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Making It Personal With Individualized Products

Richard Howells

Personalized solutions and products are everywhere. You can design your own sneakers, customize your own drinks in vending machines, configure cars and motorbikes, and print your own personalized chocolates.

Consumers are now expecting the customer experience to also be a customizable experience.

As a result, companies are doing their best to understand the full potential between physical and digital assets and the Internet of Things (IoT). And we are witnessing new use cases across industries with breathtaking results.

Coca-Cola has Coca-Cola Freestyle, a touchscreen soda fountain that enables consumers to personalize their soda with over 100 different flavor combinations. Nike has NIKEiD, which lets customers personalize their own shoes, bags, backpacks, and other accessories. Logistics service providers are investing in 3D printing farms in order to provide value-added services at the end of the runway before a customized product is shipped around the world.

The platform for personalization

The common feature of most companies’ “personalization” strategy is a strong platform that is used as a base for customization. This has been taking place in the car industry for several years, with companies such as BMW allowing people to customize their base model to order. The Apple iPhone is another great example of a platform, as anybody can buy one of a few base models, and then customize his or her own device with apps and visual effects. This means that, from five or six base options, everybody has a personalized device.

Smart products drive new business models

IoT and Industry 4.0 are changing traditional business models by connecting people, products, and assets. Manufacturers are investigating how these new technologies can help their customers get more value and how new business engagements can change established business models.

Companies are embedding sensors in their products and, as a result, are becoming more and more like technology companies, hiring software engineers and rethinking the value delivered by their products.

John Deere tractors are now equipped with sensors to transmit moisture and temperature data from the fields. Kaeser Compressors reimagined its business and moved from selling products to selling a “compressed air by cubic meter” service. This business model requires metering compressed air remotely and bundling this information into the charging and billing process. The company has also leveraged smart sensors embedded into the compressors to minimize unscheduled machine downtime through IoT-enabled predictive and preventative maintenance.

3D printing can revolutionize industries

Over the past few years, we have seen the emergence of 3D printers having a growing effect on our extended supply chain processes.

Sneaker manufacturers are prototyping the ability to print a unique 3D-printed running shoe midsole that can be tailored to the cushioning needs of an individual’s foot, based on running style on a treadmill in the store.

Logistics service providers are investing in 3D printing farms to provide value-added customization services just prior to shipment.

Chocolate manufacturers are enabling customers to personalize their favorite treat by printing unique shapes or edible messages.

Additive layer manufacturing enables us to rethink how we design, produce, and bring products to market, as well as provide competitive differentiation and personalization to our products.

Manufacturing a lot size of one

As manufacturers seek to keep up with the need for both personalized products and the changing demand market, they are looking for the agility of a manufacturer with a lot size of one. Harley Davidson completely reconfigured its York, Pennsylvania, facility to enable all machinery and logistics devices to be equipped with sensors and location awareness. The factory reduced the lead time to produce customized motorbikes from a 21-day cycle to six hours, and now you do not find two bikes in sequence that are the same. Each model has more than 1,000 configuration options, and one motorcycle comes off the assembly line every 89 seconds.

Personalize or perish

Manufacturing in the age of product customization can be challenging. But with technological advancements such as 3D printing, IoT, and the shift to Industry 4.0 taking hold, offering personalization options to your customer base is now critical to the success of your business.

To learn more, please visit Consumer products: Reimagined for the new economy.

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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.

How The Digital Age Is Driving Auto Industry Transformation

Chet Harter

Few companies are more dependent on technological sophistication than those in the automobile industry. As fast as digital technology is developing, savvy consumers still want more. But consumer demand is just one of the drivers pushing this transformation to digital. Others include Big Data, itself. Mobility and connectivity also play major roles as transformation drivers.

Consumer behavior

From design to retail sales, the auto industry is transforming faster than ever. Consumer demand drives this rapid transition through digital marketing. Consumers have access to this marketing anywhere and anytime at their discretion. When they feel ready to dig deeper, consumers can research vehicles online. They can even set up the vehicle purchase online through franchised distribution channels.

As Big Data makes more information available to them, consumers can take part in communication and collaboration all along the value chain. They can take advantage of value-added services from adjacent industries like the travel industry. And most important of all is their fascination with in-car connectivity and vehicle telematics.

