How CIOs Can Lead Digitalization Of Consumer Products Industry

Don Gordon

If you attended CES 2017 last month or, like me, just watched the highlights, you were doubtless astounded by all the new consumer gadgets and products. There was a countertop machine that brews 5 liters of beer in a couple of hours; cordless, hands-free breast pumps; and an electric skateboard that goes up to 20 mph. (We can only hope that people have the good sense not to combine these activities.)

But for all the talk about consumer-facing digital innovations, for consumer products (CP) companies, many of the opportunities are less about product and more about business model and process. Whether it’s innovating a direct-to-consumer service or using the Internet of Things (IoT) to realize supply chain efficiencies, CIOs are expected to play a leading role in digital initiatives. How individual CIOs respond to the digital challenge will help determine their own success as well as that of their organization.

History is on the CIO’s side – but time is not

The opportunities presented by the new digital frontier are profound, and leading CP companies are beginning to respond accordingly. Those that do not risk being left out of increases in market share and consumer loyalty. In one sense, the move toward a new digital future comes at a perfect time for CIOs. As noted in a recent CIO.com article:

“In the past, the CIO and IT roles were mostly about … controlling costs, business processes [and back-office] support. … IT was never seen as a strategic part of the business. … That time is over.”

As the shift to digital accelerates, CIOs need to consider a bolder, more strategic approach to their work. This will mean asking important questions like these:

  • Are my IT goals and objectives fully aligned with the business strategy?
  • Do I have the right skills? Does my team?
  • Do I understand the emerging technologies and the best practices associated with them?
  • Is our IT function organized in order to maximize innovation?
  • How will we measure ROI?
  • Ensure continuous improvement?

What digital means for IT leaders

To take full advantage of digitalization, CP companies will need to transform business models and processes. CIOs and other IT leaders will need to adopt new roles and responsibilities. Instead of “keeping the lights on” and managing system integrations and implementations, IT leaders are expected to take a new, more strategic role in the C-suite.

Now is the time for IT leaders in CP to become digital transformation leaders, setting clear direction and objectives and articulating the linkage between overall business strategy and IT directives. This means IT leaders will need to shift away from a systems support role and take the lead in developing digital strategy. For some accustomed to a more reactive role, the change will be uncomfortable – but for those who embrace it, the rewards will be extensive.

The journey will not be without difficulty. A survey performed by EIU indicates that CP lags other industries in terms of LoB-IT collaboration on strategy. But if CP companies continue to rely solely on product innovation to drive growth, their more digitally savvy competitors will keep taking share.

A CIO road map in CP

The needs and opportunities may seem daunting, but there are some very specific steps that IT leaders in CP can and should take:

  1. Promote development of a digital vision and strategy. Most companies do not have, or have not considered, a vision for digital. CIOs must educate senior leaders and boards about the importance of digitalization, the impact on markets and the raw opportunity available.
  1. Build digital skills and capacity. CIOs have a unique advantage in digital strategy. They can begin to build the new IT platform for the new digital economy, and develop the skills to engage with the consumer.
  1. Be the architect. Apps and tools may be flashy, but the CIO should begin to hone an integrated, end-to-end process. That means taking a hard look at legacy infrastructure systems and making the bold (and often short-term expensive) choices that will clear the path for innovation.
  1. Adopt agile, flexible sourcing. To be effective, IT teams must be responsive to opportunities and demands. That means having flexible and agile operational models that can build, support, and drive digitalization.
  1. Help change the culture. Digitalization is happening at the speed of now. That means CIOs need to help organizations with internal processes that can operate in an omnichannel, consumer-focused quality-driven change process, not one that’s mired by calendars, committees, and restrictive controls.
  1. Manage risk. With the rapidity of change comes a need for a governance framework that is likely going to need to be different. Risk-averse governance can slow down innovation. CIOs need to lead a governance strategy that protects at the same time it propels.

Consumers are expecting new relationships with products. Products are still important – but today, what sets your company apart is the consumer experience you deliver. To win, you need to engage with consumers like never before. This means capitalizing on moments of opportunity to ensure better outcomes – all in a digital economy where interactions happen in an instant, decisions are made in the here and now, and insight is needed in real time.  This deep transformation in the CP industry requires a fundamental evolution in the role of the CIO and the board’s understanding of what IT now brings to the business.

