Achieving The “Holy Grail” Of Customer Loyalty Through Community-Powered Commerce

Carolyn Beal

In the customer-centric world of commerce, it’s more important than ever to harness the power of online customer communities to drive business results. Too often, brands miss opportunities to align their communities with their commerce engines. This results in fragmented customer experiences and missed revenue-generation opportunities.

How customer communities enable customer loyalty

Loyalty is just one click of the mouse away. But how can brands ensure that happy customers become repeat customers?

One way is to incorporate different areas of the customer journey that impact online sales – including marketing and customer service – into a single central location.

By having this holistic strategy in place and focusing on personalized commerce, contextual marketing, and immediate customer service, companies can achieve that “Holy Grail” of customer loyalty and greatly impact commerce success. Businesses can provide this essential link with online customer communities.

Four ways customer communities drive business value

Fifty-four percent of companies state the greatest frequency of customer dropout occurs during the explore and buy phases of the customer journey, according to a 2016 Forrester study commissioned by SAP.

The study also uncovered that just 28% of companies believe they are fully harnessing the sales potential of branded social/community sites.

What can you do to impact your commerce program for success?

By tightly integrating your customer community with the core business applications you use to run your business, you can ensure that your customer community drives business value.

You can:

  • Make it easy and compelling for customers to engage (and re-engage) with your brand during every step of the buying journey
  • Leverage ratings, reviews, and community-contributed content such as blogs, Q&A boards, and discussions
  • Instill buying confidence by offering relevant, authentic, and trusted content
  • Lower the total cost of customer acquisition by inspiring loyalty

Begin your path to commerce success with a customer community

Today’s customers have more choices, maintain higher expectations, and are more connected than ever before.

With this evolution, customers are choosing brands that offer buying experiences that make sense, prove they know their customers through marketing outreach, and provide immediate and accurate access to customer service.

Are you ready to embark on this commerce journey? Download this essential checklist to learn what you need to consider when evaluating a commerce solution.

Comments

Carolyn Beal

About Carolyn Beal

Carolyn Beal is senior director of Solution Marketing for Social Software at SAP. Her specialties include product marketing, marketing communications, CRM, and demand generation.

3 Reasons Why You Should Add Services To Your Product Portfolio

Christopher Koch

Ever since I was a kid I’ve been fascinated by what they call in the construction business heavy equipment: bulldozers, backhoes, and such. I’m always getting shooed away by those bored off-duty cops they hire to keep an eye on things at construction sites.

Case Construction understands that many rainbow colors painted on a blackboard(mostly) men are like me – especially those who actually purchase these things. That’s why Case built something called the Tomahawk Experience Center in rural Wisconsin. It’s a heavy equipment theme park where customers can play with the big toys and participate in contests, such as who can remove the most amount of dirt in the shortest amount of time.

Experience and service go hand in hand

But Tomahawk isn’t just a playground; it’s a carefully crafted service. Case salespeople and equipment experts are on hand to join in the fun and explain the capabilities of the equipment in ways not possible through other channels. By building a great experience – and service – around the products, Case is winning big. The conversion rate for customers who visit Tomahawk is 80%, vs. 20% for those who go through a dealer, says Joseph Pine, a management consultant and coauthor of The Experience Economy: Work Is Theatre and Every Business a Stage.

“Companies have to rethink the product and revenues from selling goods to selling services,” says David Landsman, senior manager with Ariba Discovery, an SAP Company. “That’s challenging for a lot of companies. But when it’s done successfully, it can be very interesting and open up a much larger market than originally anticipated.”

Research by my colleague Polly Traylor uncovered three convincing reasons for companies to go beyond products and begin offering services:

  1. Global competition and commoditization. There are few products that can’t be easily copied and improved upon, and then sold into new markets anywhere. The impact of the Internet, global supply chains, cheap offshore labor, and social media can help a company rise up out of nowhere and compete directly with yours. To combat rapid marketplace disruption, companies must branch out into unique services for customers.
  1. Create sticky revenue. Some products aren’t bought very often and cost a lot to replace. Central air conditioning systems, for example. If the AC manufacturer can deliver a service, say a monthly subscription, that monitors usage, alerts you when there’s a malfunction, and even suggests ways you can save money on cooling, customers get stickier and the company gains a repeat customer.
  1. Consumers want to share and reuse. There are a few reasons why car sharing services Zipcar and Uber are doing so well: convenience, affordability, and the mere fact that some people don’t want to own an expensive, environmentally-damaging product. High-end products such as machinery, vehicles, engines, and luxury goods are prime candidates for renting versus owning. This is not only great for consumers who may not have been able to afford using such a product otherwise, but for the manufacturer who may earn higher proceeds renting a product over and over again versus selling it once.

Adding services isn’t always easy

However, while there are compelling reasons to offer services to complement a product or in addition to your product line, adding services isn’t a slam dunk. Pricing, operational metrics, business processes, customer relationships, and human capital requirements must all change to deliver a service rather than manufacture and distribute a product. Adding services also requires careful consideration of product alignment, an entrepreneurial approach, new skills, and new ways of managing.

We interviewed services experts to find out how product companies can make the transition to services in the report Your New Product Strategy: Services.

Comments

Joseph Msays

About Joseph Msays

Joseph Msays is an experienced IBM global executive, currently serving as Vice President and Global Managing Partner for NextGen Enterprise Cloud Applications Center of Excellence. In this role, he is pioneering new ways of engaging CxOs in their digital reinvention agendas, and building and migrating new cloud-based business applications. Joseph has experience managing many IBM professional services units and large strategic systems, integration and outsourcing relationships, and has lived and worked in virtually every major market across the globe.

3 Reasons Why You Should Add Services To Your Product Portfolio

Christopher Koch

Ever since I was a kid I’ve been fascinated by what they call in the construction business heavy equipment: bulldozers, backhoes, and such. I’m always getting shooed away by those bored off-duty cops they hire to keep an eye on things at construction sites.

Case Construction understands that many rainbow colors painted on a blackboard(mostly) men are like me – especially those who actually purchase these things. That’s why Case built something called the Tomahawk Experience Center in rural Wisconsin. It’s a heavy equipment theme park where customers can play with the big toys and participate in contests, such as who can remove the most amount of dirt in the shortest amount of time.

Experience and service go hand in hand

But Tomahawk isn’t just a playground; it’s a carefully crafted service. Case salespeople and equipment experts are on hand to join in the fun and explain the capabilities of the equipment in ways not possible through other channels. By building a great experience – and service – around the products, Case is winning big. The conversion rate for customers who visit Tomahawk is 80%, vs. 20% for those who go through a dealer, says Joseph Pine, a management consultant and coauthor of The Experience Economy: Work Is Theatre and Every Business a Stage.