Connectivity

Today’s consumers enjoy high levels of connectivity. These levels stretch the limits of innovation. New vehicle buyers are experienced with social media and smart devices. They want and expect these things in their cars. And not only are consumers connected, their vehicles are connected, too. Today’s cars share connectivity with their drivers and with other vehicles. They are connected to external networks such as General Motors’ OnStar monitoring service. This trend will only continue to develop further.

Our cars can now diagnose their own problems and warn us of them as the problems develop. Vehicle insights and analytics create and protect value for the consumer. As these are demanded by consumers, they also create value for the companies producing the vehicles.

KPMG, a professional auditing service in The Netherlands, conducts an annual survey of auto industry executives. Their 2016 global survey indicates that connectivity is one of the three most urgent imperatives for industry decision-making.

Connected consumers have access to a range of new technologies and information. This connectivity creates an omnichannel of seamless experiences in-car, online, and everywhere in between. We are rapidly moving toward a time when we will have connected fueling, connected parking, and automated payment systems. We will have connected electric vehicle re-charging, vehicle reservations, and payments.

The U.S. Department of Transportation (USDOT) estimates that vehicle-to-external connectivity could prevent 70 percent of vehicle crashes. And revenue from connected vehicles is expected to grow to $36.6 billion by 2025.

Digital data

Data itself is driving much of this transition. Big Data provides information on a wider scale. And vehicle data drives a need for sensors and in-car electronic monitoring devices. Portable computers interface with the consumer’s vehicle for data recording and transfer. And our vehicles are rapidly moving toward a time when the vehicle itself will be an extension of data. They will be data-connected vehicles in an automotive network of information. We are already seeing subscription services based on multi-channel access.

Autonomous vehicles are on the horizon. They are already warning drivers and taking control when it is necessary. They are monitoring and relaying information in real time on safety issues. They offer predictive data about other vehicles and traffic situations. In-car technologies already include cameras, maps, software, GPS, radar, and lasers. When enabled, automated driver assistance systems can take over in emergency situations.

The end point in this progression lies in the self-navigating driverless vehicle. These are not far off in the future. The multinational management firm, Boston Consulting Group, says the market for these cars may be worth $42 billion.

Mobility

Intelligent and agile transportation networks have changed the auto industry’s concept of mobility. There has been a shift in focus from products to services. We are seeing increasing demand for services that bundle mobility with other ancillary service offerings. These integrated mobility services become shared experiences, shared services. Mobility is now just-in-time and on-demand. We are beginning to see individualized mobility for both short distance and long-haul situations.

International management consulting firm Oliver Wyman predicts that there will be up to $100 billion potential value in mobility services.

The future: Where is this taking us?

Is there a down side to all of this? Yes, there is, but it is just one of many hurdles that the industry is fighting to overcome. The idea of driverless cars is not attractive to people who enjoy driving their cars. This, however, is just one factor in a volatile market situation.

But the upside is considerable. There will be tremendous improvement in traffic safety. Traffic deaths will plummet. The insurance industry will save billions of dollars in costs.

Besides, there is no stopping this future. The automotive industry value chain is already in transition to a digital network. It is already approaching the next-generation ecosystem. The logical prediction is that fairly soon, at least some vehicles will be driverless. To meet these growing industry demands, automotive companies are re-imagining their business models. They are looking to the future.

To learn more about digital transformation in the automotive industry, click here.

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Chet Harter

About Chet Harter

Chet Harter is a member of Industry Value Engineering at SAP and is the North American lead for Automotive. For over 12 years, Harter has helped many of SAP’s OEM, supplier, and dealer customers in the automotive, truck, and heavy equipment segments apply new technology to address current business issues and opportunities. Prior to SAP, he spent 12 years in various positions in materials and production management for global tier 1 supplier companies.

Digital Disruption Drives New Business For Auto Industry

Holger Masser

Disruption is driving change in the auto industry.

Digital innovation means companies will develop new approaches to doing business. Rethinking business models provides opportunity at every turn. Bold companies with new models discover new products and services to offer consumers.

The digital economy is a large reason for this shift. New drivers are pushing change. Auto companies that see possibilities in these changes have a decided advantage.

Digital drivers

We live in a hyper-connected world. Smart devices collect and share data with each other. Massive computer systems and platforms now allow for rapid data analysis.

