Accelerate Your Digital Transformation With Packaged Business Services

Meinolf Kaimann

From industry publications to TED Talks, it seems that people everywhere are talking about digitalization as the next big thing. Here’s a little secret, though: Digitalization isn’t coming. It’s already here.

Disruptive technological advances are shaking up businesses and markets. Although you may be expecting to do battle with your traditional competition, digitalization is making it easier for previously unseen challengers to sneak up and steal your market share. Just ask the competitors to Netflix, Airbnb, and Uber.

To avoid this fate, companies need to embrace new strategies that will help them speed their digital transformation. Meeting this goal requires partnerships with service providers that will support a laser focus on business outcomes while realizing quick wins that will help transform your enterprise. Skilled partners can help their clients save money, freeing up funds to allow companies to adopt additional innovation and unleash new business value. It’s a proven formula for maximum value, minimum risk, and rapid success.

Not all service providers are created equal

How can you choose the right service provider? Look for organizations offering services that act as accelerators, such as industrialized services, to deliver value faster. Most providers use product development as a starting point and adjust their services and processes to meet customer needs. Instead, select services that begin with best practices and proven processes that are designed for your specific industry. In other words, the center of the effort should always be your success, not the vendor’s convenience.

Predefined service packages that are based on best practices, methodologies, and tools can help you jump-start your digital transformation. When structured this way, these service packages also enable providers to systematize on service content and quality. This standardization is likely to provide consistent, positive business outcomes no matter which consultant is assigned to your initiative.

You should be able to tailor these reusable, renewable service packages to your organizational structures and preferred delivery methods. More important, each service offering should have a clear, outcome-driven scope, address the different phases of your transformation, and be delivered quickly and cost-effectively.

Industry expertise and benchmarks reveal progress

Most organizations can also benefit from a model company approach that defines the majority of processes for each industry or line of business. By combining best practices with integrated end-to-end processes, a model company approach not only acts as an accelerator, but also frees consultants to focus on any missing pieces identified during a fit-gap analysis. The expertise gathered from other customer implementation experiences helps your provider implement the latest innovations while sharply reducing implementation complexity, time, and cost.

Finally, keep in mind that it can be highly advantageous to include your software vendor in the search for services that accelerate digital transformation. Involving the vendor early in internal innovation initiatives can help you identify, prioritize, and refine ideas. With extensive knowledge of current industry best practices and familiarity with other deployments, the vendor can offer insight and recommendations that help pave the way for a successful transformation.

A software provider that supports your solution well beyond implementation is highly motivated to help your deployment succeed throughout the life of the software. This ongoing engagement provides the vendor with the opportunity – and privilege – to guide you through current and future transformations.

The importance of this customer vote of confidence cannot be overstated. Unlike a system integrator that considers your digital transformation a limited-term “project,” a software vendor views your success as a reflection on the value of the solutions and services delivered. What’s more, your software vendor can also help measure, assess, and analyze your outcomes compared with other customers, offering insight you can use to benchmark your true digital transformation progress.

Learn more about how SAP Digital Business Services can help you accelerate business opportunities through digital transformation and reduce capital expenditures, risk, and total cost of ownership.

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Meinolf Kaimann

About Meinolf Kaimann

Meinolf Kaimann is vice president, global head value assurance and premium engagements product management at SAP. You can follow him on LinkedIn.

Why GDPR Is A Helpful Catalyst For The Postmodern CIO

Christine Ashton

Part 7 and final blog in the “Postmodern CIO” series

The EU’s new General Data Protection Regulation (GDPR) is a catastrophe for old, immobile enterprises. By May 25, 2018, many large businesses will have endured a rocky path to compliance and managing breaches, at considerable cost. Some may well have seen negative impact to their brands from data issues.

GDPR is a challenge, but it is also an opportunity. For the postmodern CIO – at ease with the tools the digital revolution has provided – this is a chance to show how cloud computing can be leveraged to transform business in a way that mitigates corporate risk.

Why companies are worried about GDPR

The 1995 EU data protection directive laid out a strong framework, but failed to properly imagine the complexity of modern IT infrastructures.

Established organizations often have a mishmash of technologies handling client data. Older companies, especially financial institutions, often still use systems that date back to the ’80s and ’90s, running on obsolete platforms. The architects of some of these platforms never considered the need to delete data, let alone implement such a feature.

Meanwhile, the majority of companies now use cloud services in some way, but not always in a business process–optimized way. The average European enterprise uses an astonishing 608 cloud services, including Dropbox, Google Docs, and OneDrive. Most of these are shadow IT systems – not supported or sanctioned by the IT department and therefore prone to misuse. Identity data can leak into these cloud services’ databases with surprising ease. Personal data regularly pops up as text fields – unstructured data.

