Technology Renaissance Re-Enables Spirit Of Inquiry With Co-Innovation

Vasanth Kumar

Digitalization eases and complicates our business environments simultaneously. To tide these waves, organizations need to become capable of continuous innovation. Taking it one step further, the concept of co-innovation comes through as a disruptive force to help foster an ecosystem of open-minded and inventive organizations capable of creating game-changing solutions. So how do you become one of these?

In his 1997 commencement address at Morgan State University, President Bill Clinton encouraged students to “imagine a new century, full of promise, molded by science, shaped by technology, powered by knowledge.” The dawn of the 21st century brought newer challenges for companies.

Fiercely competitive markets and diminishing margins forced some companies to reexamine their strengths and competencies and revitalize the core of the business to remain relevant. Other conventional players chose to look inward and grow their core capabilities based on in-house knowledge and innovation. Ultimately, businesses with a high innovation quotient survived, and thrived. Those that made perfunctory attempts at acquisitions to sustain momentum managed to stay afloat, but still had difficulties in addressing their market needs.

Clearly, the realities of the new business economy are different. The business landscape has changed, and companies are tackling digital transformation as a way to meet customer behavior and expectations and to face new economic realities. Adoption of existing or emerging innovative digital technologies, such as the Internet of Things, blockchain, and artificial intelligence, is on the uptake. To do this today, it is prudent to join hands with co-innovation partners to accelerate this transformation journey in a strategic way. This means organizations once again need to revisit – and possibly reimagine – their digital transformation strategy and driving growth.

Today’s companies can either choose to grow organically, through acquisition, or a combination of the two. However, in the era of accelerated growth, it is imperative to also explore a new dimension – one of collaboration, as a way to create additional impact for revenue and profit growth through social and ecosystem involvement.

Co-innovation provides new dimensions for transformation

In today’s highly digitized and connected world, knowledge does not remain the asset of any particular department or organization. It has become a free, shared, and distributed resource. I believe that in today’s “knowledge and distributed intelligence economy” no single company, irrespective of its size, can claim dominance of the creative and skilled workforce.

It’s also important to consider that this widely distributed knowledge is not limited only to our employees, but could also reside with our partners, customers, competitors, and academia. While the changing landscape may compel companies to effectively harness in-house knowledge, it is also necessary for them to look beyond the company walls.

That’s why this integral approach of seeking ideas internally, and supplementing them with external innovation and concepts is becoming central to developing new solutions, addressing market needs, or even creating new ones. Quite simply, this calls for new ways to connect, collaborate, and innovate.

My advice, therefore, is for organizations to essentially deconstruct their existing mindset and transition to a new one that is driven by a strategy of enabling external collaboration.

 A need to transcend boundaries

The exercise of breaking down existing business boundaries and redrawing new ones is not a simple one. Connecting and developing means companies need to foster an open architecture that allows a continuous flow of ideas from anywhere and at any time. A good example is Procter and Gamble, which has set up a measurable target of achieving 50% of innovations from external ideas.

But here’s the wider challenge: While many organizations have experimented with the approach of innovating from within, the same readiness has not been evident for engaging with the external ecosystem. Often, the lag comes from the fact that developing ecosystems require clear leadership directive and an inspiring vision. Unless leaders spearhead a disruptive approach to innovation goals and reinvention, we will continue to see a mismatch.

Let’s also look beyond growth for a moment and consider another benefit of the collaborative approach: problem solving. By involving multiple partners in deriving a solution for a complex problem, organizations can reduce the risk of doing the wrong thing, or worse, doing nothing at all. Working on the problem from a variety of angles and perspectives and leveraging a diverse pool of experts, can result in unique, invaluable, and inimitable solutions.

Coupled open innovation is the new mantra of the corporate world

American organizational theorist Henry Chesbrough states that open innovation is a more profitable way to innovate because it can reduce costs, accelerate time to market, increase differentiation in the market, and create new revenue streams for the company.

Quite right. Many key companies, including names like Akzo Nobel, P&G, Lego, GE, SAP, and Unilever, are now reaping the benefits from their open innovation journey. Taking a cue from these leading organizations, it is pertinent for companies to ask themselves these key questions:

  • Is my organization ready to leverage co-innovation as a key performance lever in the growth strategy?
  • Can we potentially tap into the knowledge and insights of our external ecosystem, to advance technology and charter new routes to market?
  • Can we, as an organization, build trust and confidence, and inspire the ecosystem to make a success of the co-innovation strategy?