For more insight on digitalization strategies, see Bringing The Four Degrees Of Digital Transformation To Life.

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About Don Gordon

Don Gordon leads global Consumer Products industry marketing for SAP. Previously he led global Retail industry marketing for IBM. He lives in Philadelphia, considered by many to be the finest city on earth.

Integrated Cloud And Analytic Solutions Are Driving IoT Adoption Rates

David Parrish

The Internet of Things (IoT) offers enormous potential for discrete manufacturers. It can drive more top-line revenue by enabling new, differentiated products and services. It can also reduce bottom-line costs by streamlining production and predictive maintenance through asset optimization and inventory optimization. And, IoT can lower maintenance costs by up to 60% and inventory costs by up to 50% thanks to optimization.

Manufacturing operations spent $102.5 billion on IoT in 2016. But despite this significant investment, many discrete manufacturers are not sure how to bring all these different pieces together into a single platform. Integrated cloud and analytic solutions are solving this problem.

Integrated cloud and analytic solution benefits for manufacturing companies

By connecting things with people and processes, integrated cloud and analytic solutions empower Live Business in four important ways:

  1. Live insights – An integrated IoT network combines data retrieved via sensors with contextual information to deliver live, actionable insights.
  1. Future forward – Putting predictive analytics on top of this information enables businesses not only to analyze current and historical data but also to “consider the future.” Fully integrated IoT can predict future opportunities and recommend concrete actions your company can take to capitalize on these opportunities.
  1. Process optimization – More value is generated through IoT by optimizing business processes and leveraging insights provided by data from physical things. Process optimization typically results in cost savings and shorter processing times.
  1. New business models – Companies can efficiently run new business models that would not have been possible before. This includes usage-based pricing and Technology-as-a-Service (TaaS).

How integrated IoT solutions serve products, assets, and fleets

Technology investments, most notably in IoT, are critical components of digital transformation. These investments connect products, assets, and fleets.

  • Connected products – Also known as “smart products,” connected products are strategic priorities for industrial manufacturers as they enable new service-based business models and provide the opportunity to make aftermarket service far more efficient. Integrated cloud and analytic solutions make it possible for manufacturers and operators to leverage sensor data. For example, research and development teams can utilize data using digital twins of connected products from sensors and other Big Data sources. R&D can then use this data to support the development of more reliable and desirable products. This includes adding features to meet specific customer needs while eliminating unused or undesired features that are expensive to include and offer minimal customer benefit.
  • Connected assets – As companies move from a reactive to a proactive approach to maintenance, an end-to-end solution for predictive maintenance and a service to identify and resolve issues before they happen are critical. This service must span from condition monitoring and the identification of emerging issues via machine learning to procuring spare parts, scheduling, and executing service and maintenance. Connected assets meet these needs, enabling manufacturing companies to connect, monitor, and analyze customers’ assets as well as their own.
  • Connected fleets – By enabling connected fleets, you can track, monitor, analyze, and maintain all moving assets, wherever they are in the network. Connected fleets enable manufacturing companies with fleets of moving assets, like vehicles or forklifts, to collect live telemetry and sensor data. IoT can collect, map, store, and analyze fleet and vehicle data in real time through the integration of telematics, enterprise, and customer data. This data is then integrated into the core business processes to improve services and safety for operators, improve visibility to logistics, and provide better services for end customers.

Selecting the right integration option for your company

While analysts foresee a huge monetary potential through the IoT for manufacturers, companies are struggling to derive a firm strategy. With so many different options, it can be difficult to know where to begin. Implementing IoT does not start with technology. Companies must first clarify their core value chain and assess enterprise-wide options for value optimization through new business scenarios.

Your company should consider, for example, how connected manufacturing and predictive quality could minimize production costs. How could remote monitoring and predictive maintenance service agreements create new, aftermarket revenue streams? Finally, how could connected logistics ensure your company knows where everything stands in its supply chain, reducing safety stocks and minimizing costs? Once your company has answered these questions, your business can begin to consider platform partnerships.

