self-help marketplace continues to thrive!)

The three-stage model of employment that dominates the global economy today—education, work, and retirement—will be blown out of the water.

These skills, which today are heaped together under the dismissive “soft” rubric, are going to harden up to become indispensable. They will become more important, thanks to artificial intelligence and machine learning, which will usher in an era of infinite information, rendering the concept of an expert in most of today’s job disciplines a quaint relic. As our ability to know more than those around us decreases, our need to be able to collaborate well (with both humans and machines) will help define our success in the future.

Individuals and organizations alike will have to learn how to become more flexible and ready to give up set-in-stone ideas about how businesses and careers are supposed to operate. Given the rapid advances in knowledge and attendant skills that the future will bring, we must be willing to say, repeatedly, that whatever we’ve learned to that point doesn’t apply anymore.

Careers will become more like life itself: a series of unpredictable, fluid experiences rather than a tightly scripted narrative. We need to think about the way forward and be more willing to accept change at the individual and organizational levels.

Rethink Employee Training

One way that organizations can help employees manage this shift is by rethinking training. Today, overworked and overwhelmed employees devote just 1% of their workweek to learning, according to a study by consultancy Bersin by Deloitte. Meanwhile, top business leaders such as Bill Gates and Nike founder Phil Knight spend about five hours a week reading, thinking, and experimenting, according to an article in Inc. magazine.

If organizations are to avoid high turnover costs in a world where the need for new skills is shifting constantly, they must give employees more time for learning and make training courses more relevant to the future needs of organizations and individuals, not just to their current needs.

The amount of learning required will vary by role. That’s why at SAP we’re creating learning personas for specific roles in the company and determining how many hours will be required for each. We’re also dividing up training hours into distinct topics:

  • Law: 10%. This is training required by law, such as training to prevent sexual harassment in the workplace.

  • Company: 20%. Company training includes internal policies and systems.

  • Business: 30%. Employees learn skills required for their current roles in their business units.

  • Future: 40%. This is internal, external, and employee-driven training to close critical skill gaps for jobs of the future.

In the future, we will always need to learn, grow, read, seek out knowledge and truth, and better ourselves with new skills. With the support of employers and educators, we will transform our hardwired fear of change into excitement for change.

We must be able to say to ourselves, “I’m excited to learn something new that I never thought I could do or that never seemed possible before.” D!

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