If your answer to these questions is yes, then your organization is poised to embark on harnessing the true potential of co-innovation.

Also remember, co-innovation was not born in a day. It has been part of an evolutionary process of innovation, transitioning from closed to collaborative architectures, including open and co‐innovation approaches. With digitalization playing a double role in our environments today, an inspirational and creative leadership approach can create an organization capable of co-innovating continually over time.

For more on the role of leadership in digital transformation, see Business Intelligence Emboldens Digital Transformation.


Vasanth Kumar

About Vasanth Kumar

Vasanth Kumar is the head of SAP Co-Innovation Lab, Middle East, for SAP. He is fostering co-innovation with ecosystem and bringing success in the region for SAP. Vasanth brings over 27 years of rich and blended experience with the manufacturing industry and enterprise business software to create value for customers, partners, and startups by driving strategy and achieving execution excellence.

Can The CIO Be The CDO?

Timo Elliott

As noted by IDC in its CDO Scorecard, “The chief digital officer (CDO) is a role that has emerged to accelerate digital transformation initiatives across all industries.” But within many organizations, the CDO role often lacks clear definition and can reside within various functions across the organization. In addition, because the people in this role generally have the mandate to drive change, they tend to come up against “organizational friction,” or resistance to change from both employees and management. This is particularly true regarding CIOs, if they believe this mandate rightfully falls under their purview. As you can imagine, the resulting battle for power and control can hinder digital transformation initiatives.

So it’s logical to ask, “Can CIOs act as the CDOs for organizations today? Or do companies really need a separate CDO who can partner with the business and IT to drive digital transformation?”

Let me share my thoughts on this with you.

Why is a CDO role needed today?

To answer this question, we need to consider more carefully the process of innovation in business settings. IT has always helped transform businesses through strategic deployment of new technologies. But the role of technology has expanded far beyond purely supporting business operations. Technology is also the enabler of data management, reporting, and analytics. These critical tools are increasingly intrinsic to delivering improved customer experiences and creating innovative business models, which are driving new sources of revenue – for example, through digitally enhanced, data-driven products, services, and experiences.

Gartner draws the distinction between two types of innovation, and this distinction can aid our understanding of roles in digital transformation. They refer to bimodal innovation that encompasses:

  • “Mode 1” innovation, focused on IT infrastructure efficiency and reliability
  • “Mode 2” innovation, focused on increasing business agility, transforming customer-facing processes and customer experiences, and developing new business models

The SAP Digital Transformation Executive Study indicates that successful companies must combine the best of these modes, resulting in what is effectively a “bimodal” approach to driving innovation. Our findings suggest that 72% of digital transformation leaders see a bimodal architecture as key to maintaining their core processes while quickly implementing next-generation technology.

For better or worse, CIOs are traditionally associated with mode 1 – keeping the company running efficiently and effectively, at the lowest cost and least disruption. (No wonder they reigned during the era of deploying ERP systems.) It’s mission-critical, but it’s also the less glamorous side of IT today.

In contrast, CDOs are all about disruption and digital transformation – the “mode 2” initiatives: driving new sources of revenue generation and using data to improve the customer experience. According to the SAP study, mode 2 initiatives fall into the category of “core business goals” for 96% of the Top 100 leaders in digital transformation, compared with 61% of laggards.

Going bimodal

In my experience, successfully implementing digital transformation initiatives cuts across traditional corporate boundaries. Both types of innovation are needed.

Investments in new digital platforms (the IT infrastructure part of driving innovation) are foundational to enabling digital transformation initiatives. These digital platforms provide greater reliability, efficiency, and ease of data access, delivering benefits that actually become even more important as companies create data-driven business models and services. In addition, investments in new digital platforms also prevent “islands of innovation” from forming.

Many times, digital transformation goes wrong because it focuses on these small silos of innovation that can’t be scaled to the company as a whole because of incompatibilities with core systems, lack of security, or compliance issues. (The new European General Data Protection Regulation that comes into force in May 2018 is a good example. There are huge fines for noncompliance, and any company that has European customers must take this law into account. Compliant innovation requires a strong “mode 1” approach to governance that has to integrate tightly with the new customer-facing “mode 2” initiatives).

Savvy CIOs understand all of this

The top CIOs have always worked very closely with the business on transformation. So it’s easy to see why they might resent the creation of a new CDO role that deals with the more glamorous aspects of the job – cool customer-facing apps – without necessarily taking into account any of the (very real) infrastructure requirements.