Learn how to innovate at scale by incorporating individual innovations back to the core business to drive tangible business value by reading “Accelerating Digital Transformation in Industrial Machinery and Components.” Explore how to bring Industry 4.0 insights into your business today by reading “Industry 4.0: What’s Next?

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David Parrish

About David Parrish

David Parrish is the senior global director of Industrial Machinery & Components Solutions Marketing for SAP. Before joining SAP, he held various product and industry marketing positions with J.D. Edwards, PeopleSoft, and QAD going back to 1999.

Discovering Life Science's Bright Future

Michelle Schooff

What changes are digitization driving in life sciences?

In a recent episode of S.M.A.C. Talk Technology Podcast, hosts Brian Fanzo and Daniel Newman discussed some of the changes taking place in life sciences with Joe Miles, SAP’s life sciences business unit lead. Miles focuses on setting strategy for pharmaceutical, biotechnology and medical device business solutions. By providing more effective, innovative solutions, he’s helping the life science industry through digital transformation.

The direction of life sciences transformation

The industry has a history of rushing ahead at some points and lagging at others. As Joe said in the podcast, “Necessity, being the mother of invention, sometimes has allowed it and required it to move more quickly.” Much of the drive for digital transformation in the industry has been pushed forward by the desire to increase top-line revenue.

As a strongly regulated industry, life sciences has long needed to consider the implications of regulatory measures. Digitization is boosting visibility to compliance, process, supply chains, and patient care.

Improving research outcomes through Big Data

The Internet of Things has also driven change in life sciences. Sensors and devices add connectivity to clinical trials, for example, which vastly increases the amount of instantly available data available to researchers and physicians. Miles notes, “You’re talking probably about a terabyte a day per patient of data.” This allows researchers to gain a more comprehensive picture of patient data.

Once the clinical trials are completed, the same devices and sensors can continue to improve patient outcomes in the real world. Instead of simply monitoring A1C levels in a diabetes patient, for example, doctors can check whether the patient is exercising, staying active, eating right, or losing weight. Continual monitoring provides doctors with feedback on patient compliance and improves health outcomes.

Applications of blockchain in pharmaceuticals

Blockchain is becoming the new darling of the life sciences industry. The auditing technology is still rough for pharmaceutical use, but the digital ledger has great potential. It can authenticate assets and financial transactions as well as provide supply chain verification. In clinical trials, blockchain technology can be used to track the financial investments in drugs and to track which patients receive placebos. In trial settings, Joe notes, healthcare workers can verify that medicines are going to the right patients, helping prevent mistakes that can set back clinical trials. Blockchain acts as an irrefutable, unchangeable record of the study.

In shipments, blockchain can deliver a chain of custody to prevent counterfeit medications from reaching pharmacies, enabling workers to simply authenticate serial numbers or vials with the manufacturer. Blockchain also has applications in drug safety, making it easier to trace particular batches of medications with higher drug interaction rates. Drugs with recalls can be tracked more quickly, and impacted patients could be notified immediately to minimize potential health problems.

Blockchain technology can help bring transparency and visibility to these value and supply chains. This leads to better outcomes, improved health, and higher quality of life for patients.

Who’s driving life sciences innovation?

Innovation in life sciences is driven by a number of different sources. The healthcare industry, as well as financial service firms, are creating better, smarter, faster solutions that fall within the regulations. Patients are becoming more accountable for their health, and pressure from different directions will help drive the industry to create better outcomes.

Joe says, “U.S. [healthcare spending] was somewhere in the neighborhood of 16-18% of GDP, depending on some of the stats you see.” This is an unsustainable amount of spending. In response, digital transformation is driving outcome-driven reimbursement, which is rapidly changing current approaches to healthcare.

Today’s regulations often create barriers between patients and manufacturers. Sensors and devices allow greater transparency and visibility into patient health but in a private, non-invasive way. It’s a much more cost-effective way to gain transparency and data that allows continued refinement of treatments, therapies, and medication. Researchers and patients alike are putting pressure on doctors and healthcare systems to integrate innovation for better outcomes and long-term quality of life.