This IT landscape makes it impossible to guarantee the safety of client data and to give individuals the right to decide how their data is used, which is the purpose of data protection legislation. GDPR seeks to redress the balance by imposing punitive fines on companies that don’t simplify and unify client data storage and understand identity data lifecycles. So the more fragmented a company’s systems are, the more work they will have to put in to comply with the request to “delete everything you hold on me, please.”

How this benefits postmodern CIOs

Postmodern CIOs have moved from operating IT to owning ecosystems. They focus less on managing teams and more on growing talent. Delivering innovation trumps merely keeping the lights on. For postmodern CIOs looking to pivot to the cloud, this is an excellent time to launch a revolution within their organizations.

There are four main arguments that CIOs can make to their C-suite colleagues relative to GDPR:

1. GDPR compliance can be built into the IT landscape and scaled.

One of the most persuasive arguments against on-premise systems is the cost of installation and maintenance. The cost of compliance is something else to consider, especially as the move towards GDPR compliance may be so painful. Companies such as SAP provide facilities for structuring data and defining access to it, as well as reporting on compliance with those rules. These capabilities help in reducing the overhead of meeting compliance, as well as the spend on identifying anomalies and quantifying compliance on an ongoing basis.

For some organizations, GDPR has resulted in decisions such as the removal of an entire CRM facility because of the inability to control access to customers’ data. So for many organizations, GDPR also represents an opportunity to reconsider their IT landscape. Wholesale relocation of core capabilities to the cloud is an even more reasonable consideration.

2. The quality of data will improve.

One of the problems arising from GDPR is that companies store huge amounts of superfluous customer data, including operational data that could be used to reconstruct individuals’ identities. GDPR will force companies to store only essential data, which means that some organizations will need to perform huge data-cleansing operations. Some organizations will need to reconsider their approach to marketing. But this is a chance to create new data models based on what you actually need to know about your clients, what they’ve consented to, and how they want to be interacted with. It’s also a chance to migrate to a cloud system that has the capability to support and reinforce GDPR, and can immediately adapt to the new demands GDPR will place on it.

3. Analytics will improve.

When you have meaningful customer data, it’s much easier to perform analytics and generate insights that can help steer other departments, such as finance and marketing. Of course, to do this cost-effectively and at scale, you need to migrate this workload to the cloud. You will need major computing power to perform detailed, real-time analytics, with increasing demand as more of your colleagues take advantage of it. The postmodern CIO needs to make clear the connection between Big Data and the cloud and outline the benefits to other departments.

4. People are going to use cloud services anyway.

Security fears are the main barriers to cloud adoption. The argument is that no cloud system can ever be secure as a sealed, secure, on-premise network. This is true; but no network is ever sealed these days. People want to work remotely and expect to be able to share with external parties. Third parties want to transact with you, and in some cases manage your inventory. Customers want to buy your products wherever they are in the world, and in a currency that suits them. If this is not supported by official IT systems, your business will turn to shadow IT systems, such as personal cloud accounts or copying data onto USB drives. In the long run, cloud systems are more secure than on-premise systems, because they support the need of employees to work remotely or to use their own devices. And they provide consistent, scalable means to manage your security, identity, and other needs. For example, SAP manages 137 million cloud service users worldwide.

GDPR is legislation with an eye to the future. It imagines a well-managed, connected, data-driven world, similar to that envisaged by most CIOs. This is a chance to change how your company thinks about data and the cloud and start moving towards the future. Don’t let it pass you by.

For more on this topic, see 5 Ways To Keep Your BI Team On The Right Side Of GDPR.

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Christine Ashton

About Christine Ashton

Christine is global chief digital officer, Digital Office ERP Cloud at SAP. Her focus is to work with CxOs to reimagine strategy and business practices. She works with senior executives to plan their “AI-first” digital transformation road map enabled by intelligent ERP and public cloud. Notably, Christine is recognized in Computer Weekly's 2017’s Most Influential Women In IT - Top 100 list.

Net Neutrality Lost: Smart Solutions For Small Business – Part 2

Brandon Lewis

Part 2 of a 2-part series. Read Part 1

With the new Restoring Internet Freedom Order – passed by the U.S. Federal Communications Commission (FCC) to eliminate net neutrality rules – big companies win out. Their deep pockets give them a competitive advantage because they can afford to cover the inflated cost for bandwidth.

Corporate giants reclaim marketing stronghold with consumers

Small businesses that don’t have discretionary capital will struggle to compete, leaving the game open to corporate giants with maximum spending ability. It’s important for small businesses to use social media to persuade consumers who may become jaded from large franchises.

One area where big corporations often fall flat is connecting with their customer base. It’s not necessarily because they don’t want to, but more because it is impossible to realistically reach everyone.