What’s the answer?

The SAP study suggests that there are benefits to having digital transformation projects reside with one C-level owner: either with IT (run by the CIO) or a dedicated digital transformation group (run by the CDO). The CIO and CDO can – and ideally should – be the same person. And our findings also suggest that the best CIOs already have the skills to assume the lead role; as shown in the figure below, CIOs at the top 100 companies are already owning an equal number of transformation projects as CDOs. If your organization must have two people for these roles, then the CIO should be a “chief infrastructure officer” – but with the CDO as the “primary business customer.”

Learn more

Want to know more? I encourage you to take a look at two IDC resources that shed light on this topic: scorecards for CDOs and CIOs for digital transformation, and review the summary of the SAP Digital Transformation Executive Study.

Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.


Timo Elliott

About Timo Elliott

Timo Elliott is an Innovation Evangelist for SAP and a passionate advocate of innovation, digital business, analytics, and artificial intelligence. He was the eighth employee of BusinessObjects and for the last 25 years he has worked closely with SAP customers around the world on new technology directions and their impact on real-world organizations. His articles have appeared in publications such as Harvard Business Review, Forbes, ZDNet, The Guardian, and Digitalist Magazine. He has worked in the UK, Hong Kong, New Zealand, and Silicon Valley, and currently lives in Paris, France. He has a degree in Econometrics and a patent in mobile analytics. 

Top Five CIO Blogs Of February 2018

Jean Loh

Practical applications of emerging technologies: That’s what most interested our readers last month, as this roundup of the best-read blogs illustrates. Thanks to Hu Yoshida of Hitachi Data Systems for his 2018 Top IT Trends series, and to all our other contributors from SAP and beyond. exploring artificial intelligence, machine learning, cloud ERP, and more.

Which Industries Will See The Benefits Of AI First?

Top 10 IT Trends, Part 2: Virtualization, Analytics, AI, And Data Governance

Machine Learning And Business Problem-Solving

Top Five CIO Blogs Of January 2018

Four Ways To Capture Competitive Advantage With Intelligent Cloud ERP


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.

The Blockchain Solution

By Gil Perez, Tom Raftery, Hans Thalbauer, Dan Wellers, and Fawn Fitter

In 2013, several UK supermarket chains discovered that products they were selling as beef were actually made at least partly—and in some cases, entirely—from horsemeat. The resulting uproar led to a series of product recalls, prompted stricter food testing, and spurred the European food industry to take a closer look at how unlabeled or mislabeled ingredients were finding their way into the food chain.

By 2020, a scandal like this will be eminently preventable.

The separation between bovine and equine will become immutable with Internet of Things (IoT) sensors, which will track the provenance and identity of every animal from stall to store, adding the data to a blockchain that anyone can check but no one can alter.

Food processing companies will be able to use that blockchain to confirm and label the contents of their products accordingly—down to the specific farms and animals represented in every individual package. That level of detail may be too much information for shoppers, but they will at least be able to trust that their meatballs come from the appropriate species.

The Spine of Digitalization

Keeping food safer and more traceable is just the beginning, however. Improvements in the supply chain, which have been incremental for decades despite billions of dollars of technology investments, are about to go exponential. Emerging technologies are converging to transform the supply chain from tactical to strategic, from an easily replicable commodity to a new source of competitive differentiation.

You may already be thinking about how to take advantage of blockchain technology, which makes data and transactions immutable, transparent, and verifiable (see “What Is Blockchain and How Does It Work?”). That will be a powerful tool to boost supply chain speed and efficiency—always a worthy goal, but hardly a disruptive one.

However, if you think of blockchain as the spine of digitalization and technologies such as AI, the IoT, 3D printing, autonomous vehicles, and drones as the limbs, you have a powerful supply chain body that can leapfrog ahead of its competition.

What Is Blockchain and How Does It Work?

Here’s why blockchain technology is critical to transforming the supply chain.

Blockchain is essentially a sequential, distributed ledger of transactions that is constantly updated on a global network of computers. The ownership and history of a transaction is embedded in the blockchain at the transaction’s earliest stages and verified at every subsequent stage.

A blockchain network uses vast amounts of computing power to encrypt the ledger as it’s being written. This makes it possible for every computer in the network to verify the transactions safely and transparently. The more organizations that participate in the ledger, the more complex and secure the encryption becomes, making it increasingly tamperproof.

