Digital Remix 2018: Digitalization Changes The Nature Of CIO Leadership

Michael Golz

Change may be the law of the natural world, but digitalization is taking it to a whole new level of Darwinism. In his book On the Origin of Species, Charles Darwin speculates that the survival of any species depends on its ability to adapt and adjust to environmental changes. Not intelligence, not physical strength – just adaptability and responsiveness.

Now that technology and society are evolving faster than businesses can keep up, this 19th-century observation has become a 21st-century strategy. The more digital transformation takes hold of entire industries and creates more disruption, the more the whole business needs to commit to change.

Although the 2017 Harvey Nash/KPMG survey of CIOs suggests that adoption of enterprise-wide digital strategies has risen sharply from 27% in 2015 to 52% in 2017, cultural resistance – not budget – has become the top impediment to digital success. In turn, CIOs are forced to adapt to a new era of leadership, business innovation, and mindset. Whether the change impacts a business model, business process, or the way people work, CIOs must focus more on how to leverage the underlying technology throughout the business and less on how the technology works.

The 2018 CIO makeover: From IT leader to business executive

According to Thomas Saueressig, chief information officer and global head of IT services at SAP, CIOs are encountering an immense sense of urgency when guiding digital transformation. In his Digitalist Magazine article “The Digital CIO: An Experience In The Digital Economy,” he said: “The digital reality has changed forever the way we live and do business. And no one better understands the opportunities and the challenges of digital enterprise transformation than the CIOs of today. Staying engaged on this topic is critical to ensure the success of the digital journey.”

Everything people need to know about an emerging technology is available in the palm of their hand – their smartphone. Outside of a browser search, people can become familiar with how the innovation works as they use the apps and functions that excite them as consumers. It’s highly likely that your fellow executives and employees are using them every day and applying them to fulfill their professional duties and simplify their personal lives.

CIOs who understand the digital habits of their audience have a front-seat view into the immediate future. Here are some examples of how they can help users engage with the latest crop of emerging technology on their mobile devices.

1. Humanized digital interfaces

 The use of artificial intelligence and natural language processing found in Siri, Alexa, and a range of chatbots are enabling a high level of productivity and engaging brand experiences. Even the Pokémon Go craze in 2016 taught us about the capabilities – and limitations – of augmented reality and virtual reality and how it can be applied to business operations.

A mobile app, for instance, can connect to smart glasses to provide a hands-free, informational experience. For employees, this approach can reduce the need for scanning shipments and simplify the overall process by eliminating the use of multiple handheld devices or pen and paper.

2. The Internet of Things

It’s a safe bet that the opportunity to capture data from location-based apps and embedded sensors can yield tremendous value. And when this information is sent to intelligent cloud services that give every line of business better visibility, the benefits will only grow.

Although consumer device sensors appear to be much more basic compared to sophisticated, industrial IoT scenarios, the underlying capabilities are quite similar. For example, dashboards that continuously track asset health can send an alert immediately when a machine or production process is beginning to show signs of a malfunction. This digital capability allows plant managers to avoid the risk of unintended downtimes by triggering an order for preventive maintenance with a single click.

3. Artificial intelligence and machine learning

As artificial intelligence and machine learning continue to enjoy escalating adoption rates, it’s highly likely that these technologies will eventually be embedded into every product or service we use at work and home. When a personal digital assistant or an app on your phone can anticipate your next question or need before you think of it, you know that a fundamental technology shift is taking place.

Sooner than later, this form of intelligence will make its way into every business process. For example, a machine learning application became a crucial enabler in streamlining invoice processing for our global finance team based in Singapore, which processes upwards of 85,000 invoices each year for the Asia-Pacific region. The application automates invoice matching by identifying more than 40 features – including differences in amounts and data as well as misspelled words – to reconcile bank statements with receivables. In addition, the Singapore team uses the application to predict the future financial needs of the business and pinpoint opportunities to optimize cash flow.

4. Blockchain

While the impact of blockchain may be less apparent in today’s consumer apps, a lot of change is happening behind the scenes. Whether we are making a digital payment or participating in crowdfunding, the technology can turn a middleman-driven process into a more direct way of handling everything from financials to contracts.