Consumer expectations are shifting, too. Today’s consumers want to do more with what they buy. Consumers want experiences through their products. They expect dynamic relationships with the companies that make those products.

In the auto industry, these drivers present themselves throughout the value chain. Design, production, distribution, and retail are all ripe for reimagining.

Already, many auto companies are diving in and embracing this new digital economy.

For example, sensors and computers play an increasing role in vehicles. By recording and sharing vehicle data, companies can gain remarkable insights. These tools also now control key vehicle functions. In turn, connected vehicles provide analytics on performance and maintenance needs.

Consumers shop for and buy cars online, responding to digital marketing. Value-added services such as in-vehicle telematics are expected.

For companies that innovate, new possibilities will emerge.

With the rapid speed of change, companies might consider several core questions as they develop new business models. What profitable business models do new technologies and trends present? How does relationship-based selling work in new wholesale and retail business models? What market spaces do disruptive competitors such as Google find attractive? Who are good possible partners?

Creating new business models

In a volatile market, value will come from aligning the four core business operations in new ways. Restructuring the value chain will guide many of the successful new business models.

Let’s look at four areas where new business models are emerging.

Mobility

Mobility today carries new expectations. Transportation networks need to be agile and smart. Traveling for both short and long hauls is defined differently.

Today there is demand for service bundles that combine mobility with other ancillary services. Mobility becomes a commodity as the industry shifts from a product focus to a service focus.

Demand is growing for car sharing and fleet sharing. New possibilities include in-house solutions or joint ventures. Mobile connectivity opens up new ways to engage consumers and customers.

Vehicle networks

Connected vehicles can lead to further new business models. More historical, predictive data is available in real time about cars, traffic, and drivers. This information can guide product design, marketing strategy and bundled services.

Autonomous driverless vehicles are now possible thanks in part to a vast array of technology. Vehicles today are loaded with sensors, digital maps, cameras, lasers, radar, and wireless service.

Driver tasks are automated through new technologies. Emergency braking, adaptive cruise control, automated parking, and lane-changing assist are marketable services. Data leads to better diagnostics and vehicle health, dealer maintenance alerts, and onboard notifications.

Business networks

Digital growth allows for streamlined collaboration throughout the supply chain. Single access points, better supplier onboarding, and improved risk management services are possible.

Imagine a digitized business network. Connected partners share data from sourcing to production. Global commodities are measured in real time.

Supply volatility measurements are current. Partners share data to propel transparent transactions and information on long-term demand. Consistency grows in procurement, shipping, and invoicing. Payment processes are uniform.

Omnichannel commerce

Today, customers can connect anywhere at any time. With easy access to online resources and new technology, customers are driving change in many industries, and the auto industry is no exception.

These touchpoints across channels let companies offer seamless experiences. In the store, in the car, and online, opportunity is there.

There can now be a single view of customers, products, configurations, and orders. Commerce processes can be unified driven by these views.

New platforms that are agile, modular, and extensible allow growth. B2C, B2B, and B2B2C possibilities are waiting. The shopping process can be optimized with personalized functionality.

Potential at every turn

Experts agree that the possibilities are nearly endless for auto companies.

A 2015 report by Oliver Wyman predicts that automation alone will lead to new vehicle types within 10 years. Fully automated cars operate in closed areas like campuses or airports. Semi-automated cars will take control in traffic jams or on a highway.

Monetizing that expected functionality is a new avenue of growth. Every passenger spends an average of 50 minutes per day in a car, according to McKinsey. That’s also the average per capita amount of private Internet time. With potentially 1 billion passengers worldwide in 2030, McKinsey projects each of those 50 minutes translates to 5 billion in revenue.

Conclusion

The numbers are heady. For companies that recognize that digital disruption means opportunity, there are limitless options. By looking at mobility, networks, and omnichannel possibilities, creating new business models becomes imperative.

The digital economy allows for new relationships with customers and consumers. It opens up the potential of agile systems and collaboration throughout the value chain.

The trip to take, and the road to follow, are clear.

To learn more about digital transformation in the automotive industry, click here.