Why does blockchain matter for the supply chain?

  • It enables the safe exchange of value without a central verifying partner, which makes transactions faster and less expensive.
  • It dramatically simplifies recordkeeping by establishing a single, authoritative view of the truth across all parties.
  • It builds a secure, immutable history and chain of custody as different parties handle the items being shipped, and it updates the relevant documentation.
  • By doing these things, blockchain allows companies to create smart contracts based on programmable business logic, which can execute themselves autonomously and thereby save time and money by reducing friction and intermediaries.

Hints of the Future

In the mid-1990s, when the World Wide Web was in its infancy, we had no idea that the internet would become so large and pervasive, nor that we’d find a way to carry it all in our pockets on small slabs of glass.

But we could tell that it had vast potential.

Today, with the combination of emerging technologies that promise to turbocharge digital transformation, we’re just beginning to see how we might turn the supply chain into a source of competitive advantage (see “What’s the Magic Combination?”).

What’s the Magic Combination?

Those who focus on blockchain in isolation will miss out on a much bigger supply chain opportunity.

Many experts believe emerging technologies will work with blockchain to digitalize the supply chain and create new business models:

  • Blockchain will provide the foundation of automated trust for all parties in the supply chain.
  • The IoT will link objects—from tiny devices to large machines—and generate data about status, locations, and transactions that will be recorded on the blockchain.
  • 3D printing will extend the supply chain to the customer’s doorstep with hyperlocal manufacturing of parts and products with IoT sensors built into the items and/or their packaging. Every manufactured object will be smart, connected, and able to communicate so that it can be tracked and traced as needed.
  • Big Data management tools will process all the information streaming in around the clock from IoT sensors.
  • AI and machine learning will analyze this enormous amount of data to reveal patterns and enable true predictability in every area of the supply chain.

Combining these technologies with powerful analytics tools to predict trends will make lack of visibility into the supply chain a thing of the past. Organizations will be able to examine a single machine across its entire lifecycle and identify areas where they can improve performance and increase return on investment. They’ll be able to follow and monitor every component of a product, from design through delivery and service. They’ll be able to trigger and track automated actions between and among partners and customers to provide customized transactions in real time based on real data.

After decades of talk about markets of one, companies will finally have the power to create them—at scale and profitably.

Amazon, for example, is becoming as much a logistics company as a retailer. Its ordering and delivery systems are so streamlined that its customers can launch and complete a same-day transaction with a push of a single IP-enabled button or a word to its ever-attentive AI device, Alexa. And this level of experimentation and innovation is bubbling up across industries.

Consider manufacturing, where the IoT is transforming automation inside already highly automated factories. Machine-to-machine communication is enabling robots to set up, provision, and unload equipment quickly and accurately with minimal human intervention. Meanwhile, sensors across the factory floor are already capable of gathering such information as how often each machine needs maintenance or how much raw material to order given current production trends.

Once they harvest enough data, businesses will be able to feed it through machine learning algorithms to identify trends that forecast future outcomes. At that point, the supply chain will start to become both automated and predictive. We’ll begin to see business models that include proactively scheduling maintenance, replacing parts just before they’re likely to break, and automatically ordering materials and initiating customer shipments.

Italian train operator Trenitalia, for example, has put IoT sensors on its locomotives and passenger cars and is using analytics and in-memory computing to gauge the health of its trains in real time, according to an article in Computer Weekly. “It is now possible to affordably collect huge amounts of data from hundreds of sensors in a single train, analyse that data in real time and detect problems before they actually happen,” Trenitalia’s CIO Danilo Gismondi told Computer Weekly.

Blockchain allows all the critical steps of the supply chain to go electronic and become irrefutably verifiable by all the critical parties within minutes: the seller and buyer, banks, logistics carriers, and import and export officials.

The project, which is scheduled to be completed in 2018, will change Trenitalia’s business model, allowing it to schedule more trips and make each one more profitable. The railway company will be able to better plan parts inventories and determine which lines are consistently performing poorly and need upgrades. The new system will save €100 million a year, according to ARC Advisory Group.

New business models continue to evolve as 3D printers become more sophisticated and affordable, making it possible to move the end of the supply chain closer to the customer. Companies can design parts and products in materials ranging from carbon fiber to chocolate and then print those items in their warehouse, at a conveniently located third-party vendor, or even on the client’s premises.