Although blockchain might be most known in the context of cryptocurrencies, it is uniquely suited to support interactions between business partners in a transparent and trusted way. One prime example is the automation of contract processing. Self-validated, self-monitored, and self-enforced contracts can help bridge the trust gap during negotiation and enforcement without the intervention of a third-party intermediary.

5. Cloud

Gartner defines cloud as “a style of computing in which scalable and elastic IT-enabled capabilities are delivered as a service using Internet technologies.” Whether we realize it or not, every piece of data we record and access on our mobile devices is enabled by cloud technology. From file syncing and sharing information to streaming content services and downloading app updates, none of these capabilities could exist without the cloud.

The running joke “there is no cloud, just someone else’s computer” doesn’t quite capture the value and built-in capabilities of today’s cloud services. Whether we’re talking about infrastructure, platform, or software as a service, the days when everything will reside in the cloud are not far away. In fact, cloud computing is reaching a high level of maturity on many fronts as businesses reveal its full value.

For example, a cloud platform managed by a third-party provider can help businesses achieve the speed, scalability, and flexibility required to evolve as quickly as their customers – or, in some cases, faster than their competitors. But perhaps more impressive is the reality that these capabilities can be achieved while keeping information, connected machines, and business systems more secure.

A new role for the CIO, a new opportunity for the business

The ability to understand the latest technologies and apply them in a way that furthers digital maturity will become a paramount asset in the coming year. This imperative requires a new kind of leadership where scaling digitalized practices and operations are prioritized over technology experimentations and pilots.

Whether they’re innovating business models, setting up new organizations, or maintaining IT operations, CIOs who choose to embrace this new mindset will be the ones guiding their business through a transformation that can lead to long-lasting competitive power.

Find out how your business can bring these new technologies together to power your digital strategy in 2018 and beyond. Explore the SAP Leonardo digital innovation system.

Learn more about how to use these technologies to turn your data into a strategic asset that can be quickly analyzed to discover previously hidden insights. Read the IDC Analyst Connection paper, The Value of Data and Analytics in Digital Transformation.

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Michael Golz

About Michael Golz

Michael Golz is senior vice president and CIO Americas at SAP. He frequently speaks to customers about IT’s first-hand experiences with SAP solutions in the areas of digital transformation, digital core, cloud, business networks, and leading-edge technologies overall. Previously, Mr. Golz was senior vice president of Application Services with worldwide responsibility for SAP's internal business applications and external platforms, covering the entire spectrum of SAP solutions for SAP’s employees. Prior to joining SAP, he led the Information Management organization at OTTO Group in Cologne, Germany. Mr. Golz holds a bachelor’s degree in Business Administration and Information Technology from European Business School in Germany.

Transforming Your Business Through A Digital Supply Chain Of One

Richard Howells

A recent infographic published by IDC highlights the importance of digital transformation and the need for companies to enable a digital supply chain of one to stay competitive.

One finding from the infographic is quite striking: By 2019 “3rd Platform” technologies such as mobile, cloud, Big Data, and social will account for nearly 75% of IT spend – growing at twice the rate of the total market.

Much of the increase in IT spend will be attributed to “innovation accelerators” – a category that includes technologies such as analytics, blockchain, Internet of Things (IoT), 3D printing, and robotics. Through 2020, innovation accelerators will grow at 17% CAGR.

Of course, given the competitive pressure to innovate, perhaps these numbers aren’t so surprising after all. Across industries, companies are launching profound digital transformation initiatives as they struggle against digitally savvy competitors who use new technologies to deliver better customer outcomes. Now, this drive to digitalize is showing up in the numbers.

Top drivers

But what exactly are these competitive pressures? One is customer demand for individualized products. Part of what it means to deliver better customer outcomes in the digital economy is to deliver exactly what customers want. In practice, this often means personalization – the ability to manufacture to the lot size of one. Personalization requires processes that are highly responsive to individual needs and desires. Audi, for example, has revamped the assembly line in favor of a modular assembly approach. This approach skirts the issue of assembly line downtime – like when only a few vehicles on the line need to get fitted with optional extras.

Another driver is increasingly complex products. In this world, few companies have neither the capabilities nor the business justifications to fill out the end-to-end value chain. This is why companies partner up – leading to expanding partner ecosystems. Auto manufacturers, to stick with an example, need to partner up with software companies to deliver the onboard tech that customers want today. And as things change, these manufacturers need flexible collaboration platforms to quickly bring in new partners as needed.