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Holger Masser

About Holger Masser

Holger Masser is global vice president of the global business unit Industry Business Solution of the Automotive Industry at SAP. He is responsible for the entire solution portfolio spanning from automotive supplier, automotive OEM, and automotive retail, and importer business. He joined SAP in 2011 and has been working for more then 20 years in the automotive industry, with 10 years in Asia. Masser has profound knowledge in the entire value chain of the automotive business, implementing long-term IT strategies aligned with corporate company objectives and business strategy. In Asia, he primarily focused on logistics, sales, aftersales, production and financial services on automotive OEM, retail, wholesale, and regional and headquarter levels.

How Much Will Digital Cannibalization Eat into Your Business?

Fawn Fitter

Former Cisco CEO John Chambers predicts that 40% of companies will crumble when they fail to complete a successful digital transformation.

These legacy companies may be trying to keep up with insurgent companies that are introducing disruptive technologies, but they’re being held back by the ease of doing business the way they always have – or by how vehemently their customers object to change.

Most organizations today know that they have to embrace innovation. The question is whether they can put a digital business model in place without damaging their existing business so badly that they don’t survive the transition. We gathered a panel of experts to discuss the fine line between disruption and destruction.

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qa_qIn 2011, when Netflix hiked prices and tried to split its streaming and DVD-bymail services, it lost 3.25% of its customer base and 75% of its market capitalization.²︐³ What can we learn from that?

Scott Anthony: That debacle shows that sometimes you can get ahead of your customers. The key is to manage things at the pace of the market, not at your internal speed. You need to know what your customers are looking for and what they’re willing to tolerate. Sometimes companies forget what their customers want and care about, and they try to push things on them before they’re ready.

R. “Ray” Wang: You need to be able to split your traditional business and your growth business so that you can focus on big shifts instead of moving the needle 2%. Netflix was responding to its customers – by deciding not to define its brand too narrowly.

qa_qDoes disruption always involve cannibalizing your own business?

Wang: You can’t design new experiences in existing systems. But you have to make sure you manage the revenue stream on the way down in the old business model while managing the growth of the new one.

Merijn Helle: Traditional brick-and-mortar stores are putting a lot of capital into digital initiatives that aren’t paying enough back yet in the form of online sales, and they’re cannibalizing their profits so they can deliver a single authentic experience. Customers don’t see channels, they see brands; and they want to interact with brands seamlessly in real time, regardless of channel or format.

Lars Bastian: In manufacturing, new technologies aren’t about disrupting your business model as much as they are about expanding it. Think about predictive maintenance, the ability to warn customers when the product they’ve purchased will need service. You’re not going to lose customers by introducing new processes. You have to add these digitized services to remain competitive.

qa_qIs cannibalizing your own business better or worse than losing market share to a more innovative competitor?

Michael Liebhold: You have to create that digital business and mandate it to grow. If you cannibalize the existing business, that’s just the price you have to pay.

Wang: Companies that cannibalize their own businesses are the ones that survive. If you don’t do it, someone else will. What we’re really talking about is “Why do you exist? Why does anyone want to buy from you?”

Anthony: I’m not sure that’s the right question. The fundamental question is what you’re using disruption to do. How do you use it to strengthen what you’re doing today, and what new things does it enable? I think you can get so consumed with all the changes that reconfigure what you’re doing today that you do only that. And if you do only that, your business becomes smaller, less significant, and less interesting.

qa_qSo how should companies think about smart disruption?

Anthony: Leaders have to reconfigure today and imagine tomorrow at the same time. It’s not either/or. Every disruptive threat has an equal, if not greater, opportunity. When disruption strikes, it’s a mistake only to feel the threat to your legacy business. It’s an opportunity to expand into a different marke.

SAP_Disruption_QA_images2400x1600_4Liebhold: It starts at the top. You can’t ask a CEO for an eight-figure budget to upgrade a cloud analytics system if the C-suite doesn’t understand the power of integrating data from across all the legacy systems. So the first task is to educate the senior team so it can approve the budgets.

Scott Underwood: Some of the most interesting questions are internal organizational questions, keeping people from feeling that their livelihoods are in danger or introducing ways to keep them engaged.

Leon Segal: Absolutely. If you want to enter a new market or introduce a new product, there’s a whole chain of stakeholders – including your own employees and the distribution chain. Their experiences are also new. Once you start looking for things that affect their experience, you can’t help doing it. You walk around the office and say, “That doesn’t look right, they don’t look happy. Maybe we should change that around.”