The changes in life sciences are driving a better quality of life for people around the globe. The technology continues to develop through the use of blockchain, the role of different aspects of the industry and improvements in research. The application of sensors, Big Data, analytics, supercomputing, and artificial intelligence will help us find answers to today’s health questions.

Much like the elimination of smallpox, polio, and other diseases, the changes brought by digitization will help create a better world. Learn more about it in this S.M.A.C. Talk Technology Podcast today.

Hear the full podcast episode here. Learn how to bring new technologies and services together to power digital transformation: download The IoT Imperative for Consumer Industries. Explore how to bring Industry 4.0 insights into your business today: read Industry 4.0: What’s Next?

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Michelle Schooff

About Michelle Schooff

Michelle Schooff is a global marketing director in the retail and wholesale distribution industries for SAP. She is responsible for the marketing strategy, messaging and positioning for SAP solutions in the global marketplace. With over 20 years experience in technology and marketing, Michelle builds strategic marketing plans that drive growth, innovation and revenue.

Hack the CIO

By Thomas Saueressig, Timo Elliott, Sam Yen, and Bennett Voyles

For nerds, the weeks right before finals are a Cinderella moment. Suddenly they’re stars. Pocket protectors are fashionable; people find their jokes a whole lot funnier; Dungeons & Dragons sounds cool.

Many CIOs are enjoying this kind of moment now, as companies everywhere face the business equivalent of a final exam for a vital class they have managed to mostly avoid so far: digital transformation.

But as always, there is a limit to nerdy magic. No matter how helpful CIOs try to be, their classmates still won’t pass if they don’t learn the material. With IT increasingly central to every business—from the customer experience to the offering to the business model itself—we all need to start thinking like CIOs.

Pass the digital transformation exam, and you probably have a bright future ahead. A recent SAP-Oxford Economics study of 3,100 organizations in a variety of industries across 17 countries found that the companies that have taken the lead in digital transformation earn higher profits and revenues and have more competitive differentiation than their peers. They also expect 23% more revenue growth from their digital initiatives over the next two years—an estimate 2.5 to 4 times larger than the average company’s.

But the market is grading on a steep curve: this same SAP-Oxford study found that only 3% have completed some degree of digital transformation across their organization. Other surveys also suggest that most companies won’t be graduating anytime soon: in one recent survey of 450 heads of digital transformation for enterprises in the United States, United Kingdom, France, and Germany by technology company Couchbase, 90% agreed that most digital projects fail to meet expectations and deliver only incremental improvements. Worse: over half (54%) believe that organizations that don’t succeed with their transformation project will fail or be absorbed by a savvier competitor within four years.

Companies that are making the grade understand that unlike earlier technical advances, digital transformation doesn’t just support the business, it’s the future of the business. That’s why 60% of digital leading companies have entrusted the leadership of their transformation to their CIO, and that’s why experts say businesspeople must do more than have a vague understanding of the technology. They must also master a way of thinking and looking at business challenges that is unfamiliar to most people outside the IT department.

In other words, if you don’t think like a CIO yet, now is a very good time to learn.

However, given that you probably don’t have a spare 15 years to learn what your CIO knows, we asked the experts what makes CIO thinking distinctive. Here are the top eight mind hacks.

1. Think in Systems

A lot of businesspeople are used to seeing their organization as a series of loosely joined silos. But in the world of digital business, everything is part of a larger system.

CIOs have known for a long time that smart processes win. Whether they were installing enterprise resource planning systems or working with the business to imagine the customer’s journey, they always had to think in holistic ways that crossed traditional departmental, functional, and operational boundaries.

Unlike other business leaders, CIOs spend their careers looking across systems. Why did our supply chain go down? How can we support this new business initiative beyond a single department or function? Now supported by end-to-end process methodologies such as design thinking, good CIOs have developed a way of looking at the company that can lead to radical simplifications that can reduce cost and improve performance at the same time.

They are also used to thinking beyond temporal boundaries. “This idea that the power of technology doubles every two years means that as you’re planning ahead you can’t think in terms of a linear process, you have to think in terms of huge jumps,” says Jay Ferro, CIO of TransPerfect, a New York–based global translation firm.

No wonder the SAP-Oxford transformation study found that one of the values transformational leaders shared was a tendency to look beyond silos and view the digital transformation as a company-wide initiative.

