Turning Machine Learning Into Intelligence That Matters

Jean Loh

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

Great news for employees: Travis Tompkins, senior manager at Deloitte Consulting LLP, predicts that companies will soon be removing 20%–30% of all mundane activities from their employees’ to-do lists. That means more time to do real work and think.

“Automating paper shuffling, workflows, and simple decision making will give us extra time and resources. Now companies must decide what they are going to do with that additional capacity,” he said on the May 10, 2017 live episode of Coffee Break with Game Changers Radio, presented by SAP and produced and moderated by SAP’s Bonnie D. Graham.

He was joined on a thought leadership panel by Dr. Paul Pallath, chief data scientist and senior director of the Advanced Analytics organization at SAP, and Kevin McConnell, director of Machine Learning Solutions Go-to-Market Strategy at SAP.

Travis’s bold prediction may become reality by 2027, as we’re already seeing business leaders climb on the machine learning bandwagon. They are harnessing text and speech recognition, visual image processing, chatbots, and digital assistants – and relieving employees of repetitive and boring tasks so they can act more strategically.

Click to listen to the full episode.

Reframing the most critical questions

The more companies transform with innovative technology, the more their appetite will grow to digitize every aspect of the enterprise. “Everybody wants to apply the predictive capabilities of machine learning in their daily operations,” Paul stated. “When I talk to customers, I always advise that the business problem must address the top line or bottom line. Otherwise, machine learning will not change how customers interact with their systems. Executives must first ask the right questions to create a significant difference.”

Will machine learning answer the most fundamental concern in today’s boardroom: “What can we do differently?”

“Machine learning is not about letting machines run the world; it’s having machines help facilitate how humans run the world,” observed Kevin. “The best place to implement machine learning is where there are 5 million different possibilities. People can typically look at not more than 10 or 20 scenarios. But we still need to set the parameters, evaluate results, and apply those findings, even though machines are going to do most of the thinking.”

Travis offered a use case. “The advent of machine learning is fine-tuning finance activities – from how performance is measured to how insights are analyzed.” Then finance organizations can better predict, plan, and forecast by evaluating thousands of variables and understanding the root cause of profit growth or loss. But more important, this level of insight enables the function to deliver a critical lifeline for the entire business’s survival.

More use cases: data security and more

The panelists agreed that the top use cases for machine learning include the security of personal data and intellectual property. Across networks, computers, and anything in between, “there are thousands and millions of threats a day,” Kevin noted. “Machines must start asking for the right rules and how to make them smarter.” The highest payback for investing in machine learning is found improving data security, personal security, fraud, and credit risk.

Paul added, “If businesses categorize various use cases, then sales and marketing operations, risk management, finance, and human resources are the predominant functions that could find success.”

How to build machine learning algorithms to address a specific need? “Companies must start at the top level of the organization and ingrain the technology in the strategy,” Kevin advised. “A common mistake is to start putting machine learning in lots of different places. The expense of resource and data replication does not bring a true advantage. Instead, executives should focus on key performance indicators or strategies.”

But Travis cautioned, “When businesses first get started with machine learning, they must be willing to fail – learning in that failure process how to build better models during every iteration.”

Paul added that the organizational culture should adapt as well. “In large deployments of machine learning in business processes across all functions, it is very important to have a data-driven organization. For the huge segment of the workforce that has yet be impacted, the first thing that will come to mind is, ‘Do I trust the systems that propose actions for me to look into, versus my having to evaluate all the options?’ The culture may need to be molded into being data-driven, rather than having something forced on them.”

Will machine learning become the new norm?

According to the panelists, machine learning will become more than just another tech buzzword that disappears over time.

Travis predicted that machine learning will pave the way to a more pervasive form of artificial intelligence: natural language processing. “We’re seeing it now with Google Home, Amazon’s Alexa, and other devices we’re talking and interacting with very naturally. I envision that, five years from now, we’ll view this innovation area as we look at GPS today. It will become very natural.”