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

To learn more about how to disrupt your business without destroying it, read the in-depth report Digital Disruption: When to Cook the Golden Goose.

Download the PDF (1.2MB)

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Sherry Turkle: We Need to Talk

Stephanie Overby

reclaiming-conversation-sherry-turkle-200x300MIT psychologist Sherry Turkle on why we need to talk to our colleagues

Human beings are communicating more often and with more people than ever before, thanks to the digital devices we are all but tethered to. But the art of conversation is in decline. MIT psychologist Sherry Turkle, who has devoted her career to examining the impact of technology on human interaction, lays out some worrying consequences in her latest book, Reclaiming Conversation: The Power of Talk in a Digital Age. Overreliance on digital communication has not only affected our ability to have effective face-to-face exchanges but has also diminished our capacity for empathy and intimacy. In addition, digital discussions are often less productive and effective than in-person interactions.

We talked to Turkle about the value of human interaction that is unmediated by technology, when to choose talking over texts and e-mail, and how corporate leaders can revive conversation in the digital workplace.

Q: The big trend in business is digital transformation. A major goal is to automate and digitize interactions. What are companies losing in the bargain?

Sherry Turkle: When you want to build trust, when you want to get to know someone new, when you want to seal a deal—these are not moments for transactions, which are fairly blunt and objective instruments for communicating information. These are times for conversations, which are subjective and emotional and enable greater understanding. Good managers need to know when they are dealing with a moment when a transaction is appropriate and when it is a moment for a human exchange. If you try to be transactional when you need a conversation, you are on your way to frustration, disappointing results, and—most often—the need to do it all again.

Q: How has the increase in digital communications affected our ability to talk to each other?

Turkle: We find ways to not have the conversations that count. We would rather keep communication on screens. As one young man told me when I asked what was wrong with conversation: “It takes place in real time, and you can’t control what you’re going to say!” Of course, that is what’s “wrong” with conversation. But, it is also what’s profoundly right with conversation. It is a place where intimacy is born. The link between face-to-face conversation and empathy is strong. There has been a 40% decline in empathy among college students over the past 20 years, with most of that decline happening in the past decade.

Q: Why is face-to-face conversation important in business? Can’t that  effectively be simulated using technology?

Turkle: We are creatures designed for broadband, rich, nuanced exchange through our voices and faces. We are inventing new languages on the screen, and we are doing that with invention, wit, and nuance. But in business (as in friendship and love), we are misunderstanding each other—badly. And we are sending 10 e-mails where a brief call would do.

I am a pragmatist. When you need a video link or a call, use these tools. But what I see is people avoiding presence when it is possible.

Q: How can managers make a business case for talking?

Turkle: Research shows that conversation is good for the bottom line. People are more productive, creative, and engaged with their work when they have time for face. to-face talk. Sociologist Ben Waber had employees wear “sociometric badges” that measured their conversational patterns. When people were given coffee breaks together, performance improved. One CEO I interviewed instituted a breakfast meeting for his team. It gave them all an opportunity to share ideas and talk freely. Group productivity increased, and they needed fewer formal meetings.

One “easy” change is to eliminate devices from in-person meetings. The research is clear: devices distract. They diminish conversations and the relationships among participants. Make meetings shorter if necessary. Offer breaks. Designate one employee to notify attendees if an emergency arises. A meeting is a time to meet.

Q: What else can leaders do to encourage conversation amid the pressure to digitize?

Turkle: Make it clear that in your organization being online is not how you show your loyalty. Instead, show that what is valued is an employee who picks up the phone. Visit your colleagues in person. If you talk, others will talk. Also, design the workplace for conversation by creating device-free spaces that encourage it. Help employees work through their terror of real- time conversations by making it clear that revealing your thought process is valued. Finally, be less transactional. Begin an answer to an e-mail by saying, “I’m thinking.” It’s a powerful message. Complicated problems require thinking and then time to talk.

Q: We conducted this interview electronically to accommodate our schedules. What did I miss out on? How about you?

Turkle: We missed out on the chance to know each other better. What we had was a transaction. I took the time to lay out some of my ideas. But you and I are not closer for it. In business, this would not put us in the best relationship to move forward with a project. Now would be time for conversation!

 

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