“Companies have to rethink the product and revenues from selling goods to selling services,” says David Landsman, senior manager with Ariba Discovery, an SAP Company. “That’s challenging for a lot of companies. But when it’s done successfully, it can be very interesting and open up a much larger market than originally anticipated.”

Research by my colleague Polly Traylor uncovered three convincing reasons for companies to go beyond products and begin offering services:

  1. Global competition and commoditization. There are few products that can’t be easily copied and improved upon, and then sold into new markets anywhere. The impact of the Internet, global supply chains, cheap offshore labor, and social media can help a company rise up out of nowhere and compete directly with yours. To combat rapid marketplace disruption, companies must branch out into unique services for customers.
  1. Create sticky revenue. Some products aren’t bought very often and cost a lot to replace. Central air conditioning systems, for example. If the AC manufacturer can deliver a service, say a monthly subscription, that monitors usage, alerts you when there’s a malfunction, and even suggests ways you can save money on cooling, customers get stickier and the company gains a repeat customer.
  1. Consumers want to share and reuse. There are a few reasons why car sharing services Zipcar and Uber are doing so well: convenience, affordability, and the mere fact that some people don’t want to own an expensive, environmentally-damaging product. High-end products such as machinery, vehicles, engines, and luxury goods are prime candidates for renting versus owning. This is not only great for consumers who may not have been able to afford using such a product otherwise, but for the manufacturer who may earn higher proceeds renting a product over and over again versus selling it once.

Adding services isn’t always easy

However, while there are compelling reasons to offer services to complement a product or in addition to your product line, adding services isn’t a slam dunk. Pricing, operational metrics, business processes, customer relationships, and human capital requirements must all change to deliver a service rather than manufacture and distribute a product. Adding services also requires careful consideration of product alignment, an entrepreneurial approach, new skills, and new ways of managing.

We interviewed services experts to find out how product companies can make the transition to services in the report Your New Product Strategy: Services.

Comments

Vaag Durgaryan

About Vaag Durgaryan

Vaag Durgaryan is the commercial finance director for SAP in the Middle East and North Africa, which comprises of over 20 countries. Starting in 2017, he oversees a multinational team that provides finance expertise, knowledge, and strategy outlook for finance sales support in the region. Prior to that, Vaag was chief of staff for the CFO for SAP Global Field Finance and co-drove global transformation initiatives with focus on process simplification and people enablement. He holds an Executive MBA degree from ESSEC Business School and Mannheim Business School. Vaag has a passion in digitalization and learning culture.

3 Reasons Why You Should Add Services To Your Product Portfolio

Christopher Koch

Ever since I was a kid I’ve been fascinated by what they call in the construction business heavy equipment: bulldozers, backhoes, and such. I’m always getting shooed away by those bored off-duty cops they hire to keep an eye on things at construction sites.

Case Construction understands that many rainbow colors painted on a blackboard(mostly) men are like me – especially those who actually purchase these things. That’s why Case built something called the Tomahawk Experience Center in rural Wisconsin. It’s a heavy equipment theme park where customers can play with the big toys and participate in contests, such as who can remove the most amount of dirt in the shortest amount of time.

Experience and service go hand in hand

But Tomahawk isn’t just a playground; it’s a carefully crafted service. Case salespeople and equipment experts are on hand to join in the fun and explain the capabilities of the equipment in ways not possible through other channels. By building a great experience – and service – around the products, Case is winning big. The conversion rate for customers who visit Tomahawk is 80%, vs. 20% for those who go through a dealer, says Joseph Pine, a management consultant and coauthor of The Experience Economy: Work Is Theatre and Every Business a Stage.

“Companies have to rethink the product and revenues from selling goods to selling services,” says David Landsman, senior manager with Ariba Discovery, an SAP Company. “That’s challenging for a lot of companies. But when it’s done successfully, it can be very interesting and open up a much larger market than originally anticipated.”

Research by my colleague Polly Traylor uncovered three convincing reasons for companies to go beyond products and begin offering services:

  1. Global competition and commoditization. There are few products that can’t be easily copied and improved upon, and then sold into new markets anywhere. The impact of the Internet, global supply chains, cheap offshore labor, and social media can help a company rise up out of nowhere and compete directly with yours. To combat rapid marketplace disruption, companies must branch out into unique services for customers.
  1. Create sticky revenue. Some products aren’t bought very often and cost a lot to replace. Central air conditioning systems, for example. If the AC manufacturer can deliver a service, say a monthly subscription, that monitors usage, alerts you when there’s a malfunction, and even suggests ways you can save money on cooling, customers get stickier and the company gains a repeat customer.
  1. Consumers want to share and reuse. There are a few reasons why car sharing services Zipcar and Uber are doing so well: convenience, affordability, and the mere fact that some people don’t want to own an expensive, environmentally-damaging product. High-end products such as machinery, vehicles, engines, and luxury goods are prime candidates for renting versus owning. This is not only great for consumers who may not have been able to afford using such a product otherwise, but for the manufacturer who may earn higher proceeds renting a product over and over again versus selling it once.

Adding services isn’t always easy

However, while there are compelling reasons to offer services to complement a product or in addition to your product line, adding services isn’t a slam dunk. Pricing, operational metrics, business processes, customer relationships, and human capital requirements must all change to deliver a service rather than manufacture and distribute a product. Adding services also requires careful consideration of product alignment, an entrepreneurial approach, new skills, and new ways of managing.

We interviewed services experts to find out how product companies can make the transition to services in the report Your New Product Strategy: Services.

Comments

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.

3 Reasons Why You Should Add Services To Your Product Portfolio

Christopher Koch

Ever since I was a kid I’ve been fascinated by what they call in the construction business heavy equipment: bulldozers, backhoes, and such. I’m always getting shooed away by those bored off-duty cops they hire to keep an eye on things at construction sites.

Case Construction understands that many rainbow colors painted on a blackboard(mostly) men are like me – especially those who actually purchase these things. That’s why Case built something called the Tomahawk Experience Center in rural Wisconsin. It’s a heavy equipment theme park where customers can play with the big toys and participate in contests, such as who can remove the most amount of dirt in the shortest amount of time.

Experience and service go hand in hand

But Tomahawk isn’t just a playground; it’s a carefully crafted service. Case salespeople and equipment experts are on hand to join in the fun and explain the capabilities of the equipment in ways not possible through other channels. By building a great experience – and service – around the products, Case is winning big. The conversion rate for customers who visit Tomahawk is 80%, vs. 20% for those who go through a dealer, says Joseph Pine, a management consultant and coauthor of The Experience Economy: Work Is Theatre and Every Business a Stage.