Paul went further. “I predict there will be a machine-driven, completely automated world that we’ll be a part of. People will be interacting with this digital wall seamlessly without understanding that we are still existing somehow. Maybe the machine understands my responses to your questions and would be taking this call for me,” he mused.

Kevin’s perspective: “You’re going to engage with things a lot differently than you do now, and it will start with machine learning. I may come home on a Friday night and there will be a pizza waiting at my door. The machine will already know that I’m going to order it at 7 o’clock anyway. All those things are going to happen, and we’ll joke about the days when we had to do things.”

Learn more

Listen to the SAP Radio show “Machine Learning Trends – Part 2: Harnessing AI” on demand.

Automation is THE priority for global business organizations that want to drive costs down. Join Randy Garrison of SAP and Weston Jones of Ernst & Young, LLP on July 17 at 1 p.m. EDT to understand what robotic process automation can offer you today and in the future. Register now!


Jean Loh

About Jean Loh

Jean Loh is the director, Global Audience Marketing at SAP. She is an experienced marketing and communication professional, currently responsible for developing thought leadership content that is unbiased and audience-led while addressing market challenges to illuminate and solve the unmet needs of CFOs, CIOs, and the wider global finance and IT audience.

Drive Business Growth With A Hybrid Analytics Strategy

Steve McHugh

Combining the most valuable aspects of on-premises and cloud solutions can be extremely beneficial: utilizing a hybrid strategy for your analytics/BI solution has been shown to improve performance and increase revenue. In a recent survey by Forrester Consulting commissioned by SAP, 92% of companies with well-established analytics/BI practices have seen revenue growth of 15% or greater over the last three years. But in order to see those performance and revenue gains, you need to make sure you’re implementing it correctly. Read on to learn what you can do with a hybrid strategy, why it’s important, and how to build up a hybrid strategy effectively.

What can you do with a hybrid approach?

You can take advantage of a hybrid strategy by appropriately leveraging your on-premises offerings and knowing when to extend or expand to the cloud. The great thing is that a successful hybrid strategy can be enacted in many forms, and it’s important to keep in mind that one size does not fit all. Some companies are using a mix of on-premises and cloud deployments by department, while others are using cloud BI as a direct replacement for on-premises deployments. Further, some companies are even using a cloud BI platform that accesses a mix of on-premises and cloud data sources via the same semantic layer.

But the list doesn’t end there. Look at your current on-premises investments and ask yourself: When can we extend or expand to the cloud to reap these benefits? True success comes from analyzing your company’s unique state and offerings and knowing where to branch out.

Why do you need a hybrid strategy?

Some 82% of survey respondents agree that a hybrid approach is a crucial next step in the evolution of their strategy, and nearly two-thirds of companies report they anticipate their future analytics/BI solution will include a mix of on-premises and cloud resources. The benefits extend far beyond the financials.

A hybrid strategy that successfully takes advantage of the best of what both an on-premises and cloud solution have to offer can deliver significant performance gains as well. You’ll see better business agility due to the self-service analytics/BI capabilities and the cloud’s flexibility. You’ll see optimized business performance thanks to rising user adoption of these tools. You’ll get more value from your on-premises data and investments by leveraging them with the cloud’s capabilities. And finally, more departments throughout your firm will be able to access analytical tools and reports, decreasing the ever-common silo effect.

How can you implement hybrid successfully?

The survey also found that 88% of respondents reported that they regard hybrid analytics/BI platforms as important to their company, and 60% are already using a hybrid strategy for their analytics and data. We know that the market sees value in hybrid solutions and that the need is real. To achieve success and build an effective hybrid analytics strategy, follow the footsteps of hybrid trailblazers by:

  • Increasing investment in analytics/BI technology and resources
  • Pursuing greater use of the cloud for data storage
  • Adopting more powerful analytics/BI tools
  • Implementing tighter security controls on data usage

One thing is certain: hybrid is the future, and those who aren’t currently utilizing a hybrid strategy may soon be feeling the weight of lost revenue. Armed with the right information, this can be a seamless transition.