In addition to minimizing their shipping expenses and reducing fulfillment time, companies will be able to offer more personalized or customized items affordably in small quantities. For example, clothing retailer Ministry of Supply recently installed a 3D printer at its Boston store that enables it to make an article of clothing to a customer’s specifications in under 90 minutes, according to an article in Forbes.

This kind of highly distributed manufacturing has potential across many industries. It could even create a market for secure manufacturing for highly regulated sectors, allowing a manufacturer to transmit encrypted templates to printers in tightly protected locations, for example.

Meanwhile, organizations are investigating ways of using blockchain technology to authenticate, track and trace, automate, and otherwise manage transactions and interactions, both internally and within their vendor and customer networks. The ability to collect data, record it on the blockchain for immediate verification, and make that trustworthy data available for any application delivers indisputable value in any business context. The supply chain will be no exception.

Blockchain Is the Change Driver

The supply chain is configured as we know it today because it’s impossible to create a contract that accounts for every possible contingency. Consider cross-border financial transfers, which are so complex and must meet so many regulations that they require a tremendous number of intermediaries to plug the gaps: lawyers, accountants, customer service reps, warehouse operators, bankers, and more. By reducing that complexity, blockchain technology makes intermediaries less necessary—a transformation that is revolutionary even when measured only in cost savings.

“If you’re selling 100 items a minute, 24 hours a day, reducing the cost of the supply chain by just $1 per item saves you more than $52.5 million a year,” notes Dirk Lonser, SAP go-to-market leader at DXC Technology, an IT services company. “By replacing manual processes and multiple peer-to-peer connections through fax or e-mail with a single medium where everyone can exchange verified information instantaneously, blockchain will boost profit margins exponentially without raising prices or even increasing individual productivity.”

But the potential for blockchain extends far beyond cost cutting and streamlining, says Irfan Khan, CEO of supply chain management consulting and systems integration firm Bristlecone, a Mahindra Group company. It will give companies ways to differentiate.

“Blockchain will let enterprises more accurately trace faulty parts or products from end users back to factories for recalls,” Khan says. “It will streamline supplier onboarding, contracting, and management by creating an integrated platform that the company’s entire network can access in real time. It will give vendors secure, transparent visibility into inventory 24×7. And at a time when counterfeiting is a real concern in multiple industries, it will make it easy for both retailers and customers to check product authenticity.”

Blockchain allows all the critical steps of the supply chain to go electronic and become irrefutably verifiable by all the critical parties within minutes: the seller and buyer, banks, logistics carriers, and import and export officials. Although the key parts of the process remain the same as in today’s analog supply chain, performing them electronically with blockchain technology shortens each stage from hours or days to seconds while eliminating reams of wasteful paperwork. With goods moving that quickly, companies have ample room for designing new business models around manufacturing, service, and delivery.

Challenges on the Path to Adoption

For all this to work, however, the data on the blockchain must be correct from the beginning. The pills, produce, or parts on the delivery truck need to be the same as the items listed on the manifest at the loading dock. Every use case assumes that the data is accurate—and that will only happen when everything that’s manufactured is smart, connected, and able to self-verify automatically with the help of machine learning tuned to detect errors and potential fraud.

Companies are already seeing the possibilities of applying this bundle of emerging technologies to the supply chain. IDC projects that by 2021, at least 25% of Forbes Global 2000 (G2000) companies will use blockchain services as a foundation for digital trust at scale; 30% of top global manufacturers and retailers will do so by 2020. IDC also predicts that by 2020, up to 10% of pilot and production blockchain-distributed ledgers will incorporate data from IoT sensors.

Despite IDC’s optimism, though, the biggest barrier to adoption is the early stage level of enterprise use cases, particularly around blockchain. Currently, the sole significant enterprise blockchain production system is the virtual currency Bitcoin, which has unfortunately been tainted by its associations with speculation, dubious financial transactions, and the so-called dark web.

The technology is still in a sufficiently early stage that there’s significant uncertainty about its ability to handle the massive amounts of data a global enterprise supply chain generates daily. Never mind that it’s completely unregulated, with no global standard. There’s also a critical global shortage of experts who can explain emerging technologies like blockchain, the IoT, and machine learning to nontechnology industries and educate organizations in how the technologies can improve their supply chain processes. Finally, there is concern about how blockchain’s complex algorithms gobble computing power—and electricity (see “Blockchain Blackouts”).