This will come in handy because in digital transformation, not only do business processes evolve but the company’s entire value proposition changes, says Jeanne Ross, principal research scientist at the Center for Information Systems Research at the Massachusetts Institute of Technology (MIT). “It either already has or it’s going to, because digital technologies make things possible that weren’t possible before,” she explains.

2. Work in Diverse Teams

When it comes to large projects, CIOs have always needed input from a diverse collection of businesspeople to be successful. The best have developed ways to convince and cajole reluctant participants to come to the table. They seek out technology enthusiasts in the business and those who are respected by their peers to help build passion and commitment among the halfhearted.

Digital transformation amps up the urgency for building diverse teams even further. “A small, focused group simply won’t have the same breadth of perspective as a team that includes a salesperson and a service person and a development person, as well as an IT person,” says Ross.

At Lenovo, the global technology giant, many of these cross-functional teams become so used to working together that it’s hard to tell where each member originally belonged: “You can’t tell who is business or IT; you can’t tell who is product, IT, or design,” says the company’s CIO, Arthur Hu.

One interesting corollary of this trend toward broader teamwork is that talent is a priority among digital leaders: they spend more on training their employees and partners than ordinary companies, as well as on hiring the people they need, according to the SAP-Oxford Economics survey. They’re also already being rewarded for their faith in their teams: 71% of leaders say that their successful digital transformation has made it easier for them to attract and retain talent, and 64% say that their employees are now more engaged than they were before the transformation.

3. Become a Consultant

Good CIOs have long needed to be internal consultants to the business. Ever since technology moved out of the glasshouse and onto employees’ desks, CIOs have not only needed a deep understanding of the goals of a given project but also to make sure that the project didn’t stray from those goals, even after the businesspeople who had ordered the project went back to their day jobs. “Businesspeople didn’t really need to get into the details of what IT was really doing,” recalls Ferro. “They just had a set of demands and said, ‘Hey, IT, go do that.’”

Now software has become so integral to the business that nobody can afford to walk away. Businesspeople must join the ranks of the IT consultants.

But that was then. Now software has become so integral to the business that nobody can afford to walk away. Businesspeople must join the ranks of the IT consultants. “If you’re building a house, you don’t just disappear for six months and come back and go, ‘Oh, it looks pretty good,’” says Ferro. “You’re on that work site constantly and all of a sudden you’re looking at something, going, ‘Well, that looked really good on the blueprint, not sure it makes sense in reality. Let’s move that over six feet.’ Or, ‘I don’t know if I like that anymore.’ It’s really not much different in application development or for IT or technical projects, where on paper it looked really good and three weeks in, in that second sprint, you’re going, ‘Oh, now that I look at it, that’s really stupid.’”

4. Learn Horizontal Leadership

CIOs have always needed the ability to educate and influence other leaders that they don’t directly control. For major IT projects to be successful, they need other leaders to contribute budget, time, and resources from multiple areas of the business.

It’s a kind of horizontal leadership that will become critical for businesspeople to acquire in digital transformation. “The leadership role becomes one much more of coaching others across the organization—encouraging people to be creative, making sure everybody knows how to use data well,” Ross says.

In this team-based environment, having all the answers becomes less important. “It used to be that the best business executives and leaders had the best answers. Today that is no longer the case,” observes Gary Cokins, a technology consultant who focuses on analytics-based performance management. “Increasingly, it’s the executives and leaders who ask the best questions. There is too much volatility and uncertainty for them to rely on their intuition or past experiences.”

Many experts expect this trend to continue as the confluence of automation and data keeps chipping away at the organizational pyramid. “Hierarchical, command-and-control leadership will become obsolete,” says Edward Hess, professor of business administration and Batten executive-in-residence at the Darden School of Business at the University of Virginia. “Flatter, distributive leadership via teams will become the dominant structure.”

5. Understand Process Design

When business processes were simpler, IT could analyze the process and improve it without input from the business. But today many processes are triggered on the fly by the customer, making a seamless customer experience more difficult to build without the benefit of a larger, multifunctional team. In a highly digitalized organization like Amazon, which releases thousands of new software programs each year, IT can no longer do it all.