Companies are also looking to improve outcomes for customers after the sale. With IoT, for example, companies can track KPIs and monitor performance for the products they produce and sell. Cars, again, are a perfect use case. Take Tesla, for instance. The company continuously collects data on its cars (self-driving and otherwise), analyzes it for insight, and proactively pushes out improvements to the cars in its network. Ever hear companies talk about knowing what customers want before the customers know it themselves? This is what they’re talking about.

The digital innovation platform

To thrive in the digital economy, IDC believes that “product innovation, supply chain, and manufacturing must be connected through a digital innovation platform powered by key technologies such as cloud, analytics, IoT, machine learning, and blockchain.”

As discussed in a previous blog, companies can use such platforms to mix these technologies in creative ways. IoT sensor data can be transmitted and stored in the cloud. Machine learning can then be used to make processes smarter. Artificial intelligence can help automate processes – and blockchain can help ensure the processes remain traceable and secure.

Yet, there’s a long way to go. According to IDC, only nine percent of manufacturers use an innovation platform for extended collaboration, only nine percent have digitally transformed their supply chains, and a full 67% still consider themselves “Digital Explorers” or “Digital Players” – meaning they’re at the early stages of digital transformation.

Yes, you can get there from here

The good news is that companies can actually move forward. IDC recommends adopting cloud-based platforms and enhancing them with the intelligent technologies we’ve already discussed – such as AI, machine learning, and analytics. This can help accelerate product innovation, increase supply chain visibility, improve manufacturing, and drive revenue growth.

IDC also touts the advantages of a network of digital twins. A digital twin is a simply a live digital representation of a physical thing – say a forklift in one of your warehouses or a heating/cooling unit deployed at a customer site. A network of these digital twins can provide the insight needed to achieve a digital supply chain of one. It can also help you track performance, usage, and service demand for deployed units or sold items – allowing you to monetize connected products.

The bottom line is that the supply chain is now front and center for companies competing in the digital economy. With a digital supply chain of one supported by emerging technologies for greater visibility, predictability, and agility, your company can deliver the personalized products and experiences that customers value. Good luck out there.

Customers want individualized products with shorter delivery and new payment options. View this infographic to understand how a digital supply chain to serve the segment of one can deliver customer centricity by enabling predictive business and smart automation for total supply chain visibility. 

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Richard Howells

About Richard Howells

Richard Howells is a Vice President at SAP responsible for the positioning, messaging, AR , PR and go-to market activities for the SAP Supply Chain solutions.

Transportation Industry: 'Ripe For Change'

Paul Pessutti

A recent S.M.A.C. Talk Technology Podcast looks at the urgencies facing the commercial transportation industry. Hosted by Brian Fanzo and Daniel Newman, the 12-minute audio interviews expert Paul Pessutti, global vice president and general manager of Travel, Transportation and Hospitality Industries at SAP. Pessutti, who spent 25 years with cargo logistics, discusses why the transportation industry is “ripe for change.”

Ocean shipping, rail, and trucking industry must embrace a generational shift

As Pessutti points out, the cargo industry faces disruption from today’s millennial-leaning transportation innovators. Think in terms of what modernized companies are bringing to the table. They offer tech-based transportation coupled with expanding services. For example, unlike many traditional trucking outfits, customers can click on electronic devices and enjoy real-time benefits.

“Companies that are able to not only provide the actual logistic services but value-added services on top of that to create an amazing customer experience,” Pessutti says . “That is what I think is what’s keeping a lot of shipping executives up at night, is not only how do they reduce their costs and maintain those expensive assets, but how do they innovate and provide a better experience to the customer.”

Many long-haul and regional transportation organizations have the competitive technology at their disposal. However, they tend to be hamstrung by an older workforce who are unsteady about embracing multi-level technology.

“I mean, that’s a big problem that we have in the industry, is that we have, in many cases, an aging workforce within these companies,” Pessutti says. “Whether it’s trucking, ocean shipping, the rail business, and they’re used to doing things a certain way. The whole concept of change management and doing things with technology can be a little bit scary for that group.”

