Sections

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.

Comments

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.

Comments

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.

Comments

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

The Future of Cybersecurity: Trust as Competitive Advantage

Justin Somaini and Dan Wellers

 

The cost of data breaches will reach US$2.1 trillion globally by 2019—nearly four times the cost in 2015.

Cyberattacks could cost up to $90 trillion in net global economic benefits by 2030 if cybersecurity doesn’t keep pace with growing threat levels.

Cyber insurance premiums could increase tenfold to $20 billion annually by 2025.

Cyberattacks are one of the top 10 global risks of highest concern for the next decade.


Companies are collaborating with a wider network of partners, embracing distributed systems, and meeting new demands for 24/7 operations.

But the bad guys are sharing intelligence, harnessing emerging technologies, and working round the clock as well—and companies are giving them plenty of weaknesses to exploit.

  • 33% of companies today are prepared to prevent a worst-case attack.
  • 25% treat cyber risk as a significant corporate risk.
  • 80% fail to assess their customers and suppliers for cyber risk.

The ROI of Zero Trust

Perimeter security will not be enough. As interconnectivity increases so will the adoption of zero-trust networks, which place controls around data assets and increases visibility into how they are used across the digital ecosystem.


A Layered Approach

Companies that embrace trust as a competitive advantage will build robust security on three core tenets:

  • Prevention: Evolving defensive strategies from security policies and educational approaches to access controls
  • Detection: Deploying effective systems for the timely detection and notification of intrusions
  • Reaction: Implementing incident response plans similar to those for other disaster recovery scenarios

They’ll build security into their digital ecosystems at three levels:

  1. Secure products. Security in all applications to protect data and transactions
  2. Secure operations. Hardened systems, patch management, security monitoring, end-to-end incident handling, and a comprehensive cloud-operations security framework
  3. Secure companies. A security-aware workforce, end-to-end physical security, and a thorough business continuity framework

Against Digital Armageddon

Experts warn that the worst-case scenario is a state of perpetual cybercrime and cyber warfare, vulnerable critical infrastructure, and trillions of dollars in losses. A collaborative approach will be critical to combatting this persistent global threat with implications not just for corporate and personal data but also strategy, supply chains, products, and physical operations.


Download the executive brief The Future of Cybersecurity: Trust as Competitive Advantage.


Comments

Tags:

How Digital Transformation Is Rewriting Business Models

Ginger Shimp

Everybody knows someone who has a stack of 3½-inch floppies in a desk drawer “just in case we may need them someday.” While that might be amusing, the truth is that relatively few people are confident that they’re making satisfactory progress on their digital journey. The boundaries between the digital and physical worlds continue to blur — with profound implications for the way we do business. Virtually every industry and every enterprise feels the effects of this ongoing digital transformation, whether from its own initiative or due to pressure from competitors.

What is digital transformation? It’s the wholesale reimagining and reinvention of how businesses operate, enabled by today’s advanced technology. Businesses have always changed with the times, but the confluence of technologies such as mobile, cloud, social, and Big Data analytics has accelerated the pace at which today’s businesses are evolving — and the degree to which they transform the way they innovate, operate, and serve customers.

The process of digital transformation began decades ago. Think back to how word processing fundamentally changed the way we write, or how email transformed the way we communicate. However, the scale of transformation currently underway is drastically more significant, with dramatically higher stakes. For some businesses, digital transformation is a disruptive force that leaves them playing catch-up. For others, it opens to door to unparalleled opportunities.

Upending traditional business models

To understand how the businesses that embrace digital transformation can ultimately benefit, it helps to look at the changes in business models currently in process.

Some of the more prominent examples include:

  • A focus on outcome-based models — Open the door to business value to customers as determined by the outcome or impact on the customer’s business.
  • Expansion into new industries and markets — Extend the business’ reach virtually anywhere — beyond strictly defined customer demographics, physical locations, and traditional market segments.
  • Pervasive digitization of products and services — Accelerate the way products and services are conceived, designed, and delivered with no barriers between customers and the businesses that serve them.
  • Ecosystem competition — Create a more compelling value proposition in new markets through connections with other companies to enhance the value available to the customer.
  • Access a shared economy — Realize more value from underutilized sources by extending access to other business entities and customers — with the ability to access the resources of others.
  • Realize value from digital platforms — Monetize the inherent, previously untapped value of customer relationships to improve customer experiences, collaborate more effectively with partners, and drive ongoing innovation in products and services,

In other words, the time-tested assumptions about how to identify customers, develop and market products and services, and manage organizations may no longer apply. Every aspect of business operations — from forecasting demand to sourcing materials to recruiting and training staff to balancing the books — is subject to this wave of reinvention.

The question is not if, but when

These new models aren’t predictions of what could happen. They’re already realities for innovative, fast-moving companies across the globe. In this environment, playing the role of late adopter can put a business at a serious disadvantage. Ready or not, digital transformation is coming — and it’s coming fast.

Is your company ready for this sea of change in business models? At SAP, we’ve helped thousands of organizations embrace digital transformation — and turn the threat of disruption into new opportunities for innovation and growth. We’d relish the opportunity to do the same for you. Our Digital Readiness Assessment can help you see where you are in the journey and map out the next steps you’ll need to take.

Up next I’ll discuss the impact of digital transformation on processes and work. Until then, you can read more on how digital transformation is impacting your industry.

Comments

About Ginger Shimp

With more than 20 years’ experience in marketing, Ginger Shimp has been with SAP since 2004. She has won numerous awards and honors at SAP, including being designated “Top Talent” for two consecutive years. Not only is she a Professional Certified Marketer with the American Marketing Association, but she's also earned her Connoisseur's Certificate in California Reds from the Chicago Wine School. She holds a bachelor's degree in journalism from the University of San Francisco, and an MBA in marketing and managerial economics from the Kellogg Graduate School of Management at Northwestern University. Personally, Ginger is the proud mother of a precocious son and happy wife of one of YouTube's 10 EDU Gurus, Ed Shimp.