This is where small businesses can sneak in and capture the flag. There is an innate stigma surrounding social media and how it is required to survive. This is both true and false. The point of social media is to be better than the competition, and you can’t do that if it’s not personal.

Achieving this is a direct result of brand transformation and culture. Extend these concepts to the consumer by making them a part of your vision. Go beyond customer service, and focus on customer experience.

Solution: Train employees to become effective “brand ambassadors” on social media. Don’t bother reinventing the wheel, but do define your immediate goals for your initial outreach. Be realistic; identify and empower several employees who are already advocating for you.

Then, create some incentives for the best advocates and ask them to share a photo with the prize. Keep rewarding those who are the most vocal and active first, but be sure to award everyone. Sustain the ebb and flow by maintaining continuous creation. Always be attuned to how you can keep delivering value.

Changes in productivity and procedures create ethical concerns

Cloud computing has become a trend for its ability to increase productivity and profits. But failure could happen if the cloud-based system is operating at a slower speed because the cloud program and service providers couldn’t buy a higher bandwidth.

Small-business people wonder who might be affected, but the real question is: who won’t be affected? Realistically, the ones with the deepest pockets.

Businesses turn to cloud-based providers for better IT operations, an economical alternative for filing, and better security. If the cloud fails, so does your business. Data that wasn’t backed up with paper trails or alternative methods will essentially be lost.

Solution: There are cost-effective alternatives that are not Internet-based management systems. For example, Amazon’s S3 storage charges a few cents per GB per month for raw hard drive capacity.

Another provider is Zadara, which can be used in the cloud, but can also be used as an in-house software on the hard drive for the same price.

Choosing the right alternative will rely heavily on how much storage is needed, what you are backing up, and the flexibility you desire. Encourage leaders to research your current needs, what works, what doesn’t, and how a new product can offer a sense of maintenance.

Be aware of ethical issues a CEO might face when deciding to move to another service provider. It can be difficult to determine the right timing. The obvious “right timing” is when you are facing issues or have been in the market for a new provider.

If that is not the case, it’s best to examine other things going on in your company and the likelihood of a smooth transition. Avoid switching at the same time you are implementing other programs or methodology changes.

Understanding the overturn of net neutrality can be challenging. So it’s best to focus on how to avoid slower Internet speeds, ways to compete against corporate giants, and how changes in productivity and procedures create ethical concerns.

Social media is no longer just a marketing function; everyone in the business has a role to play. Learn How to Weave Social Media Into the Fabric of the Business.

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Brandon Lewis

About Brandon Lewis

Brandon Lewis is president and CEO of Win More Patients.

Tick Tock: Start Preparing for Resource Disruption

By Maurizio Cattaneo, Joerg Ferchow, Daniel Wellers, and Christopher Koch

Businesses share something important with lions. When a lion captures and consumes its prey, only about 10% to 20% of the prey’s energy is directly transferred into the lion’s metabolism. The rest evaporates away, mostly as heat loss, according to research done in the 1940s by ecologist Raymond Lindeman.

Today, businesses do only about as well as the big cats. When you consider the energy required to manage, power, and move products and services, less than 20% goes directly into the typical product or service—what economists call aggregate efficiency (the ratio of potential work to the actual useful work that gets embedded into a product or service at the expense of the energy lost in moving products and services through all of the steps of their value chains). Aggregate efficiency is a key factor in determining productivity.

After making steady gains during much of the 20th century, businesses’ aggregate energy efficiency peaked in the 1980s and then stalled. Japan, home of the world’s most energy-efficient economy, has been skating along at or near 20% ever since. The U.S. economy, meanwhile, topped out at about 13% aggregate efficiency in the 1990s, according to research.

Why does this matter? Jeremy Rifkin says he knows why. Rifkin is an economic and social theorist, author, consultant, and lecturer at the Wharton School’s Executive Education program who believes that economies experience major increases in growth and productivity only when big shifts occur in three integrated infrastructure segments around the same time: communications, energy, and transportation.

But it’s only a matter of time before information technology blows all three wide open, says Rifkin. He envisions a new economic infrastructure based on digital integration of communications, energy, and transportation, riding atop an Internet of Things (IoT) platform that incorporates Big Data, analytics, and artificial intelligence. This platform will disrupt the world economy and bring dramatic levels of efficiency and productivity to businesses that take advantage of it, he says.

Some economists consider Rifkin’s ideas controversial. And his vision of a new economic platform may be problematic—at least globally. It will require massive investments and unusually high levels of government, community, and private sector cooperation, all of which seem to be at depressingly low levels these days.

