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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.

Zhena’s Gypsy Tea Brews Sustainable Growth On Cloud ERP

David Trites

Recently I had the pleasure of hosting a podcast with Paula Muesse, COO and CFO of Zhena’s Gypsy Tea, a small, organic, fair-trade tea company based in California, and Ursula Ringham from SAP. We talked about some of the business challenges Zhena’s faces and how the company’s ERP solution helped spur growth and digital transformation.

Small but complex business

~ERP helped Zhena’s sustain growthZhena’s has grown from one person (Zhena Muzyka) selling hand-packed tea from a cart, into a thriving small business that puts quality, sustainability, and fair trade first. And although the company is small its business is complex.

For starters, tea isn’t grown in the United States, so Zhena’s has to maintain and import inventory from multiple warehouses around the world. Some of their tea blends have up to 14 ingredients, and each one has a different lead time. That makes demand-planning difficult. In addition, the FDA and US Customs require designated ingredients be traced and treated a certain way to comply with regulations.

Being organic and fair trade also makes things more complicated. Zhena’s has to pass an annual organic compliance audit for all products and processing facilities. And all products need to be traceable back to the farms where the tea was grown and picked to ensure the workers (mostly women) are paid fair wages.

Sustainable growth

Prior to implementing its new ERP system, Zhena’s was using a mix of tools like QuickBooks, Excel, and paper to manage the business. But to sustain growth and ensure future success, the company had to make some changes. Zhena’s needed an integrated software solution that could handle all facets of the business. It needed a tool that could help with cost control and profitability analysis and facilitate complex reporting and regulatory requirements.

The SAP Business ByDesign solution was the perfect choice. The cloud-based ERP solution reduced both business and IT costs, simplified processes from demand planning to accounting, and enabled mobile access and real-time reporting.

Check out the podcast to hear more about how Zhena’s successfully transformed its business by moving to SAP Business ByDesign.

 This article originally appeared on SAP Business Trends.

Building a successful company is hard work. SAP’s affordable solutions for small and midsize companies are designed to make it easier. Simple to install and use, SAP SME Solutions help you automate and integrate your business processes to give real-time, actionable insights. So you can make decisions on the spot. Find out how Run Simple can work for you. Visit sap.com/sme.

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About David Trites

David Trites is a Director of SAP Global Marketing. He is responsible for producing interesting and compelling customer stories that will humanize the SAP brand, support sales and marketing teams across SAP, and increase the awareness of SAP in key markets.

Haier Asia Builds A Digital Platform To Speed Innovation And Win Consumers’ Loyalty [VIDEO]

Dinesh Sharma

08 Apr 2013 --- Intersection, Germany. --- Image by © Markus Hanke/www.MarkusHanke.de/CorbisFew words scare the corporate world like the term “disruption.” No matter the language, disruption conjures the fear of dilution, alteration, and disturbance. And as the world becomes increasingly hyperconnected, disruption seems to be an ever-present threat.

Nevertheless, the C-suite is remaining vigilant by embracing the digital economy as the new reality. According to a recent study conducted by the Economist Intelligence Unit, 80% of executives view hyperconnectivity positively – indicating that it presents more opportunities than threats. All the while, they are carefully watching the competitive landscape and anticipating the arrival of overnight digital sensations and the inventiveness of long-time adversaries.

However, this is only one side of the transformational change hyperconnectivity is bringing. Disruption is not just happening on the corporate side of the consumer market – consumers are steadily disrupting everything a business touches.

The secret? Go beyond the competition to find disruptive opportunity

Not that long ago, most businesses followed a one-time transaction model. They would manufacture the product and ship it to the retailer, and consumers would purchase it. However, hyperconnectivity has changed the rules – making this experience a distant memory.

Consumers are more connected to information and no longer interested in listening corporate rhetoric. By drastically changing everything in our lives, the Internet is giving more power to the consumer, putting them in a position to guide the conversation and dictate product and service offerings. From this perspective, it is easy to see that hyperconnectivity and its impact on social behavior are the true disruptors.