For more information on how a hybrid strategy can help your firm, download this SAP-commissioned thought-leadership study from Forrester Consulting: “Improving Business Performance By Closing BI Maturity Gaps With Hybrid Cloud Deployments.”

Learn how to improve business decision-making with cloud analytics


Steve McHugh

About Steve McHugh

Steve McHugh is director for BI Enterprise Marketing at SAP. He has a solid background in enterprise performance management and analytics. For the last several years, Steve has been involved in leading marketing efforts for SAP's on-premise enterprise BI solutions. Currently, his focus is on helping enterprise BI customers with their journey to the cloud, extending and expanding their analytics adoption and use by capitalizing on their on-premise investments and data through hybrid analytics.

Revolutionizing Procurement’s User Experience With AI

Scott Pezza

It’s difficult to boil down the full experience of working with procurement applications into one pithy phrase. When we know what we want, but need to wade through oceans of irrelevant data to get it, we may think less is more. When we aren’t exactly sure where to find what we need and have difficulty locating relevant sources then, well, more is actually more.

Without really knowing it, we’ve created a pretty restrictive experience for ourselves. We need to define what’s needed; we need to know where to look; we need to find the information; and we need to bring it back to incorporate into whatever task we were working on.

This is our user experience. It is cumbersome. It is tedious. It is manual. And thankfully for us, it doesn’t need to stay that way.

Rethinking user experience: three key pieces

While the technology that makes it possible to revolutionize the user experience may be complex from an engineering perspective, what it actually does is pretty simple. If we focus on what’s truly changed, we see that artificial intelligence (AI) impacts three main things: what we see, what we don’t see, and how we interact with our systems. Let’s take a quick look at each of those elements:

1. What we see. The best way to think about AI’s impact on procurement is that it augments or improves the way we do things. Its goal is to make procurement professionals more informed and better equipped for their jobs. This means bringing them user experience elements such as:

  • Tailored content. Intelligent solutions show you the information you need to know, but this isn’t simply about designing a better dashboard. By applying machine learning to analyze the way different functions work, AI-enabled solutions know what information is important to you without your IT team having to design a customized screen for you. The system knows and automatically presents you with the information you need at the right time and place.
  • Guidance and recommendations. In any complex process like issuing a new RFP, there’s always a question of either “what comes next?” or “what should come next?” That’s where AI-enabled systems can really shine, learning from past behavior to understand process flows, business rules, and even things like sourcing goals (such as targets for sustainable or minority-owned suppliers), which can be seamlessly offered to you as options on how to best proceed. Everything is streamlined right within the system, keeping you focused and efficient as you move from beginning to end.
  • Prepopulated forms. This one is deceptively powerful. By understanding what you need and using natural language processing to extract information from both systems and unstructured documents (like attached Word files), AI-enabled systems can reduce your manual effort by filling in forms for you automatically. You simply review and tweak as necessary. No more manual searching. No more data entry. No more repetitive rework starting from scratch each time you kick off any given process.

2. What we don’t see. When less really is more, AI-enabled systems can help keep you focused on what really matters. Using AI-enabled systems, you’ll see a lot less:

  • Irrelevant information. When the system is focused on what you actually need, it can avoid showing you what you don’t. Understanding which commodities a category manager cares about will teach the system which indices to display on a personalized dashboard, for example. Track the things you need to track and ignore the ones you don’t.
  • Inaccurate information. One area where AI has a huge positive impact outside of tailoring what information you see is in improving the quality of data you have available. This is where spend-data classification comes in, and machine learning allows it to be done on a scale – and at a speed – that is simply not possible when humans are doing the reviewing. This means you have access to and can have greater confidence in more data than ever before. And this all feeds back into the learning algorithms and tailored, in-content interfaces discussed earlier.