However, Rifkin has some influential adherents to his philosophy. He has advised three presidents of the European Commission—Romano Prodi, José Manuel Barroso, and the current president, Jean-Claude Juncker—as well as the European Parliament and numerous European Union (EU) heads of state, including Angela Merkel, on the ushering in of what he calls “a smart, green Third Industrial Revolution.” Rifkin is also advising the leadership of the People’s Republic of China on the build out and scale up of the “Internet Plus” Third Industrial Revolution infrastructure to usher in a sustainable low-carbon economy.

The internet has already shaken up one of the three major economic sectors: communications. Today it takes little more than a cell phone, an internet connection, and social media to publish a book or music video for free—what Rifkin calls zero marginal cost. The result has been a hollowing out of once-mighty media empires in just over 10 years. Much of what remains of their business models and revenues has been converted from physical (remember CDs and video stores?) to digital.

But we haven’t hit the trifecta yet. Transportation and energy have changed little since the middle of the last century, says Rifkin. That’s when superhighways reached their saturation point across the developed world and the internal-combustion engine came close to the limits of its potential on the roads, in the air, and at sea. “We have all these killer new technology products, but they’re being plugged into the same old infrastructure, and it’s not creating enough new business opportunities,” he says.

All that may be about to undergo a big shake-up, however. The digitalization of information on the IoT at near-zero marginal cost generates Big Data that can be mined with analytics to create algorithms and apps enabling ubiquitous networking. This digital transformation is beginning to have a big impact on the energy and transportation sectors. If that trend continues, we could see a metamorphosis in the economy and society not unlike previous industrial revolutions in history. And given the pace of technology change today, the shift could happen much faster than ever before.

The speed of change is dictated by the increase in digitalization of these three main sectors; expensive physical assets and processes are partially replaced by low-cost virtual ones. The cost efficiencies brought on by digitalization drive disruption in existing business models toward zero marginal cost, as we’ve already seen in entertainment and publishing. According to research company Gartner, when an industry gets to the point where digital drives at least 20% of revenues, you reach the tipping point.

“A clear pattern has emerged,” says Peter Sondergaard, executive vice president and head of research and advisory for Gartner. “Once digital revenues for a sector hit 20% of total revenue, the digital bloodbath begins,” he told the audience at Gartner’s annual 2017 IT Symposium/ITxpo, according to The Wall Street Journal. “No matter what industry you are in, 20% will be the point of no return.”

Communications is already there, and energy and transportation are heading down that path. If they hit the magic 20% mark, the impact will be felt not just within those industries but across all industries. After all, who doesn’t rely on energy and transportation to power their value chains?

The eye of the technology disruption hurricane has moved beyond communications and is heading toward … the rest of the economy.

That’s why businesses need to factor potentially massive business model disruptions into their plans for digital transformation today if they want to remain competitive with organizations in early adopter countries like China and Germany. China, for example, is already halfway through an US$88 billion upgrade to its state electricity grid that will enable renewable energy transmission around the country—all managed and moved digitally, according to an article in The Economist magazine. And it is competing with the United States for leadership in self-driving vehicles, which will shift the transportation process and revenue streams heavily to digital, according to an article in Wired magazine.

Once China’s and Germany’s renewables and driverless infrastructures are in place, the only additional costs are management and maintenance. That could bring businesses in these countries dramatic cost savings over those that still rely on fossil fuels and nuclear energy to power their supply chains and logistics. “Once you pay the fixed costs of renewables, the marginal costs are near zero,” says Rifkin. “The sun and wind haven’t sent us invoices yet.”

In other words, zero marginal cost has become a zero-sum game.

To understand why that is, consider the major industrial revolutions in history, writes Rifkin in his books, The Zero Marginal Cost Society and The Third Industrial Revolution. The first major shift occurred in the 19th century when cheap, abundant coal provided an efficient new source of power (steam) for manufacturing and enabled the creation of a vast railway transportation network. Meanwhile, the telegraph gave the world near-instant communication over a globally connected network.

The second big change occurred at the beginning of the 20th century, when inexpensive oil began to displace coal and gave rise to a much more flexible new transportation network of cars and trucks. Telephones, radios, and televisions had a similar impact on communications.

Breaking Down the Walls Between Sectors

Now, according to Rifkin, we’re poised for the third big shift. The eye of the technology disruption hurricane has moved beyond communications and is heading toward—or as publishing and entertainment executives might warn, coming for—the rest of the economy. With its assemblage of global internet and cellular network connectivity and ever-smaller and more powerful sensors, the IoT, along with Big Data analytics and artificial intelligence, is breaking down the economic walls that have protected the energy and transportation sectors for the past 50 years.