Haier Asia, a top-ranking multinational consumer electronics and home appliances company, is one of those few companies that quickly recognized how hyperconnectivity is powering consumer-based disruption. “When you look around, no consumer life business is making money. Why is that? Margins are so slim,” cites Yoshiaki Ito, president and CEO of Haier Asia. “Consumers are far, far faster than manufacturers because they are getting new information on a daily basis. In the meantime, traditional companies produce their products – taking 24 months. So the gap is just widening every second.”

Instead of surrendering to these challenges, Haier decided to disrupt itself and the market it serves. With a two-prong approach to digital transformation, the company created a service-based model to seize the potential of new consumer behaviors and accelerate its product development cycles.

“My strategy for Haier Asia is to double up the digital platform. This is a great opportunity to bring us to the next level by becoming a services provider and gaining a steady stream of new revenue,” says Ito.

How did Haier take advantage of hyperconnectivity to gain the attention of stakeholders and consumers? Watch the video below to find out.

This article originally appeared on SAP Business Trends.

Want more insight on managing digital disruption? See Three Keys To Winning In A World Of Disruption.

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About Dinesh Sharma

Dinesh Sharma is the Vice President of Digital Economy at SAP. He is a GM-level technology executive with leadership, technical innovation, effective strategic planning, customer and partner engagement, turnaround management and focused operational execution experience at both large enterprise and startup companies. Share your thoughts with Dinesh on Twitter @sharmad

How Emotionally Aware Computing Can Bring Happiness to Your Organization

Christopher Koch


Do you feel me?

Just as once-novel voice recognition technology is now a ubiquitous part of human–machine relationships, so too could mood recognition technology (aka “affective computing”) soon pervade digital interactions.

Through the application of machine learning, Big Data inputs, image recognition, sensors, and in some cases robotics, artificially intelligent systems hunt for affective clues: widened eyes, quickened speech, and crossed arms, as well as heart rate or skin changes.




Emotions are big business

The global affective computing market is estimated to grow from just over US$9.3 billion a year in 2015 to more than $42.5 billion by 2020.

Source: “Affective Computing Market 2015 – Technology, Software, Hardware, Vertical, & Regional Forecasts to 2020 for the $42 Billion Industry” (Research and Markets, 2015)

Customer experience is the sweet spot

Forrester found that emotion was the number-one factor in determining customer loyalty in 17 out of the 18 industries it surveyed – far more important than the ease or effectiveness of customers’ interactions with a company.


Source: “You Can’t Afford to Overlook Your Customers’ Emotional Experience” (Forrester, 2015)


Humana gets an emotional clue

Source: “Artificial Intelligence Helps Humana Avoid Call Center Meltdowns” (The Wall Street Journal, October 27, 2016)

Insurer Humana uses artificial intelligence software that can detect conversational cues to guide call-center workers through difficult customer calls. The system recognizes that a steady rise in the pitch of a customer’s voice or instances of agent and customer talking over one another are causes for concern.

The system has led to hard results: Humana says it has seen an 28% improvement in customer satisfaction, a 63% improvement in agent engagement, and a 6% improvement in first-contact resolution.


Spread happiness across the organization

Source: “Happiness and Productivity” (University of Warwick, February 10, 2014)

Employers could monitor employee moods to make organizational adjustments that increase productivity, effectiveness, and satisfaction. Happy employees are around 12% more productive.




Walking on emotional eggshells

Whether customers and employees will be comfortable having their emotions logged and broadcast by companies is an open question. Customers may find some uses of affective computing creepy or, worse, predatory. Be sure to get their permission.


Other limiting factors

The availability of the data required to infer a person’s emotional state is still limited. Further, it can be difficult to capture all the physical cues that may be relevant to an interaction, such as facial expression, tone of voice, or posture.



Get a head start


Discover the data

Companies should determine what inferences about mental states they want the system to make and how accurately those inferences can be made using the inputs available.