Along with a workforce nearing retirement, the trucking industry also has a youth shortfall. Although artificial intelligence-functioning vehicles are on the drawing board, the trucking industry faces massive driver shortages in the United States.

Bob Costello, chief economist for the American Trucking Associations, concluded that the trucking industry could see its driver shortage grow to upwards of 174,000 by 2026 due to growth and attrition.

“This means that even as the shortage numbers fluctuate, it remains a serious concern for our industry, for the supply chain and for the economy at large,” Costello stated in an industry report.

SAP transportation expert Pessutti agrees with the chief economist’s conclusions.

“In addition, they’re having the challenge of attracting younger millennial talent that has the technology skills and know-how to be able to come in and help them innovate and make a change within their organization,” he says. “They’re having a hard time attracting the new talent because they’re not seen as innovators when it comes to technology. So, it’s something that we’re keeping our eye on and advising them to look at and find ways to take advantage of some of these new technologies.”

Bridging the gap between an aging workforce accustomed to traditional methods and engaging in millennial-styled outreach may be the pathway to resolving the growing workforce shortage. Costello concurs and has pointed to ideas such as lifestyle management and other industry modifications to attract a younger workforce.

Beyond making a shift that meets the ideas of tech-savvy drivers, the sector is tasked with maximizing its administrative and customer service technologies.

Blockchain innovation appears promising

When thinking about transportation in a comprehensive sense, it includes the movement of materials, manufacturing, air and sea travel, port arrivals, and warehousing. Trucking simply makes up one of the last legs of an intricate process. At each stage, stakeholders rely on traditional communication, cumbersome documents and sometimes just blind trust. The condition and timeliness of a product’s arrival are too often best guesses. Pessutti believes blockchain offers solutions.

“When you think about an indent shipment from the time an order gets placed to when it gets delivered to a customer, there’s probably 35 to 40 documents that you have to exchange in that process,” Pessutti says. “If we can get to a place where you’re able to look at those documents and actually get visibility and transparency into what’s happening as well as then trust that information, we’re going to do really well with blockchain in this industry.”

And, the SAP expert is far from alone in his assessment that blockchain can help revolutionize the transportation industry. Jillian Farrington argues in her article, “3 Ways Blockchain Technology Can Improve the Logistics Industry,” that it provides these key benefits: transparency, security, and cost-effectiveness. She makes these points.

  • Transparency: “Every time a product is handled, the transaction can be documented. The technology can enable everyone in the process of shipping to experience better visibility and connectivity.”
  • Security: “With blockchain, a copy of the essential shipping data can be stored on a decentralized network on individual nodes, so even if the network is hacked, the data remains safe.”
  • Increased efficiency and reduced costs: “The efficiencies created by this technology will get orders filled and delivered faster. It can record the transfer of raw materials and goods as they move through the supply chain as well as track purchase orders, shipment notifications, and receipts.”

Although blockchain can be a primary mover in terms of leveraging transportation industry data, the SAP expert recognizes the value of bringing a full complement of technological innovations to bear.

“I think what we’re able to do, and what we’ve proven out so far in this industry, is giving a lot of comfort to these shipping companies by connecting and integrating the digital core of what they’re running their business,” Pessutti says. “Whether it’s transportation management or an ERP environment, and then connecting them to these different capabilities around analytics and blockchain, (and) IOT.”

Transportation industry insiders appear to agree that the future of the sector faces a significant technological shift.

Take 12 minutes to get intellectually stimulated about the future of the transportation industry by listening to this S.M.A.C. Talk Technology Podcast featuring SAP expert Paul Pessutti.

Hear the full podcast episode here. Learn how to innovate at scale by incorporating individual innovations back to the core business to drive tangible business value by reading Accelerating Digital Transformation in Transportation.

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Paul Pessutti

About Paul Pessutti

Paul Pessutti is Senior Vice President and General Manager of the Travel, Transportation, and Hospitality Industry Unit at SAP. Applying over 20 years of experience in this area, Paul is responsible for establishing and maintaining key customer relationships, ensuring customer success, enhancing the solution portfolio, growing the partner ecosystem, and acting as the brand ambassador worldwide. The industry consists of nine industry segments including airlines, airports, passenger transport, hospitality, travel service providers, freight forwarding and third parties, rail cargo, liner shipping, and trucking.

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.

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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