“Companies have to rethink the product and revenues from selling goods to selling services,” says David Landsman, senior manager with Ariba Discovery, an SAP Company. “That’s challenging for a lot of companies. But when it’s done successfully, it can be very interesting and open up a much larger market than originally anticipated.”

Research by my colleague Polly Traylor uncovered three convincing reasons for companies to go beyond products and begin offering services:

  1. Global competition and commoditization. There are few products that can’t be easily copied and improved upon, and then sold into new markets anywhere. The impact of the Internet, global supply chains, cheap offshore labor, and social media can help a company rise up out of nowhere and compete directly with yours. To combat rapid marketplace disruption, companies must branch out into unique services for customers.
  1. Create sticky revenue. Some products aren’t bought very often and cost a lot to replace. Central air conditioning systems, for example. If the AC manufacturer can deliver a service, say a monthly subscription, that monitors usage, alerts you when there’s a malfunction, and even suggests ways you can save money on cooling, customers get stickier and the company gains a repeat customer.
  1. Consumers want to share and reuse. There are a few reasons why car sharing services Zipcar and Uber are doing so well: convenience, affordability, and the mere fact that some people don’t want to own an expensive, environmentally-damaging product. High-end products such as machinery, vehicles, engines, and luxury goods are prime candidates for renting versus owning. This is not only great for consumers who may not have been able to afford using such a product otherwise, but for the manufacturer who may earn higher proceeds renting a product over and over again versus selling it once.

Adding services isn’t always easy

However, while there are compelling reasons to offer services to complement a product or in addition to your product line, adding services isn’t a slam dunk. Pricing, operational metrics, business processes, customer relationships, and human capital requirements must all change to deliver a service rather than manufacture and distribute a product. Adding services also requires careful consideration of product alignment, an entrepreneurial approach, new skills, and new ways of managing.

We interviewed services experts to find out how product companies can make the transition to services in the report Your New Product Strategy: Services.

Comments

Stefan Guertzgen

About Stefan Guertzgen

Dr. Stefan Guertzgen is the Global Director of Industry Solution Marketing for Chemicals at SAP. He is responsible for driving Industry Thought Leadership, Positioning & Messaging and strategic Portfolio Decisions for Chemicals.

3 Reasons Why You Should Add Services To Your Product Portfolio

Christopher Koch

Ever since I was a kid I’ve been fascinated by what they call in the construction business heavy equipment: bulldozers, backhoes, and such. I’m always getting shooed away by those bored off-duty cops they hire to keep an eye on things at construction sites.

Case Construction understands that many rainbow colors painted on a blackboard(mostly) men are like me – especially those who actually purchase these things. That’s why Case built something called the Tomahawk Experience Center in rural Wisconsin. It’s a heavy equipment theme park where customers can play with the big toys and participate in contests, such as who can remove the most amount of dirt in the shortest amount of time.

Experience and service go hand in hand

But Tomahawk isn’t just a playground; it’s a carefully crafted service. Case salespeople and equipment experts are on hand to join in the fun and explain the capabilities of the equipment in ways not possible through other channels. By building a great experience – and service – around the products, Case is winning big. The conversion rate for customers who visit Tomahawk is 80%, vs. 20% for those who go through a dealer, says Joseph Pine, a management consultant and coauthor of The Experience Economy: Work Is Theatre and Every Business a Stage.

“Companies have to rethink the product and revenues from selling goods to selling services,” says David Landsman, senior manager with Ariba Discovery, an SAP Company. “That’s challenging for a lot of companies. But when it’s done successfully, it can be very interesting and open up a much larger market than originally anticipated.”

Research by my colleague Polly Traylor uncovered three convincing reasons for companies to go beyond products and begin offering services:

  1. Global competition and commoditization. There are few products that can’t be easily copied and improved upon, and then sold into new markets anywhere. The impact of the Internet, global supply chains, cheap offshore labor, and social media can help a company rise up out of nowhere and compete directly with yours. To combat rapid marketplace disruption, companies must branch out into unique services for customers.
  1. Create sticky revenue. Some products aren’t bought very often and cost a lot to replace. Central air conditioning systems, for example. If the AC manufacturer can deliver a service, say a monthly subscription, that monitors usage, alerts you when there’s a malfunction, and even suggests ways you can save money on cooling, customers get stickier and the company gains a repeat customer.
  1. Consumers want to share and reuse. There are a few reasons why car sharing services Zipcar and Uber are doing so well: convenience, affordability, and the mere fact that some people don’t want to own an expensive, environmentally-damaging product. High-end products such as machinery, vehicles, engines, and luxury goods are prime candidates for renting versus owning. This is not only great for consumers who may not have been able to afford using such a product otherwise, but for the manufacturer who may earn higher proceeds renting a product over and over again versus selling it once.

Adding services isn’t always easy

However, while there are compelling reasons to offer services to complement a product or in addition to your product line, adding services isn’t a slam dunk. Pricing, operational metrics, business processes, customer relationships, and human capital requirements must all change to deliver a service rather than manufacture and distribute a product. Adding services also requires careful consideration of product alignment, an entrepreneurial approach, new skills, and new ways of managing.

We interviewed services experts to find out how product companies can make the transition to services in the report Your New Product Strategy: Services.

Comments

Andy Hirst

About Andy Hirst

Andy Hirst is vice president of Banking Solutions, SAP Banking Industry Business Unit, at SAP. He is responsible for driving the success of the SAP go-to-market strategy in Line of Business Cloud Applications and Analytics in Financial Services. Previously, Andy was responsible for Capital Markets solutions for banking. Andy is an expert in Big Data and analytics use cases in financial services and has been involved in many digital banking initiatives for banks.

3 Reasons Why You Should Add Services To Your Product Portfolio

Christopher Koch

Ever since I was a kid I’ve been fascinated by what they call in the construction business heavy equipment: bulldozers, backhoes, and such. I’m always getting shooed away by those bored off-duty cops they hire to keep an eye on things at construction sites.

Case Construction understands that many rainbow colors painted on a blackboard(mostly) men are like me – especially those who actually purchase these things. That’s why Case built something called the Tomahawk Experience Center in rural Wisconsin. It’s a heavy equipment theme park where customers can play with the big toys and participate in contests, such as who can remove the most amount of dirt in the shortest amount of time.

Experience and service go hand in hand

But Tomahawk isn’t just a playground; it’s a carefully crafted service. Case salespeople and equipment experts are on hand to join in the fun and explain the capabilities of the equipment in ways not possible through other channels. By building a great experience – and service – around the products, Case is winning big. The conversion rate for customers who visit Tomahawk is 80%, vs. 20% for those who go through a dealer, says Joseph Pine, a management consultant and coauthor of The Experience Economy: Work Is Theatre and Every Business a Stage.