While businesspeople aren’t expected to start coding, their involvement in process design is crucial. One of the techniques that many organizations have adopted to help IT and businesspeople visualize business processes together is design thinking (for more on design thinking techniques, see “A Cult of Creation“).

Customers aren’t the only ones who benefit from better processes. Among the 100 companies the SAP-Oxford Economics researchers have identified as digital leaders, two-thirds say that they are making their employees’ lives easier by eliminating process roadblocks that interfere with their ability to do their jobs. Ninety percent of leaders surveyed expect to see value from these projects in the next two years alone.

6. Learn to Keep Learning

The ability to learn and keep learning has been a part of IT from the start. Since the first mainframes in the 1950s, technologists have understood that they need to keep reinventing themselves and their skills to adapt to the changes around them.

Now that’s starting to become part of other job descriptions too. Many companies are investing in teaching their employees new digital skills. One South American auto products company, for example, has created a custom-education institute that trained 20,000 employees and partner-employees in 2016. In addition to training current staff, many leading digital companies are also hiring new employees and creating new roles, such as a chief robotics officer, to support their digital transformation efforts.

Nicolas van Zeebroeck, professor of information systems and digital business innovation at the Solvay Brussels School of Economics and Management at the Free University of Brussels, says that he expects the ability to learn quickly will remain crucial. “If I had to think of one critical skill,” he explains, “I would have to say it’s the ability to learn and keep learning—the ability to challenge the status quo and question what you take for granted.”

7. Fail Smarter

Traditionally, CIOs tended to be good at thinking through tests that would allow the company to experiment with new technology without risking the entire network.

This is another unfamiliar skill that smart managers are trying to pick up. “There’s a lot of trial and error in the best companies right now,” notes MIT’s Ross. But there’s a catch, she adds. “Most companies aren’t designed for trial and error—they’re trying to avoid an error,” she says.

To learn how to do it better, take your lead from IT, where many people have already learned to work in small, innovative teams that use agile development principles, advises Ross.

For example, business managers must learn how to think in terms of a minimum viable product: build a simple version of what you have in mind, test it, and if it works start building. You don’t build the whole thing at once anymore.… It’s really important to build things incrementally,” Ross says.

Flexibility and the ability to capitalize on accidental discoveries during experimentation are more important than having a concrete project plan, says Ross. At Spotify, the music service, and CarMax, the used-car retailer, change is driven not from the center but from small teams that have developed something new. “The thing you have to get comfortable with is not having the formalized plan that we would have traditionally relied on, because as soon as you insist on that, you limit your ability to keep learning,” Ross warns.

8. Understand the True Cost—and Speed—of Data

Gut instincts have never had much to do with being a CIO; now they should have less to do with being an ordinary manager as well, as data becomes more important.

As part of that calculation, businesspeople must have the ability to analyze the value of the data that they seek. “You’ll need to apply a pinch of knowledge salt to your data,” advises Solvay’s van Zeebroeck. “What really matters is the ability not just to tap into data but to see what is behind the data. Is it a fair representation? Is it impartial?”

Increasingly, businesspeople will need to do their analysis in real time, just as CIOs have always had to manage live systems and processes. Moving toward real-time reports and away from paper-based decisions increases accuracy and effectiveness—and leaves less time for long meetings and PowerPoint presentations (let us all rejoice).

Not Every CIO Is Ready

Of course, not all CIOs are ready for these changes. Just as high school has a lot of false positives—genius nerds who turn out to be merely nearsighted—so there are many CIOs who aren’t good role models for transformation.

Success as a CIO these days requires more than delivering near-perfect uptime, says Lenovo’s Hu. You need to be able to understand the business as well. Some CIOs simply don’t have all the business skills that are needed to succeed in the transformation. Others lack the internal clout: a 2016 KPMG study found that only 34% of CIOs report directly to the CEO.

This lack of a strategic perspective is holding back digital transformation at many organizations. They approach digital transformation as a cool, one-off project: we’re going to put this new mobile app in place and we’re done. But that’s not a systematic approach; it’s an island of innovation that doesn’t join up with the other islands of innovation. In the longer term, this kind of development creates more problems than it fixes.