Daimler is now among the first movers in transitioning into a digitalized mobility internet. The company has equipped nearly 400,000 of its trucks with external sensors, transforming the vehicles into mobile Big Data centers. The sensors are picking up real-time Big Data on weather conditions, traffic flows, and warehouse availability. Daimler plans to establish collaborations with thousands of companies, providing them with Big Data and analytics that can help dramatically increase their aggregate efficiency and productivity in shipping goods across their value chains. The Daimler trucks are autonomous and capable of establishing platoons of multiple trucks driving across highways.

It won’t be long before vehicles that navigate the more complex transportation infrastructures around the world begin to think for themselves. Autonomous vehicles will bring massive economic disruption to transportation and logistics thanks to new aggregate efficiencies. Without the cost of having a human at the wheel, autonomous cars could achieve a shared cost per mile below that of owned vehicles by as early as 2030, according to research from financial services company Morgan Stanley.

The transition is getting a push from governments pledging to give up their addiction to cars powered by combustion engines. Great Britain, France, India, and Norway are seeking to go all electric as early as 2025 and by 2040 at the latest.

The Final Piece of the Transition

Considering that automobiles account for 47% of petroleum consumption in the United States alone—more than twice the amount used for generators and heating for homes and businesses, according to the U.S. Energy Information Administration—Rifkin argues that the shift to autonomous electric vehicles could provide the momentum needed to upend the final pillar of the economic platform: energy. Though energy has gone through three major disruptions over the past 150 years, from coal to oil to natural gas—each causing massive teardowns and rebuilds of infrastructure—the underlying economic model has remained constant: highly concentrated and easily accessible fossil fuels and highly centralized, vertically integrated, and enormous (and enormously powerful) energy and utility companies.

Now, according to Rifkin, the “Third Industrial Revolution Internet of Things infrastructure” is on course to disrupt all of it. It’s neither centralized nor vertically integrated; instead, it’s distributed and networked. And that fits perfectly with the commercial evolution of two energy sources that, until the efficiencies of the IoT came along, made no sense for large-scale energy production: the sun and the wind.

But the IoT gives power utilities the means to harness these batches together and to account for variable energy flows. Sensors on solar panels and wind turbines, along with intelligent meters and a smart grid based on the internet, manage a new, two-way flow of energy to and from the grid.

Today, fossil fuel–based power plants need to kick in extra energy if insufficient energy is collected from the sun and wind. But industrial-strength batteries and hydrogen fuel cells are beginning to take their place by storing large reservoirs of reserve power for rainy or windless days. In addition, electric vehicles will be able to send some of their stored energy to the digitalized energy internet during peak use. Demand for ever-more efficient cell phone and vehicle batteries is helping push the evolution of batteries along, but batteries will need to get a lot better if renewables are to completely replace fossil fuel energy generation.

Meanwhile, silicon-based solar cells have not yet approached their limits of efficiency. They have their own version of computing’s Moore’s Law called Swanson’s Law. According to data from research company Bloomberg New Energy Finance (BNEF), Swanson’s Law means that for each doubling of global solar panel manufacturing capacity, the price falls by 28%, from $76 per watt in 1977 to $0.41 in 2016. (Wind power is on a similar plunging exponential cost curve, according to data from the U.S. Department of Energy.)

Thanks to the plummeting solar price, by 2028, the cost of building and operating new sun-based generation capacity will drop below the cost of running existing fossil power plants, according to BNEF. “One of the surprising things in this year’s forecast,” says Seb Henbest, lead author of BNEF’s annual long-term forecast, the New Energy Outlook, “is that the crossover points in the economics of new and old technologies are happening much sooner than we thought last year … and those were all happening a bit sooner than we thought the year before. There’s this sense that it’s not some distant risk or distant opportunity. A lot of these realities are rushing toward us.”

The conclusion, he says, is irrefutable. “We can see the data and when we map that forward with conservative assumptions, these technologies just get cheaper than everything else.”

The smart money, then—72% of total new power generation capacity investment worldwide by 2040—will go to renewable energy, according to BNEF. The firm’s research also suggests that there’s more room in Swanson’s Law along the way, with solar prices expected to drop another 66% by 2040.

Another factor could push the economic shift to renewables even faster. Just as computers transitioned from being strictly corporate infrastructure to becoming consumer products with the invention of the PC in the 1980s, ultimately causing a dramatic increase in corporate IT investments, energy generation has also made the transition to the consumer side.

Thanks to future tech media star Elon Musk, consumers can go to his Tesla Energy company website and order tempered glass solar panels that look like chic, designer versions of old-fashioned roof shingles. Models that look like slate or a curved, terracotta-colored, ceramic-style glass that will make roofs look like those of Tuscan country villas, are promised soon. Consumers can also buy a sleek-looking battery called a Powerwall to store energy from the roof.