“Companies have to rethink the product and revenues from selling goods to selling services,” says David Landsman, senior manager with Ariba Discovery, an SAP Company. “That’s challenging for a lot of companies. But when it’s done successfully, it can be very interesting and open up a much larger market than originally anticipated.”

Research by my colleague Polly Traylor uncovered three convincing reasons for companies to go beyond products and begin offering services:

  1. Global competition and commoditization. There are few products that can’t be easily copied and improved upon, and then sold into new markets anywhere. The impact of the Internet, global supply chains, cheap offshore labor, and social media can help a company rise up out of nowhere and compete directly with yours. To combat rapid marketplace disruption, companies must branch out into unique services for customers.
  1. Create sticky revenue. Some products aren’t bought very often and cost a lot to replace. Central air conditioning systems, for example. If the AC manufacturer can deliver a service, say a monthly subscription, that monitors usage, alerts you when there’s a malfunction, and even suggests ways you can save money on cooling, customers get stickier and the company gains a repeat customer.
  1. Consumers want to share and reuse. There are a few reasons why car sharing services Zipcar and Uber are doing so well: convenience, affordability, and the mere fact that some people don’t want to own an expensive, environmentally-damaging product. High-end products such as machinery, vehicles, engines, and luxury goods are prime candidates for renting versus owning. This is not only great for consumers who may not have been able to afford using such a product otherwise, but for the manufacturer who may earn higher proceeds renting a product over and over again versus selling it once.

Adding services isn’t always easy

However, while there are compelling reasons to offer services to complement a product or in addition to your product line, adding services isn’t a slam dunk. Pricing, operational metrics, business processes, customer relationships, and human capital requirements must all change to deliver a service rather than manufacture and distribute a product. Adding services also requires careful consideration of product alignment, an entrepreneurial approach, new skills, and new ways of managing.

We interviewed services experts to find out how product companies can make the transition to services in the report Your New Product Strategy: Services.

Comments

Tina Gunn

About Tina Gunn

Tina Gunn is the content marketing manager for the Enterprise Americas team at SAP Concur. Tina earned her degree in Journalism from the University of Washington and brings her experience in content strategy and digital marketing to SAP Concur. When she’s not creating thought leadership and sales enablement content, Tina writes fiction and screenplays of the horror and sci-fi genres.

3 Reasons Why You Should Add Services To Your Product Portfolio

Christopher Koch

Ever since I was a kid I’ve been fascinated by what they call in the construction business heavy equipment: bulldozers, backhoes, and such. I’m always getting shooed away by those bored off-duty cops they hire to keep an eye on things at construction sites.

Case Construction understands that many rainbow colors painted on a blackboard(mostly) men are like me – especially those who actually purchase these things. That’s why Case built something called the Tomahawk Experience Center in rural Wisconsin. It’s a heavy equipment theme park where customers can play with the big toys and participate in contests, such as who can remove the most amount of dirt in the shortest amount of time.

Experience and service go hand in hand

But Tomahawk isn’t just a playground; it’s a carefully crafted service. Case salespeople and equipment experts are on hand to join in the fun and explain the capabilities of the equipment in ways not possible through other channels. By building a great experience – and service – around the products, Case is winning big. The conversion rate for customers who visit Tomahawk is 80%, vs. 20% for those who go through a dealer, says Joseph Pine, a management consultant and coauthor of The Experience Economy: Work Is Theatre and Every Business a Stage.

“Companies have to rethink the product and revenues from selling goods to selling services,” says David Landsman, senior manager with Ariba Discovery, an SAP Company. “That’s challenging for a lot of companies. But when it’s done successfully, it can be very interesting and open up a much larger market than originally anticipated.”

Research by my colleague Polly Traylor uncovered three convincing reasons for companies to go beyond products and begin offering services:

  1. Global competition and commoditization. There are few products that can’t be easily copied and improved upon, and then sold into new markets anywhere. The impact of the Internet, global supply chains, cheap offshore labor, and social media can help a company rise up out of nowhere and compete directly with yours. To combat rapid marketplace disruption, companies must branch out into unique services for customers.
  1. Create sticky revenue. Some products aren’t bought very often and cost a lot to replace. Central air conditioning systems, for example. If the AC manufacturer can deliver a service, say a monthly subscription, that monitors usage, alerts you when there’s a malfunction, and even suggests ways you can save money on cooling, customers get stickier and the company gains a repeat customer.
  1. Consumers want to share and reuse. There are a few reasons why car sharing services Zipcar and Uber are doing so well: convenience, affordability, and the mere fact that some people don’t want to own an expensive, environmentally-damaging product. High-end products such as machinery, vehicles, engines, and luxury goods are prime candidates for renting versus owning. This is not only great for consumers who may not have been able to afford using such a product otherwise, but for the manufacturer who may earn higher proceeds renting a product over and over again versus selling it once.

Adding services isn’t always easy

However, while there are compelling reasons to offer services to complement a product or in addition to your product line, adding services isn’t a slam dunk. Pricing, operational metrics, business processes, customer relationships, and human capital requirements must all change to deliver a service rather than manufacture and distribute a product. Adding services also requires careful consideration of product alignment, an entrepreneurial approach, new skills, and new ways of managing.

We interviewed services experts to find out how product companies can make the transition to services in the report Your New Product Strategy: Services.

Comments

Rushenka Perera

About Rushenka Perera

Rushenka is Head of Marketing at SAP ANZ.

3 Reasons Why You Should Add Services To Your Product Portfolio

Christopher Koch

Ever since I was a kid I’ve been fascinated by what they call in the construction business heavy equipment: bulldozers, backhoes, and such. I’m always getting shooed away by those bored off-duty cops they hire to keep an eye on things at construction sites.

Case Construction understands that many rainbow colors painted on a blackboard(mostly) men are like me – especially those who actually purchase these things. That’s why Case built something called the Tomahawk Experience Center in rural Wisconsin. It’s a heavy equipment theme park where customers can play with the big toys and participate in contests, such as who can remove the most amount of dirt in the shortest amount of time.

Experience and service go hand in hand

But Tomahawk isn’t just a playground; it’s a carefully crafted service. Case salespeople and equipment experts are on hand to join in the fun and explain the capabilities of the equipment in ways not possible through other channels. By building a great experience – and service – around the products, Case is winning big. The conversion rate for customers who visit Tomahawk is 80%, vs. 20% for those who go through a dealer, says Joseph Pine, a management consultant and coauthor of The Experience Economy: Work Is Theatre and Every Business a Stage.