Work with IT

Involve IT and engineering groups to figure out the challenges of integrating with existing systems for collecting, assimilating, and analyzing large volumes of emotional data.


Consider the complexity

Some emotions may be more difficult to discern or respond to. Context is also key. An emotionally aware machine would need to respond differently to frustration in a user in an educational setting than to frustration in a user in a vehicle.

 


 

download arrowTo learn more about how affective computing can help your organization, read the feature story Empathy: The Killer App for Artificial Intelligence.


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About Christopher Koch

Christopher Koch is the Editorial Director of the SAP Center for Business Insight. He is an experienced publishing professional, researcher, editor, and writer in business, technology, and B2B marketing. Share your thoughts with Chris on Twitter @Ckochster.

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In An Agile Environment, Revenue Models Are Flexible Too

Todd Wasserman

In 2012, Dollar Shave Club burst on the scene with a cheeky viral video that won praise for its creativity and marketing acumen. Less heralded at the time was the startup’s pricing model, which swapped traditional retail for subscriptions.

For as low as $1 a month (for five two-bladed cartridges), consumers got a package in the mail that saved them a trip to the pharmacy or grocery store. Dollar Shave Club received the ultimate vindication for the idea in 2016 when Unilever purchased the company for $1 billion.

As that example shows, new technology creates the possibility for new pricing models that can disrupt existing industries. The same phenomenon has occurred in software, in which the cloud and Web-based interfaces have ushered in Software as a Service (SaaS), which charges users on a monthly basis, like a utility, instead of the typical purchase-and-later-upgrade model.

Pricing, in other words, is a variable that can be used to disrupt industries. Other options include usage-based pricing and freemium.

Products as services, services as products

There are basically two ways that businesses can use pricing to disrupt the status quo: Turn products into services and turn services into products. Dollar Shave Club and SaaS are two examples of turning products into services.

Others include Amazon’s Dash, a bare-bones Internet of Things device that lets consumers reorder items ranging from Campbell’s Soup to Play-Doh. Another example is Rent the Runway, which rents high-end fashion items for a weekend rather than selling the items. Trunk Club offers a twist on this by sending items picked out by a stylist to users every month. Users pay for what they want and send back the rest.

The other option is productizing a service. Restaurant franchising is based on this model. While the restaurant offers food service to consumers, for entrepreneurs the franchise offers guidance and brand equity that can be condensed into a product format. For instance, a global HR firm called Littler has productized its offerings with Littler CaseSmart-Charges, which is designed for in-house attorneys and features software, project management tools, and access to flextime attorneys.

As that example shows, technology offers opportunities to try new revenue models. Another example is APIs, which have become a large source of revenue for companies. The monetization of APIs is often viewed as a side business that encompasses a wholly different pricing model that’s often engineered to create huge user bases with volume discounts.

Not a new idea

Though technology has opened up new vistas for businesses seeking alternate pricing models, Rajkumar Venkatesan, a marketing professor at University of Virginia’s Darden School of Business, points out that this isn’t necessarily a new idea. For instance, King Gillette made his fortune in the early part of the 20th Century by realizing that a cheap shaving device would pave the way for a recurring revenue stream via replacement razor blades.

“The new variation was the Keurig,” said Venkatesan, referring to the coffee machine that relies on replaceable cartridges. “It has started becoming more prevalent in the last 10 years, but the fundamental model has been there.” For businesses, this can be an attractive model not only for the recurring revenue but also for the ability to cross-sell new goods to existing customers, Venkatesan said.

Another benefit to a subscription model is that it can also supply first-party data that companies can use to better understand and market to their customers. Some believe that Dollar Shave Club’s close relationship with its young male user base was one reason for Unilever’s purchase, for instance. In such a cut-throat market, such relationships can fetch a high price.

To learn more about how you can monetize disruption, watch this video overview of the new SAP Hybris Revenue Cloud.

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