The combination of solar panels, batteries, and smart meters transforms homeowners from passive consumers of energy into active producers and traders who can choose to take energy from the grid during off-peak hours, when some utilities offer discounts, and sell energy back to the grid during periods when prices are higher. And new blockchain applications promise to accelerate the shift to an energy market that is laterally integrated rather than vertically integrated as it is now. Consumers like their newfound sense of control, according to Henbest. “Energy’s never been an interesting consumer decision before and suddenly it is,” he says.

As the price of solar equipment continues to drop, homes, offices, and factories will become like nodes on a computer network. And if promising new solar cell technologies, such as organic polymers, small molecules, and inorganic compounds, supplant silicon, which is not nearly as efficient with sunlight as it is with ones and zeroes, solar receivers could become embedded into windows and building compounds. Solar production could move off the roof and become integrated into the external facades of homes and office buildings, making nearly every edifice in town a node.

The big question, of course, is how quickly those nodes will become linked together—if, say doubters, they become linked at all. As we learned from Metcalfe’s Law, the value of a network is proportional to its number of connected users.

The Will Determines the Way

Right now, the network is limited. Wind and solar account for just 5% of global energy production today, according to Bloomberg.

But, says Rifkin, technology exists that could enable the network to grow exponentially. We are seeing the beginnings of a digital energy network, which uses a combination of the IoT, Big Data, analytics, and artificial intelligence to manage distributed energy sources, such as solar and wind power from homes and businesses.

As nodes on this network, consumers and businesses could take a more active role in energy production, management, and efficiency, according to Rifkin. Utilities, in turn, could transition from simply transmitting power and maintaining power plants and lines to managing the flow to and from many different energy nodes; selling and maintaining smart home energy management products; and monitoring and maintaining solar panels and wind turbines. By analyzing energy use in the network, utilities could create algorithms that automatically smooth the flow of renewables. Consumers and businesses, meanwhile, would not have to worry about connecting their wind and solar assets to the grid and keeping them up and running; utilities could take on those tasks more efficiently.

Already in Germany, two utility companies, E.ON and RWE, have each split their businesses into legacy fossil and nuclear fuel companies and new services companies based on distributed generation from renewables, new technologies, and digitalization.

The reason is simple: it’s about survival. As fossil fuel generation winds down, the utilities need a new business model to make up for lost revenue. Due to Germany’s population density, “the utilities realize that they won’t ever have access to enough land to scale renewables themselves,” says Rifkin. “So they are starting service companies to link together all the different communities that are building solar and wind and are managing energy flows for them and for their customers, doing their analytics, and managing their Big Data. That’s how they will make more money while selling less energy in the future.”

The digital energy internet is already starting out in pockets and at different levels of intensity around the world, depending on a combination of citizen support, utility company investments, governmental power, and economic incentives.

China and some countries within the EU, such as Germany and France, are the most likely leaders in the transition toward a renewable, energy-based infrastructure because they have been able to align the government and private sectors in long-term energy planning. In the EU for example, wind has already overtaken coal as the second largest form of power capacity behind natural gas, according to an article in The Guardian newspaper. Indeed, Rifkin has been working with China, the EU, and governments, communities, and utilities in Northern France, the Netherlands, and Luxembourg to begin building these new internets.

Hauts-de-France, a region that borders the English Channel and Belgium and has one of the highest poverty rates in France, enlisted Rifkin to develop a plan to lift it out of its downward spiral of shuttered factories and abandoned coal mines. In collaboration with a diverse group of CEOs, politicians, teachers, scientists, and others, it developed Rev3, a plan to put people to work building a renewable energy network, according to an article in Vice.

Today, more than 1,000 Rev3 projects are underway, encompassing everything from residential windmills made from local linen to a fully electric car–sharing system. Rev3 has received financial support from the European Investment Bank and a handful of private investment funds, and startups have benefited from crowdfunding mechanisms sponsored by Rev3. Today, 90% of new energy in the region is renewable and 1,500 new jobs have been created in the wind energy sector alone.

Meanwhile, thanks in part to generous government financial support, Germany is already producing 35% of its energy from renewables, according to an article in The Independent, and there is near unanimous citizen support (95%, according to a recent government poll) for its expansion.

If renewables are to move forward …, it must come from the ability to make green, not act green.

If renewable energy is to move forward in other areas of the world that don’t enjoy such strong economic and political support, however, it must come from the ability to make green, not act green.

Not everyone agrees that renewables will produce cost savings sufficient to cause widespread cost disruption anytime soon. A recent forecast by the U.S. Energy Information Administration predicts that in 2040, oil, natural gas, and coal will still be the planet’s major electricity producers, powering 77% of worldwide production, while renewables such as wind, solar, and biofuels will account for just 15%.