“Companies have to rethink the product and revenues from selling goods to selling services,” says David Landsman, senior manager with Ariba Discovery, an SAP Company. “That’s challenging for a lot of companies. But when it’s done successfully, it can be very interesting and open up a much larger market than originally anticipated.”

Research by my colleague Polly Traylor uncovered three convincing reasons for companies to go beyond products and begin offering services:

  1. Global competition and commoditization. There are few products that can’t be easily copied and improved upon, and then sold into new markets anywhere. The impact of the Internet, global supply chains, cheap offshore labor, and social media can help a company rise up out of nowhere and compete directly with yours. To combat rapid marketplace disruption, companies must branch out into unique services for customers.
  1. Create sticky revenue. Some products aren’t bought very often and cost a lot to replace. Central air conditioning systems, for example. If the AC manufacturer can deliver a service, say a monthly subscription, that monitors usage, alerts you when there’s a malfunction, and even suggests ways you can save money on cooling, customers get stickier and the company gains a repeat customer.
  1. Consumers want to share and reuse. There are a few reasons why car sharing services Zipcar and Uber are doing so well: convenience, affordability, and the mere fact that some people don’t want to own an expensive, environmentally-damaging product. High-end products such as machinery, vehicles, engines, and luxury goods are prime candidates for renting versus owning. This is not only great for consumers who may not have been able to afford using such a product otherwise, but for the manufacturer who may earn higher proceeds renting a product over and over again versus selling it once.

Adding services isn’t always easy

However, while there are compelling reasons to offer services to complement a product or in addition to your product line, adding services isn’t a slam dunk. Pricing, operational metrics, business processes, customer relationships, and human capital requirements must all change to deliver a service rather than manufacture and distribute a product. Adding services also requires careful consideration of product alignment, an entrepreneurial approach, new skills, and new ways of managing.

We interviewed services experts to find out how product companies can make the transition to services in the report Your New Product Strategy: Services.

Comments

Jennifer Horowitz

About Jennifer Horowitz

Jennifer Horowitz is a journalist with over 15 years of experience working in the technology, financial, hospitality, real estate, healthcare, manufacturing, not for profit, and retail sectors. She specializes in the field of analytics, offering management consulting serving global clients from midsize to large-scale organizations. Within the field of analytics, she helps higher-level organizations define their metrics strategies, create concepts, define problems, conduct analysis, problem solve, and execute.

3 Reasons Why You Should Add Services To Your Product Portfolio

Christopher Koch

Ever since I was a kid I’ve been fascinated by what they call in the construction business heavy equipment: bulldozers, backhoes, and such. I’m always getting shooed away by those bored off-duty cops they hire to keep an eye on things at construction sites.

Case Construction understands that many rainbow colors painted on a blackboard(mostly) men are like me – especially those who actually purchase these things. That’s why Case built something called the Tomahawk Experience Center in rural Wisconsin. It’s a heavy equipment theme park where customers can play with the big toys and participate in contests, such as who can remove the most amount of dirt in the shortest amount of time.

Experience and service go hand in hand

But Tomahawk isn’t just a playground; it’s a carefully crafted service. Case salespeople and equipment experts are on hand to join in the fun and explain the capabilities of the equipment in ways not possible through other channels. By building a great experience – and service – around the products, Case is winning big. The conversion rate for customers who visit Tomahawk is 80%, vs. 20% for those who go through a dealer, says Joseph Pine, a management consultant and coauthor of The Experience Economy: Work Is Theatre and Every Business a Stage.

“Companies have to rethink the product and revenues from selling goods to selling services,” says David Landsman, senior manager with Ariba Discovery, an SAP Company. “That’s challenging for a lot of companies. But when it’s done successfully, it can be very interesting and open up a much larger market than originally anticipated.”

Research by my colleague Polly Traylor uncovered three convincing reasons for companies to go beyond products and begin offering services:

  1. Global competition and commoditization. There are few products that can’t be easily copied and improved upon, and then sold into new markets anywhere. The impact of the Internet, global supply chains, cheap offshore labor, and social media can help a company rise up out of nowhere and compete directly with yours. To combat rapid marketplace disruption, companies must branch out into unique services for customers.
  1. Create sticky revenue. Some products aren’t bought very often and cost a lot to replace. Central air conditioning systems, for example. If the AC manufacturer can deliver a service, say a monthly subscription, that monitors usage, alerts you when there’s a malfunction, and even suggests ways you can save money on cooling, customers get stickier and the company gains a repeat customer.
  1. Consumers want to share and reuse. There are a few reasons why car sharing services Zipcar and Uber are doing so well: convenience, affordability, and the mere fact that some people don’t want to own an expensive, environmentally-damaging product. High-end products such as machinery, vehicles, engines, and luxury goods are prime candidates for renting versus owning. This is not only great for consumers who may not have been able to afford using such a product otherwise, but for the manufacturer who may earn higher proceeds renting a product over and over again versus selling it once.

Adding services isn’t always easy

However, while there are compelling reasons to offer services to complement a product or in addition to your product line, adding services isn’t a slam dunk. Pricing, operational metrics, business processes, customer relationships, and human capital requirements must all change to deliver a service rather than manufacture and distribute a product. Adding services also requires careful consideration of product alignment, an entrepreneurial approach, new skills, and new ways of managing.

We interviewed services experts to find out how product companies can make the transition to services in the report Your New Product Strategy: Services.

Comments

Patrick Crampton-Thomas

About Patrick Crampton-Thomas

Patrick Crampton-Thomas is Vice President of Supply Chain Solution Management at SAP, with global responsibility for the response and supply orchestration portfolio, based in the UK. This includes the strategy and go-to-market for existing and new supply chain solutions including integrated business planning solutions, supply chain control tower, and supply chain collaboration.

3 Reasons Why You Should Add Services To Your Product Portfolio

Christopher Koch

Ever since I was a kid I’ve been fascinated by what they call in the construction business heavy equipment: bulldozers, backhoes, and such. I’m always getting shooed away by those bored off-duty cops they hire to keep an eye on things at construction sites.

Case Construction understands that many rainbow colors painted on a blackboard(mostly) men are like me – especially those who actually purchase these things. That’s why Case built something called the Tomahawk Experience Center in rural Wisconsin. It’s a heavy equipment theme park where customers can play with the big toys and participate in contests, such as who can remove the most amount of dirt in the shortest amount of time.

Experience and service go hand in hand

But Tomahawk isn’t just a playground; it’s a carefully crafted service. Case salespeople and equipment experts are on hand to join in the fun and explain the capabilities of the equipment in ways not possible through other channels. By building a great experience – and service – around the products, Case is winning big. The conversion rate for customers who visit Tomahawk is 80%, vs. 20% for those who go through a dealer, says Joseph Pine, a management consultant and coauthor of The Experience Economy: Work Is Theatre and Every Business a Stage.