Such organizations are not building in the capacity for change; they’re trying to get away with just doing it once rather than thinking about how they’re going to use digitalization as a means to constantly experiment and become a better company over the long term.

As a result, in some companies, the most interesting tech developments are happening despite IT, not because of it. “There’s an alarming digital divide within many companies. Marketers are developing nimble software to give customers an engaging, personalized experience, while IT departments remain focused on the legacy infrastructure. The front and back ends aren’t working together, resulting in appealing web sites and apps that don’t quite deliver,” writes George Colony, founder, chairman, and CEO of Forrester Research, in the MIT Sloan Management Review.

Thanks to cloud computing and easier development tools, many departments are developing on their own, without IT’s support. These days, anybody with a credit card can do it.

Traditionally, IT departments looked askance at these kinds of do-it-yourself shadow IT programs, but that’s changing. Ferro, for one, says that it’s better to look at those teams not as rogue groups but as people who are trying to help. “It’s less about ‘Hey, something’s escaped,’ and more about ‘No, we just actually grew our capacity and grew our ability to innovate,’” he explains.

“I don’t like the term ‘shadow IT,’” agrees Lenovo’s Hu. “I think it’s an artifact of a very traditional CIO team. If you think of it as shadow IT, you’re out of step with reality,” he says.

The reality today is that a company needs both a strong IT department and strong digital capacities outside its IT department. If the relationship is good, the CIO and IT become valuable allies in helping businesspeople add digital capabilities without disrupting or duplicating existing IT infrastructure.

If a company already has strong digital capacities, it should be able to move forward quickly, according to Ross. But many companies are still playing catch-up and aren’t even ready to begin transforming, as the SAP-Oxford Economics survey shows.

For enterprises where business and IT are unable to get their collective act together, Ross predicts that the next few years will be rough. “I think these companies ought to panic,” she says. D!


About the Authors

Thomas Saueressig is Chief Information Officer at SAP.

Timo Elliott is an Innovation Evangelist at SAP.

Sam Yen is Chief Design Officer at SAP and Managing Director of SAP Labs.

Bennett Voyles is a Berlin-based business writer.

Read more thought provoking articles in the latest issue of the Digitalist Magazine, Executive Quarterly.
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Cloud Computing: Separating Myth From Reality

Misa Rawlins and Krishnakant Dave

Across industries, many enterprise leaders believe and understand that cloud computing is here to stay. Globally, public cloud services market revenue is projected to reach US$411 billion by 2020, compared with $260 billion in 2017, according to research firm Gartner, Inc. Cloud technology in all its forms—software, platform, or infrastructure as a service—is rapidly becoming essential to the needs of business today. With cloud computing, organizations can simplify IT, save costs, scale rapidly, drive standardization and user adoption, and start getting ahead of tomorrow’s needs when it comes to customer engagement, the supply chain, the workforce, a simplified finance function, and more.

Despite the short- and long-term advantages, some executives remain uncertain about the next steps or have lingering questions about the benefits of moving to the cloud. For many leaders, separating the cloud myths from the facts can prove daunting. Start here, with these insights that can help you bust big myths about the cloud and start moving confidently toward a cloud-enabled transformation of your organization.

Myth No. 1: Moving to the cloud is too costly. “Costly” is a relative term. The cloud can be costly – but costs should be weighed against benefit and return once requirements and migration plans are in place. Rapidly evolving business demands, for example, can dramatically alter cloud-related requirements. Meanwhile, new technologies are dramatically redefining the art of the possible with the cloud. Because migrating to the cloud is not a true “plug-and-play” proposition, and many enterprise leaders underestimate what a migration or implementation involves, some organizations can be surprised by the costs of a cloud transformation. Without a clear understanding of the potential benefits—without a clear business case for moving to the cloud—the focus on costs can overshadow the return on investment. Knowing the value that cloud solutions can bring—not just the costs—can help manage expectations.