Skeptics also say that renewables’ complex management needs, combined with the need to store reserve power, will make them less economical than fossil fuels through at least 2035. “All advanced economies demand full-time electricity,” Benjamin Sporton, chief executive officer of the World Coal Association told Bloomberg. “Wind and solar can only generate part-time, intermittent electricity. While some renewable technologies have achieved significant cost reductions in recent years, it’s important to look at total system costs.”

On the other hand, there are many areas of the world where distributed, decentralized, renewable power generation already makes more sense than a centralized fossil fuel–powered grid. More than 20% of Indians in far flung areas of the country have no access to power today, according to an article in The Guardian. Locally owned and managed solar and wind farms are the most economical way forward. The same is true in other developing countries, such as Afghanistan, where rugged terrain, war, and tribal territorialism make a centralized grid an easy target, and mountainous Costa Rica, where strong winds and rivers have pushed the country to near 100% renewable energy, according to The Guardian.

The Light and the Darknet

Even if all the different IoT-enabled economic platforms become financially advantageous, there is another concern that could disrupt progress and potentially cause widespread disaster once the new platforms are up and running: hacking. Poorly secured IoT sensors have allowed hackers to take over everything from Wi-Fi enabled Barbie dolls to Jeep Cherokees, according to an article in Wired magazine.

Humans may be lousy drivers, but at least we can’t be hacked (yet). And while the grid may be prone to outages, it is tightly controlled, has few access points for hackers, and is physically separated from the Wild West of the internet.

If our transportation and energy networks join the fray, however, every sensor, from those in the steering system on vehicles to grid-connected toasters, becomes as vulnerable as a credit card number. Fake news and election hacking are bad enough, but what about fake drivers or fake energy? Now we’re talking dangerous disruptions and putting millions of people in harm’s way.

The only answer, according to Rifkin, is for businesses and governments to start taking the hacking threat much more seriously than they do today and to begin pouring money into research and technologies for making the internet less vulnerable. That means establishing “a fully distributed, redundant, and resilient digital infrastructure less vulnerable to the kind of disruptions experienced by Second Industrial Revolution–centralized communication systems and power grids that are increasingly subject to climate change, disasters, cybercrime, and cyberterrorism,” he says. “The ability of neighborhoods and communities to go off centralized grids during crises and re-aggregate in locally decentralized networks is the key to advancing societal security in the digital era,” he adds.

Start Looking Ahead

Until today, digital transformation has come mainly through the networking and communications efficiencies made possible by the internet. Airbnb thrives because web communications make it possible to create virtual trust markets that allow people to feel safe about swapping their most private spaces with one another.

But now these same efficiencies are coming to two other areas that have never been considered core to business strategy. That’s why businesses need to begin managing energy and transportation as key elements of their digital transformation portfolios.

Microsoft, for example, formed a senior energy team to develop an energy strategy to mitigate risk from fluctuating energy prices and increasing demands from customers to reduce carbon emissions, according to an article in Harvard Business Review. “Energy has become a C-suite issue,” Rob Bernard, Microsoft’s top environmental and sustainability executive told the magazine. “The CFO and president are now actively involved in our energy road map.”

As Daimler’s experience shows, driverless vehicles will push autonomous transportation and automated logistics up the strategic agenda within the next few years. Boston Consulting Group predicts that the driverless vehicle market will hit $42 billion by 2025. If that happens, it could have a lateral impact across many industries, from insurance to healthcare to the military.

Businesses must start planning now. “There’s always a period when businesses have to live in the new and the old worlds at the same time,” says Rifkin. “So businesses need to be considering new business models and structures now while continuing to operate their existing models.”

He worries that many businesses will be left behind if their communications, energy, and transportation infrastructures don’t evolve. Companies that still rely on fossil fuels for powering traditional transportation and logistics could be at a major competitive disadvantage to those that have moved to the new, IoT-based energy and transportation infrastructures.

Germany, for example, has set a target of 80% renewables for gross power consumption by 2050, according to The Independent. If the cost advantages of renewables bear out, German businesses, which are already the world’s third-largest exporters behind China and the United States, could have a major competitive advantage.

“How would a second industrial revolution society or country compete with one that has energy at zero marginal cost and driverless vehicles?” asks Rifkin. “It can’t be done.” D!


About the Authors

Maurizio Cattaneo is Director, Delivery Execution, Energy and Natural Resources, at SAP.

Joerg Ferchow is Senior Utilities Expert and Design Thinking Coach, Digital Transformation, at SAP.

Daniel Wellers is Digital Futures Lead, Global Marketing, at SAP.

Christopher Koch is Editorial Director, SAP Center for Business Insight, at SAP.


Read more thought provoking articles in the latest issue of the Digitalist Magazine, Executive Quarterly.