“Companies have to rethink the product and revenues from selling goods to selling services,” says David Landsman, senior manager with Ariba Discovery, an SAP Company. “That’s challenging for a lot of companies. But when it’s done successfully, it can be very interesting and open up a much larger market than originally anticipated.”

Research by my colleague Polly Traylor uncovered three convincing reasons for companies to go beyond products and begin offering services:

  1. Global competition and commoditization. There are few products that can’t be easily copied and improved upon, and then sold into new markets anywhere. The impact of the Internet, global supply chains, cheap offshore labor, and social media can help a company rise up out of nowhere and compete directly with yours. To combat rapid marketplace disruption, companies must branch out into unique services for customers.
  1. Create sticky revenue. Some products aren’t bought very often and cost a lot to replace. Central air conditioning systems, for example. If the AC manufacturer can deliver a service, say a monthly subscription, that monitors usage, alerts you when there’s a malfunction, and even suggests ways you can save money on cooling, customers get stickier and the company gains a repeat customer.
  1. Consumers want to share and reuse. There are a few reasons why car sharing services Zipcar and Uber are doing so well: convenience, affordability, and the mere fact that some people don’t want to own an expensive, environmentally-damaging product. High-end products such as machinery, vehicles, engines, and luxury goods are prime candidates for renting versus owning. This is not only great for consumers who may not have been able to afford using such a product otherwise, but for the manufacturer who may earn higher proceeds renting a product over and over again versus selling it once.

Adding services isn’t always easy

However, while there are compelling reasons to offer services to complement a product or in addition to your product line, adding services isn’t a slam dunk. Pricing, operational metrics, business processes, customer relationships, and human capital requirements must all change to deliver a service rather than manufacture and distribute a product. Adding services also requires careful consideration of product alignment, an entrepreneurial approach, new skills, and new ways of managing.

We interviewed services experts to find out how product companies can make the transition to services in the report Your New Product Strategy: Services.

Comments

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. 

4 Ways To Customize Products Without Breaking The Bank

Christopher Koch

Imagine you ran a company that lets customers specify whatever they want in your products – custom sneakersincluding using their own materials.

You’re probably thinking that the company has to be small and focused on artisanal products: custom jewelry, custom bicycles, etc., that lend themselves to catering to every whim of the customer. But there is a company that is neither small nor in it for the sake of art or lifestyle (read just enough money to make rent).

Lutron Electronics has built a manufacturing and services business based on customization. It began when founder Joel Spira invented the electronic light dimmer in the late ’50s. Today, it offers 17,000 products, all built around the concept of customer-driven customization.

Lutron can match any color – that Benjamin Moore Palladian blue you painted the nursery, say – and deliver a light switch cover to match. Its new motorized window shade products can incorporate custom fabrics sent in by customers.

The tension between order and chaos

In an interview with my colleague Stephanie Overby, Spira says that his company’s embrace of a profitable make-for-me model is governed by a constant tension between order and chaos, between standard modules and creativity in engineering, between costs and customization in production, and between customer satisfaction and information overload in sales. The chaos increases new business. The order boosts profitability.

4 practices to make customization work

Lutron focuses on four practices when customizing its products:

  1. Create common modular components across product lines. Of course, not every aspect of a Lutron product is customized – just the ones customers care about. The rest is built on common platforms that are shared.
  1. Make sure employees continuously interact with customers. Continuous interaction, through sales and service, helps Lutron figure out what parts of its products need to be customized.
  1. Widen the ranges of functions and features in new and old product lines. There’s a certain finality to customization in customers’ minds. They got it just the way they wanted it. But if the product suddenly does more than it used to, that sense of finality goes away and customers become more open to replacing it.
  1. Think ahead of customers. Most importantly, Lutron thinks about how customers might want to alter or improve a product before they begin producing it in order to create profitable processes for bespoke products.

Processes designed to anticipate

Early on in the product lifecycle, Lutron’s designers and engineers meet to brainstorm the kinds of individualization customers may want. For example, when Lutron decided to launch ultra-quiet, precision-controlled window treatments, it created a process for the automated window shades so that they could incorporate custom materials designated by the customer – a specific red fabric, for example – while still maintaining product quality. They created a “customer-supplied material process” so the company could accept and safely store the fabrics, some of which might be valuable or irreplaceable.

Don’t customize everything

Lutron still churns out mass produced products. Mass production will never die – at Lutron or anywhere else. But a complementary and profitable make-for-me model of manufacturing has sprung up alongside it.

Lutron’s model gives it a head start in the make-for-me future. We are witnessing the beginning of the democratization, decentralization, and hyper-personalization of manufacturing – just in time, just in place, and just for me. As a broad spectrum of customization emerges, from truly unique lots of one to the typical “list of options” model that exists today, companies will have to figure out where they fit – and fit profitably – on that continuum.

We recently interviewed other experts along with Lutron about where the make-for-me future is going. You can read our findings in the in-depth report The Make-for-Me Future.

Comments

Joseph Msays

About Joseph Msays

Joseph Msays is an experienced IBM global executive, currently serving as Vice President and Global Managing Partner for NextGen Enterprise Cloud Applications Center of Excellence. In this role, he is pioneering new ways of engaging CxOs in their digital reinvention agendas, and building and migrating new cloud-based business applications. Joseph has experience managing many IBM professional services units and large strategic systems, integration and outsourcing relationships, and has lived and worked in virtually every major market across the globe.

4 Ways To Customize Products Without Breaking The Bank

Christopher Koch

Imagine you ran a company that lets customers specify whatever they want in your products – custom sneakersincluding using their own materials.

You’re probably thinking that the company has to be small and focused on artisanal products: custom jewelry, custom bicycles, etc., that lend themselves to catering to every whim of the customer. But there is a company that is neither small nor in it for the sake of art or lifestyle (read just enough money to make rent).

Lutron Electronics has built a manufacturing and services business based on customization. It began when founder Joel Spira invented the electronic light dimmer in the late ’50s. Today, it offers 17,000 products, all built around the concept of customer-driven customization.

Lutron can match any color – that Benjamin Moore Palladian blue you painted the nursery, say – and deliver a light switch cover to match. Its new motorized window shade products can incorporate custom fabrics sent in by customers.

The tension between order and chaos

In an interview with my colleague Stephanie Overby, Spira says that his company’s embrace of a profitable make-for-me model is governed by a constant tension between order and chaos, between standard modules and creativity in engineering, between costs and customization in production, and between customer satisfaction and information overload in sales. The chaos increases new business. The order boosts profitability.