Myth No. 2: The benefits of the cloud aren’t substantial enough. As vendors adopt a “cloud-first” stance for many solutions and product updates, organizations that move to the cloud may have a competitive advantage—no matter the size of the enterprise. Cloud solutions continue to offer abundant and increasing functionality. And with the help of an end-to-end solution provider, you can configure cloud solutions to the specific needs of your industry and your business. For larger organizations, rapidly deployable cloud solutions can help support growth or the unique needs of certain business units, such as new acquisitions or foreign subsidiaries, for example. For smaller organizations, the cloud can help you position your organization to tap new opportunities and tame growth challenges.

Myth No. 3: Cloud is too risky. All digital technologies and all business models come with inherent risk. In a hyperconnected world, no system is immune from cyber attacks, insider threats, data leakage, or related risks. No transformation project is a guaranteed success. Market changes, new competition, regulatory issues, and other factors can require you to change your cloud strategy overnight.

Because the risks are real, take advantage of resources and capabilities that can help reduce risk and ensure that your technology investments align tightly with clear business objectives. The maturity of the software goes a long way toward mitigating risk with cloud projects. You can add an extra layer of capabilities such as managed cloud services to provide active, hands-on oversight of cloud applications and infrastructure—helping you to avoid service interruptions and address issues proactively.

Myth No. 4: Cloud computing is still an immature technology. Like other evolving technologies, cloud is advancing every day. Those who wait for the next generation of cloud offerings may find themselves missing out on tangible benefits as competitors leverage cloud technology to sharpen their edge. Across industries, leading organizations are not waiting. Many view cloud technology as evolving but necessary, and they are leveraging it effectively today. Some, for example, are tightly integrating cloud software solutions to streamline supply chain processes, boost information transparency, and improve decision-making across the board—all the while tapping the cloud benefits of cost savings and scalability. Others are confidently turning to infrastructure solutions delivered and running solutions in a private or hybrid cloud. Still others are turning to cloud platform solutions to extend the power of existing applications, build modern analytics platforms, or support new Internet of Things business models. Turning the cloud to your advantage may depend less on the maturity of the technology and more on the power of your imagination.

Myth No. 5: Moving to the cloud will be easy. Cloud technology can help organizations streamline and simplify their IT landscapes and their business processes, reducing needs around capital expenses and infrastructure while helping to save costs. But migrating to the cloud requires more than simply plugging in technology. It requires an ability to address a host of considerations—data migration, the business-specific capabilities of solutions, change management, governance, systems integration, security, and more.

A cloud transformation is more than a plug-and-play project or a traditional system implementation. It requires progressive thinking and an ability to align technology with your business needs and processes— for today and for the future. Migrating to the cloud is a journey. Moving forward with the cloud will require a vision of your “to be” state—your destination—as well as a strategy for getting you there.

To learn more, and to find out what IDC thinks about the future of the cloud, please read this study that presents a strategic blueprint for enterprises on their digital transformation journey.

For more information on how to simplify innovation with cloud technology, learn more about SAP Cloud Platform.

Ready to reimagine the potential of the cloud? Contact us to get the conversation started.

Contact Krishnakant Dave at kdave@deloitte.com and follow him on Twitter: @kkdave

Contact Misa Rawlins at mrawlins@deloitte.com and follow her on Twitter: @misa_rawlins

www.deloitte.com/SAP

SAP@deloitte.com

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This article originally appeared on Deloitte.com and is republished by permission.

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Misa Rawlins

About Misa Rawlins

As a senior manager and consultant in Deloitte’s SAP practice, Misa Rawlins enjoys helping her clients not only to figure out how to solve their current business problems, but also to envision how a modern cloud platform can transform their organizations moving ahead. Within the practice, she has specifically chosen to take a leadership role around the sales and delivery of SAP S/4HANA Cloud because she considers it the wave of the future. She has made it her mission to deeply understand this technology to better advise clients on what moving to a cloud infrastructure really means.

Krishnakant Dave

About Krishnakant Dave

As a principal in Deloitte’s global SAP practice, KK Dave is a consulting leader for Deloitte’s largest clients; part of the U.S. SAP leadership team where he spearheads Deloitte's cloud offerings; and leader of global go-to-market efforts in the wholesale distribution and manufacturing sector. In these roles, he assists clients in their business transformation journeys using the absolute latest SAP toolset, which presently comprises SAP S/4HANA, SAP Cloud Platform, and SAP S/4HANA Cloud, among other technologies.