3. How we interact. Screens, menus, shortcodes, and report runs – they’ve been around forever. There’s a reason that procurement job listings so often ask for experience using specific systems: they’re complicated and are often a barrier to entry all to themselves. AI-enabled solutions offer a few ways to change this paradigm completely:

  • Natural language. Simply put, you can type (or even talk) to your procurement system just like you would to a colleague. Rather than navigating some hierarchy like Document > Create > Create New RFP and then searching through a series of drop-downs to define what you’re looking for, for example, you’d simply type “I’d like to open an RFP for marketing services.” That’s quite a change.
  • Informed choice. Picking up on the previous example, AI-enabled systems can recognize your request and present you with different options. For instance, it may tell you that you can choose to either buy marketing services under an existing, current contract with a supplier that covers your business unit or create a new one using a previous RFP as a template. And it didn’t do that in some strange, complex interface. It sends you a chat message just like your kids would do.
  • Start with review. This was covered a bit earlier, but it bears repeating. When a system is intelligent enough to prepopulate information for you, the way you interact with that system changes. Your job isn’t data entry; it’s review and approval. It’s a productivity gain. It’s an accuracy improvement. And most of all, it’s a quality of life improvement.
  • Manage exceptions. We haven’t focused much on automation, but AI-enabled systems do hold the promise of taking a process from beginning to end without the need for human intervention. We’ve already seen this with “simple” scenarios like invoice matching. By defining rules and applying machine learning to better understand what is and is not acceptable, we can expand this much further. Now you don’t need to spend your time reviewing what the system knows with certainty is fine. You do tactical reviews only when exceptions pop up.

What you need, where and when you need it

While this only scratches the surface, the day-to-day experience of someone using a system founded on these emerging technologies is a tremendous change. These changes are not merely superficial. They’re not just a matter of design. They are, quite simply, impossible to achieve without the advances that artificial intelligence provides. That’s why it seems so fitting to talk about AI’s potential to revolutionize the procurement user’s experience. Providing exactly the information that you need, at the right time, and in the most convenient location – that’s the ultimate expression of a system truly serving the needs of the user.

If this discussion has piqued your interest, we’ve got a lot more to share. Join us for SAP Ariba Live in Amsterdam, coming up April 23–25. In addition to compelling mainstage content, you can dig deeper in breakout sessions dedicated to these fascinating new technologies.

If you can’t join us in Amsterdam, we’ve got you covered as well. Take a look at Intelligent Procurement from SAP Ariba: Making Procurement Solutions Smarter, a new paper that provides more detail on our recent and upcoming innovations in the procurement technology space. There’s a lot of opportunity for technology to drive significant improvements. Today’s a great day to start learning more!


Scott Pezza

About Scott Pezza

As part of SAP Ariba's Nework Value Organization Center of Excellence, Scott researches, compiles, and shares best-practice information to help customers get the most out of their investments. With a focus on the financial supply chain (invoice management, payments, discounting, and supply chain finance), his research helps inform strategic planning, performance measurement, and program execution. He has spent the past 15 years in the B2B technology space, in roles ranging from software development and support to research and consulting. Scott earned his BA in English and Philosophy from Clark University, his MBA from Boston University Graduate School of Management, and his JD from Boston University School of Law, where he served on the Executive Board of the Annual Review of Banking and Financial Law.

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.


CEO Priorities And Challenges In The Digital World

Dr. Chakib Bouhdary

Digital transformation is here, and it is moving fast. Companies are starting to realize the enormous power of digital technologies like artificial intelligence (AI), Internet of things (IoT) and blockchain. These technologies will drive massive opportunities—and threats—for every company, and they will impact all aspects of business, including the business model. In fact, business velocity has never been this fast, yet it will never be this slow again.