4 practices to make customization work

Lutron focuses on four practices when customizing its products:

  1. Create common modular components across product lines. Of course, not every aspect of a Lutron product is customized – just the ones customers care about. The rest is built on common platforms that are shared.
  1. Make sure employees continuously interact with customers. Continuous interaction, through sales and service, helps Lutron figure out what parts of its products need to be customized.
  1. Widen the ranges of functions and features in new and old product lines. There’s a certain finality to customization in customers’ minds. They got it just the way they wanted it. But if the product suddenly does more than it used to, that sense of finality goes away and customers become more open to replacing it.
  1. Think ahead of customers. Most importantly, Lutron thinks about how customers might want to alter or improve a product before they begin producing it in order to create profitable processes for bespoke products.

Processes designed to anticipate

Early on in the product lifecycle, Lutron’s designers and engineers meet to brainstorm the kinds of individualization customers may want. For example, when Lutron decided to launch ultra-quiet, precision-controlled window treatments, it created a process for the automated window shades so that they could incorporate custom materials designated by the customer – a specific red fabric, for example – while still maintaining product quality. They created a “customer-supplied material process” so the company could accept and safely store the fabrics, some of which might be valuable or irreplaceable.

Don’t customize everything

Lutron still churns out mass produced products. Mass production will never die – at Lutron or anywhere else. But a complementary and profitable make-for-me model of manufacturing has sprung up alongside it.

Lutron’s model gives it a head start in the make-for-me future. We are witnessing the beginning of the democratization, decentralization, and hyper-personalization of manufacturing – just in time, just in place, and just for me. As a broad spectrum of customization emerges, from truly unique lots of one to the typical “list of options” model that exists today, companies will have to figure out where they fit – and fit profitably – on that continuum.

We recently interviewed other experts along with Lutron about where the make-for-me future is going. You can read our findings in the in-depth report The Make-for-Me Future.

Comments

Vaag Durgaryan

About Vaag Durgaryan

Vaag Durgaryan is the commercial finance director for SAP in the Middle East and North Africa, which comprises of over 20 countries. Starting in 2017, he oversees a multinational team that provides finance expertise, knowledge, and strategy outlook for finance sales support in the region. Prior to that, Vaag was chief of staff for the CFO for SAP Global Field Finance and co-drove global transformation initiatives with focus on process simplification and people enablement. He holds an Executive MBA degree from ESSEC Business School and Mannheim Business School. Vaag has a passion in digitalization and learning culture.

4 Ways To Customize Products Without Breaking The Bank

Christopher Koch

Imagine you ran a company that lets customers specify whatever they want in your products – custom sneakersincluding using their own materials.

You’re probably thinking that the company has to be small and focused on artisanal products: custom jewelry, custom bicycles, etc., that lend themselves to catering to every whim of the customer. But there is a company that is neither small nor in it for the sake of art or lifestyle (read just enough money to make rent).

Lutron Electronics has built a manufacturing and services business based on customization. It began when founder Joel Spira invented the electronic light dimmer in the late ’50s. Today, it offers 17,000 products, all built around the concept of customer-driven customization.

Lutron can match any color – that Benjamin Moore Palladian blue you painted the nursery, say – and deliver a light switch cover to match. Its new motorized window shade products can incorporate custom fabrics sent in by customers.

The tension between order and chaos

In an interview with my colleague Stephanie Overby, Spira says that his company’s embrace of a profitable make-for-me model is governed by a constant tension between order and chaos, between standard modules and creativity in engineering, between costs and customization in production, and between customer satisfaction and information overload in sales. The chaos increases new business. The order boosts profitability.

4 practices to make customization work

Lutron focuses on four practices when customizing its products:

  1. Create common modular components across product lines. Of course, not every aspect of a Lutron product is customized – just the ones customers care about. The rest is built on common platforms that are shared.
  1. Make sure employees continuously interact with customers. Continuous interaction, through sales and service, helps Lutron figure out what parts of its products need to be customized.
  1. Widen the ranges of functions and features in new and old product lines. There’s a certain finality to customization in customers’ minds. They got it just the way they wanted it. But if the product suddenly does more than it used to, that sense of finality goes away and customers become more open to replacing it.
  1. Think ahead of customers. Most importantly, Lutron thinks about how customers might want to alter or improve a product before they begin producing it in order to create profitable processes for bespoke products.

Processes designed to anticipate

Early on in the product lifecycle, Lutron’s designers and engineers meet to brainstorm the kinds of individualization customers may want. For example, when Lutron decided to launch ultra-quiet, precision-controlled window treatments, it created a process for the automated window shades so that they could incorporate custom materials designated by the customer – a specific red fabric, for example – while still maintaining product quality. They created a “customer-supplied material process” so the company could accept and safely store the fabrics, some of which might be valuable or irreplaceable.

Don’t customize everything

Lutron still churns out mass produced products. Mass production will never die – at Lutron or anywhere else. But a complementary and profitable make-for-me model of manufacturing has sprung up alongside it.

Lutron’s model gives it a head start in the make-for-me future. We are witnessing the beginning of the democratization, decentralization, and hyper-personalization of manufacturing – just in time, just in place, and just for me. As a broad spectrum of customization emerges, from truly unique lots of one to the typical “list of options” model that exists today, companies will have to figure out where they fit – and fit profitably – on that continuum.

We recently interviewed other experts along with Lutron about where the make-for-me future is going. You can read our findings in the in-depth report The Make-for-Me Future.

Comments

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.

4 Ways To Customize Products Without Breaking The Bank

Christopher Koch

Imagine you ran a company that lets customers specify whatever they want in your products – custom sneakersincluding using their own materials.

You’re probably thinking that the company has to be small and focused on artisanal products: custom jewelry, custom bicycles, etc., that lend themselves to catering to every whim of the customer. But there is a company that is neither small nor in it for the sake of art or lifestyle (read just enough money to make rent).

Lutron Electronics has built a manufacturing and services business based on customization. It began when founder Joel Spira invented the electronic light dimmer in the late ’50s. Today, it offers 17,000 products, all built around the concept of customer-driven customization.

Lutron can match any color – that Benjamin Moore Palladian blue you painted the nursery, say – and deliver a light switch cover to match. Its new motorized window shade products can incorporate custom fabrics sent in by customers.

The tension between order and chaos

In an interview with my colleague Stephanie Overby, Spira says that his company’s embrace of a profitable make-for-me model is governed by a constant tension between order and chaos, between standard modules and creativity in engineering, between costs and customization in production, and between customer satisfaction and information overload in sales. The chaos increases new business. The order boosts profitability.