Blockchain Blackouts

Blockchain is a power glutton. Can technology mediate the issue?

A major concern today is the enormous carbon footprint of the networks creating and solving the algorithmic problems that keep blockchains secure. Although virtual currency enthusiasts claim the problem is overstated, Michael Reed, head of blockchain technology for Intel, has been widely quoted as saying that the energy demands of blockchains are a significant drain on the world’s electricity resources.

Indeed, Wired magazine has estimated that by July 2019, the Bitcoin network alone will require more energy than the entire United States currently uses and that by February 2020 it will use as much electricity as the entire world does today.

Still, computing power is becoming more energy efficient by the day and sticking with paperwork will become too slow, so experts—Intel’s Reed among them—consider this a solvable problem.

“We don’t know yet what the market will adopt. In a decade, it might be status quo or best practice, or it could be the next Betamax, a great technology for which there was no demand,” Lonser says. “Even highly regulated industries that need greater transparency in the entire supply chain are moving fairly slowly.”

Blockchain will require acceptance by a critical mass of companies, governments, and other organizations before it displaces paper documentation. It’s a chicken-and-egg issue: multiple companies need to adopt these technologies at the same time so they can build a blockchain to exchange information, yet getting multiple companies to do anything simultaneously is a challenge. Some early initiatives are already underway, though:

  • A London-based startup called Everledger is using blockchain and IoT technology to track the provenance, ownership, and lifecycles of valuable assets. The company began by tracking diamonds from mine to jewelry using roughly 200 different characteristics, with a goal of stopping both the demand for and the supply of “conflict diamonds”—diamonds mined in war zones and sold to finance insurgencies. It has since expanded to cover wine, artwork, and other high-value items to prevent fraud and verify authenticity.
  • In September 2017, SAP announced the creation of its SAP Leonardo Blockchain Co-Innovation program, a group of 27 enterprise customers interested in co-innovating around blockchain and creating business buy-in. The diverse group of participants includes management and technology services companies Capgemini and Deloitte, cosmetics company Natura Cosméticos S.A., and Moog Inc., a manufacturer of precision motion control systems.
  • Two of Europe’s largest shipping ports—Rotterdam and Antwerp—are working on blockchain projects to streamline interaction with port customers. The Antwerp terminal authority says eliminating paperwork could cut the costs of container transport by as much as 50%.
  • The Chinese online shopping behemoth Alibaba is experimenting with blockchain to verify the authenticity of food products and catch counterfeits before they endanger people’s health and lives.
  • Technology and transportation executives have teamed up to create the Blockchain in Transport Alliance (BiTA), a forum for developing blockchain standards and education for the freight industry.

It’s likely that the first blockchain-based enterprise supply chain use case will emerge in the next year among companies that see it as an opportunity to bolster their legal compliance and improve business processes. Once that happens, expect others to follow.

Customers Will Expect Change

It’s only a matter of time before the supply chain becomes a competitive driver. The question for today’s enterprises is how to prepare for the shift. Customers are going to expect constant, granular visibility into their transactions and faster, more customized service every step of the way. Organizations will need to be ready to meet those expectations.

If organizations have manual business processes that could never be automated before, now is the time to see if it’s possible. Organizations that have made initial investments in emerging technologies are looking at how their pilot projects are paying off and where they might extend to the supply chain. They are starting to think creatively about how to combine technologies to offer a product, service, or business model not possible before.

A manufacturer will load a self-driving truck with a 3D printer capable of creating a customer’s ordered item en route to delivering it. A vendor will capture the market for a socially responsible product by allowing its customers to track the product’s production and verify that none of its subcontractors use slave labor. And a supermarket chain will win over customers by persuading them that their choice of supermarket is also a choice between being certain of what’s in their food and simply hoping that what’s on the label matches what’s inside.

At that point, a smart supply chain won’t just be a competitive edge. It will become a competitive necessity. D!

About the Authors

Gil Perez is Senior Vice President, Internet of Things and Digital Supply Chain, at SAP.

Tom Raftery is Global Vice President, Futurist, and Internet of Things Evangelist, at SAP.

Hans Thalbauer is Senior Vice President, Internet of Things and Digital Supply Chain, at SAP.

Dan Wellers is Global Lead, Digital Futures, at SAP.

Fawn Fitter is a freelance writer specializing in business and technology.