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Human Is The Next Big Thing

Traci Maddox

One of my favorite movies of 2016 was Hidden Figures. The main character, Katherine Johnson, and her team of colleagues had an interesting job title: Computer. Here’s what Katherine said about her job: “On any given day, I analyze the binomial levels of air displacement, friction, and velocity. And compute over 10 thousand calculations by cosine, square root, and lately analytic geometry. By hand.”

That was the 1960s. It was amazing work, but work that took hours to complete – and something an in-memory computer could do in a fraction of a second today.

Just as in-memory computing transformed calculating by hand (and made jobs like Katherine’s much easier), digital technologies are transforming the way we work today – and making our day-to-day activities more efficient.

What’s the real impact of technology in today’s workplace?

We are surrounded by technology, both at home and at work. Machine learning and robotics are making their way into everyday life and are affecting the way we expect to engage with technology at work. That has a big impact on organizations: If a machine can do a job safely and more efficiently, a company, nonprofit, or government – and its employees – will benefit. Digital technologies are becoming increasingly more feasible, affordable, and desirable. The challenge for organizations now is effectively merging human talent and digital business to harness new capabilities.

How will jobs change?

What does this mean for humans in the workplace? In a previous blog, Kerry Brown showed that as enterprises continue to learn, human/machine collaboration increases. People will direct technology and hand over work that can be done more efficiently by machine. Does that mean people will go away? No – but they will need to leverage different skills than they have today.

Although we don’t know exactly how jobs will change, one thing is for sure: Becoming more digitally proficient will help every employee stay relevant (and prepare them to move forward in their careers). Today’s workforce demographic complicates how people embrace technology – with up to five generations in the workforce, there is a wide variety in digital fluency (i.e., the ability to understand which technology is available and what tools will best achieve desired outcomes).

What is digital fluency and how can organizations embrace it?

Digital fluency is the combination of several capabilities related to technology:

  • Foundation skills: The ability to use technology tools that enhance your productivity and effectiveness
  • Information skills: The ability to research and develop your own perspective on topics using technology
  • Collaboration skills: The ability to share knowledge and collaborate with others using technology
  • Transformation skills: The ability to assess your own skills and take action toward building your digital fluency

No matter how proficient you are today, you can continue to build your digital IQ by building new habits and skills. This is something that both the organization and employee will have to own to be successful.

So, what skills are needed?

In a Technical University of Munich study released in July 2017, 64% of respondents said they do not have the skills necessary for digital transformation.

Today's workplace reality

These skills will be applied not only to the jobs of today, but also to the top jobs of the future, which haven’t been imagined yet! A recent article in Fast Company mentions a few, which include Digital Death Manager, Corporate Disorganizer, and 3D Printing Handyman.

And today’s skills will be used differently in 2025, as reported by another Fast Company article:

  • Tech skills, especially analytical skills, will increase in importance. Demand for software developers, market analysts, and computer analysts will increase significantly between now and 2025.
  • Retail and sales skills, or any job related to soft skills that are hard for computers to learn, will continue to grow. Customer service representatives, marketing specialists, and sales reps must continue to collaborate and understand how to use social media effectively to communicate worldwide.
  • Lifelong learning will be necessary to keep up with the changes in technology and adapt to our fast-moving lives. Teachers and trainers will continue to be hot jobs in the future, but the style of teaching will change to adapt to a “sound bite” world.
  • Contract workers who understand how businesses and projects work will thrive in the “gig economy.” Management analysts and auditors will continue to be in high demand.

What’s next?

How do companies address a shortage of digital skills and build digital fluency? Here are some steps you can take to increase your digital fluency – and that of your organization:

  • Assess where you are today. Either personally or organizationally, knowing what skills you have is the first step toward identifying where you need to go.
  • Identify one of each of the skill sets to focus on. What foundational skills do you or your organization need? How can you promote collaboration? What thought leadership can your team share – and how can they connect with the right information to stay relevant?
  • Start practicing! Choose just one thing – and use that technology every day for a month. Use it within your organization so others can practice too.

And up next for this blog series – a look at the workplace of the future!

The computer made its debut in Hidden Figures. Did it replace jobs? Yes, for some of the computer team. But members of that team did not leave quietly and continue manual calculations elsewhere. They learned how to use that new mainframe computer and became programmers. I believe humans will always be the next big thing.

If we want to retain humanity’s value in an increasingly automated world, we need to start recognizing and nurturing Human Skills for the Digital Future.

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Traci Maddox

About Traci Maddox

Traci Maddox is the Director of the North America Customer Transformation Office at SAP, where she is elevating customer success through innovation and digital transformation. Traci is also part of the Digital Workforce Taskforce, a team of SAP leaders whose mission is to help companies succeed by understanding and addressing workforce implications of digital technology.