To move quickly, companies need to be clear on what they want to achieve through digital transformation and understand the possible roadblocks. Based on my meetings with customer executives across regions and industries, I have learned that CEOs often have the same three priorities and face the same three challenges:

1. Customer experience – No longer defined by omnichannel and personalized marketing.

Not surprisingly, 92 percent of digital leaders focus on customer experience. However, this is no longer just about omnichannel and personalized marketing – it is about the total customer experience. Businesses are realizing that they need to reimagine their value proposition and orchestrate changes across the value chain – from the first point of interaction to manufacturing, to shipment, to service – and be able to deliver the total customer experience. In some cases, it will even be necessary to change the core product or service itself.

2. Step change in productivity – Transform productivity and cost structure through digital technologies.

Businesses have been using technology to achieve growth for decades, but by combining emerging technologies, they can now achieve a significant productivity boost and reduce costs. For this to happen, companies must first identify the scenarios that will drive significant change in productivity, prioritize them based on value, and then determine the right technologies and solutions. Both Mckinsey and Boston Consulting Group expect a 15 to 30 percent improvement in productivity through digital advancements – blowing the doors off business-as-usual and its incremental productivity growth of 1 to 2 percent.

3. Employee engagement – Fostering a culture of innovation should be at the core of any business.

Companies are looking to create an environment that encourages creativity and innovation. Leaders are attracting the needed talent and building the right skill sets. Additionally, they aim for ways to attract a diverse workforce, improve collaborations, and empower employees – because engaged employees are crucial in order to achieve the best results. This Gallup study reveals that approximately 85 percent of employees worldwide are performing below their potential due to engagement issues.

As CEOs work towards achieving these three desired outcomes, they face some critical challenges that they must address. I define the top three challenges as follows: run vs. innovate, corporate cholesterol, and digital transformation roadmap.

1. Run vs. innovate – To be successful you must prioritize the future.

The foremost challenge that CEOs are facing is how they can keep running current profitable businesses while investing in future innovations. Quite often these two conflict as most executives mistakenly prioritize the first and spend much less time on the latter. This must change. CEOs and their management teams need to spend more time thinking about what digital is for them, discuss new ideas, and reimagine the future. According to Gartner, approximately 50 percent of boards are pushing their CEOs to make progress on digital. Although this is a promising sign, digital must become a priority on every CEOs agenda.

2. Corporate cholesterol – Do not let company culture get in the way of change.

The older the company is, the more stuck it likely is with policies, procedures, layers of management, and risk averseness. When a company’s own processes get in the way of change, that is what I call “corporate cholesterol.” CEOs need to change the culture, encourage cross-team collaborations, and bring in more diverse thinking to reduce the cholesterol levels. In fact, both Mckinsey and Capgemini conclude that culture is the number-one obstacle to digital effectiveness.

3. Digital transformation roadmap – Digital transformation is a journey without a destination.

Many CEOs struggle with their digital roadmap. Questions like: Where do I start? Can a CDO or another executive run this innovation for me? What is my three- to five-year roadmap? often come up during the conversations. Most companies think that there is a set roadmap, or a silver bullet, for digital transformation, but that is not the case. Digital transformation is a journey without a destination, and each company must start small, acquire the necessary skills and knowledge, and continue to innovate.

It is time to face the digital reality and make it a priority. According to KPMG, 70 percent to 80 percent of CEOs believe that the next three years are more critical for their company than the last fifty. And there is good reason to worry, as 75 percent of S&P 500 companies from 2012 will be replaced by 2027 at the current disruption rate.

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Dr. Chakib Bouhdary

About Dr. Chakib Bouhdary

Dr. Chakib Bouhdary is the Digital Transformation Officer at SAP. Chakib spearheads thought leadership for the SAP digital strategy and advises on the SAP business model, having led its transformation in 2010. He also engages with strategic customers and prospects on digital strategy and chairs Executive Digital Exchange (EDX), which is a global community of digital innovation leaders. Follow Chakib on LinkedIn and Twitter