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



Why Blockchain Is Crucial For FP&A: Part 1

Brian Kalish

Part 17 in the Dynamic Planning Series

In these times of almost continuous technological change, there is a natural tendency to be suspect of whatever is being heralded as the “flavor of the month” or the “next best bet.” In early 2017, I was graciously given the opportunity to speak on what I believed to be the technologies that were transforming finance and specifically, the FP&A function. The talk I ended up giving covered five areas:

  • Advanced analytics and forecasting
  • Robotic process automation
  • Cloud and Software-as-a-Service
  • Artificial intelligence
  • Blockchain

While all these topics deserve further investigation, for this article, I want to focus on blockchain. Part of the reason for diving deeper into blockchain is the lack of understanding of what it actually is and the great amount of time people in the finance function are currently spending talking about it. This has greatly changed in the past nine months.

Last March, while hosting an FP&A Roundtable in Boston, I ask a group of 25 senior FP&A professionals how familiar they were with the concept of blockchain. Out of this august group, there was only one participant who felt truly comfortable with the concept. I still get asked on a regular basis, all over the world, “Blockchain. What is it?”

Blockchain: What is it?

By allowing digital information to be distributed but not copied, blockchain technology has created the spine of a new type of Internet. Picture a spreadsheet that is duplicated thousands of times across a network of computers. Now imagine that this network is designed to regularly update this spreadsheet, and you have a basic understanding of blockchain.

Information held on a blockchain exists as a shared and continually reconciled database. This is a way of using the network that has obvious benefits. The blockchain database isn’t stored in any single location, meaning the records it keeps are truly transparent and easily verifiable. No centralized version of this information exists for someone to corrupt. Hosted by many computers simultaneously, its data is accessible to any authorized user.

Blockchain technology is like the Internet in that it has a built-in robustness. By storing blocks of information that are identical across its network, the blockchain 1) cannot be controlled by any single entity and 2) has no single point of failure. The Internet itself has proven to be durable for almost 30 years. It’s a track record that bodes well for blockchain technology as it continues to be developed.

A self-auditing ecosystem

The blockchain network lives in a state of consensus, one that automatically checks in with itself on a regular basis. A kind of self-auditing ecosystem of a digital value, the network reconciles every transaction that happens at regular intervals. Each group of these transactions is referred to as a “block.” Two important properties result from this:

Transparency. Data is embedded within the network as a whole, and by definition, is available to all authorized users.

Incorruptibility. Altering any unit of information on the blockchain would mean using a huge amount of computing power to override the entire network. In theory, it is possible; however, in practice, it’s unlikely to happen.

A decentralized technology

By design, the blockchain is a decentralized technology, so anything that happens on it is a function of the network as a whole. Some important implications stem from this. By creating a new way to verify transactions, aspects of traditional commerce may become unnecessary.

Today’s Internet has security problems that are familiar to everyone. However, by storing data across its network, the blockchain eliminates the risks that come with data held centrally. There are no centralized points of vulnerability that can be exploited. In addition, while we all currently rely on the “username/password” system to protect our identity and assets online, blockchain security methods use encryption technology.

I hope this little tutorial helps describe what blockchain is. In my next article, I’ll discuss the value of blockchain to the FP&A profession.

For more on this topic, read the two-part “Blockchain and the CFO” series and “When Blockchain Fulfills CFOs’ Paperless Vision.”

2018 will be a busy year with FP&A Roundtables in St. Louis, Charlotte, Atlanta, San Diego, Las Vegas, London, Boston, Minneapolis, DFW, San Francisco, Hong Kong, Jeddah, and many other locations around the world to support the global FP&A community.

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Brian Kalish

About Brian Kalish

Brian Kalish is founder and principal at Kalish Consulting. As a public speaker and writer addressing many of the most topical issues facing treasury and FP&A professionals today, he is passionately committed to building and connecting the global FP&A community. He hosts FP&A Roundtable meetings in North America, Europe, Asia, and South America. Brian is former executive director of the global FP&A Practice at AFP. He has over 20 years experience in finance, FP&A, treasury, and investor relations. Before joining AFP, he held a number of treasury and finance positions with the FHLB, Washington Mutual/JP Morgan, NRUCFC, Fifth Third Bank, and Fannie Mae. Brian attended Georgia Tech in Atlanta, GA for his undergraduate studies and the Pamplin College of Business at Virginia Tech for his graduate work. In 2014, Brian was awarded the Global Certified Corporate FP&A Professional designation.