4 practices to make customization work

Lutron focuses on four practices when customizing its products:

  1. Create common modular components across product lines. Of course, not every aspect of a Lutron product is customized – just the ones customers care about. The rest is built on common platforms that are shared.
  1. Make sure employees continuously interact with customers. Continuous interaction, through sales and service, helps Lutron figure out what parts of its products need to be customized.
  1. Widen the ranges of functions and features in new and old product lines. There’s a certain finality to customization in customers’ minds. They got it just the way they wanted it. But if the product suddenly does more than it used to, that sense of finality goes away and customers become more open to replacing it.
  1. Think ahead of customers. Most importantly, Lutron thinks about how customers might want to alter or improve a product before they begin producing it in order to create profitable processes for bespoke products.

Processes designed to anticipate

Early on in the product lifecycle, Lutron’s designers and engineers meet to brainstorm the kinds of individualization customers may want. For example, when Lutron decided to launch ultra-quiet, precision-controlled window treatments, it created a process for the automated window shades so that they could incorporate custom materials designated by the customer – a specific red fabric, for example – while still maintaining product quality. They created a “customer-supplied material process” so the company could accept and safely store the fabrics, some of which might be valuable or irreplaceable.

Don’t customize everything

Lutron still churns out mass produced products. Mass production will never die – at Lutron or anywhere else. But a complementary and profitable make-for-me model of manufacturing has sprung up alongside it.

Lutron’s model gives it a head start in the make-for-me future. We are witnessing the beginning of the democratization, decentralization, and hyper-personalization of manufacturing – just in time, just in place, and just for me. As a broad spectrum of customization emerges, from truly unique lots of one to the typical “list of options” model that exists today, companies will have to figure out where they fit – and fit profitably – on that continuum.

We recently interviewed other experts along with Lutron about where the make-for-me future is going. You can read our findings in the in-depth report The Make-for-Me Future.

Comments

Stefan Guertzgen

About Stefan Guertzgen

Dr. Stefan Guertzgen is the Global Director of Industry Solution Marketing for Chemicals at SAP. He is responsible for driving Industry Thought Leadership, Positioning & Messaging and strategic Portfolio Decisions for Chemicals.

4 Ways To Customize Products Without Breaking The Bank

Christopher Koch

Imagine you ran a company that lets customers specify whatever they want in your products – custom sneakersincluding using their own materials.

You’re probably thinking that the company has to be small and focused on artisanal products: custom jewelry, custom bicycles, etc., that lend themselves to catering to every whim of the customer. But there is a company that is neither small nor in it for the sake of art or lifestyle (read just enough money to make rent).

Lutron Electronics has built a manufacturing and services business based on customization. It began when founder Joel Spira invented the electronic light dimmer in the late ’50s. Today, it offers 17,000 products, all built around the concept of customer-driven customization.

Lutron can match any color – that Benjamin Moore Palladian blue you painted the nursery, say – and deliver a light switch cover to match. Its new motorized window shade products can incorporate custom fabrics sent in by customers.

The tension between order and chaos

In an interview with my colleague Stephanie Overby, Spira says that his company’s embrace of a profitable make-for-me model is governed by a constant tension between order and chaos, between standard modules and creativity in engineering, between costs and customization in production, and between customer satisfaction and information overload in sales. The chaos increases new business. The order boosts profitability.

4 practices to make customization work

Lutron focuses on four practices when customizing its products:

  1. Create common modular components across product lines. Of course, not every aspect of a Lutron product is customized – just the ones customers care about. The rest is built on common platforms that are shared.
  1. Make sure employees continuously interact with customers. Continuous interaction, through sales and service, helps Lutron figure out what parts of its products need to be customized.
  1. Widen the ranges of functions and features in new and old product lines. There’s a certain finality to customization in customers’ minds. They got it just the way they wanted it. But if the product suddenly does more than it used to, that sense of finality goes away and customers become more open to replacing it.
  1. Think ahead of customers. Most importantly, Lutron thinks about how customers might want to alter or improve a product before they begin producing it in order to create profitable processes for bespoke products.

Processes designed to anticipate

Early on in the product lifecycle, Lutron’s designers and engineers meet to brainstorm the kinds of individualization customers may want. For example, when Lutron decided to launch ultra-quiet, precision-controlled window treatments, it created a process for the automated window shades so that they could incorporate custom materials designated by the customer – a specific red fabric, for example – while still maintaining product quality. They created a “customer-supplied material process” so the company could accept and safely store the fabrics, some of which might be valuable or irreplaceable.

Don’t customize everything

Lutron still churns out mass produced products. Mass production will never die – at Lutron or anywhere else. But a complementary and profitable make-for-me model of manufacturing has sprung up alongside it.

Lutron’s model gives it a head start in the make-for-me future. We are witnessing the beginning of the democratization, decentralization, and hyper-personalization of manufacturing – just in time, just in place, and just for me. As a broad spectrum of customization emerges, from truly unique lots of one to the typical “list of options” model that exists today, companies will have to figure out where they fit – and fit profitably – on that continuum.

We recently interviewed other experts along with Lutron about where the make-for-me future is going. You can read our findings in the in-depth report The Make-for-Me Future.

Comments

Andy Hirst

About Andy Hirst

Andy Hirst is vice president of Banking Solutions, SAP Banking Industry Business Unit, at SAP. He is responsible for driving the success of the SAP go-to-market strategy in Line of Business Cloud Applications and Analytics in Financial Services. Previously, Andy was responsible for Capital Markets solutions for banking. Andy is an expert in Big Data and analytics use cases in financial services and has been involved in many digital banking initiatives for banks.

4 Ways To Customize Products Without Breaking The Bank

Christopher Koch

Imagine you ran a company that lets customers specify whatever they want in your products – custom sneakersincluding using their own materials.

You’re probably thinking that the company has to be small and focused on artisanal products: custom jewelry, custom bicycles, etc., that lend themselves to catering to every whim of the customer. But there is a company that is neither small nor in it for the sake of art or lifestyle (read just enough money to make rent).

Lutron Electronics has built a manufacturing and services business based on customization. It began when founder Joel Spira invented the electronic light dimmer in the late ’50s. Today, it offers 17,000 products, all built around the concept of customer-driven customization.

Lutron can match any color – that Benjamin Moore Palladian blue you painted the nursery, say – and deliver a light switch cover to match. Its new motorized window shade products can incorporate custom fabrics sent in by customers.

The tension between order and chaos

In an interview with my colleague Stephanie Overby, Spira says that his company’s embrace of a profitable make-for-me model is governed by a constant tension between order and chaos, between standard modules and creativity in engineering, between costs and customization in production, and between customer satisfaction and information overload in sales. The chaos increases new business. The order boosts profitability.

4 practices to make customization work

Lutron focuses on four practices when customizing its products:

  1. Create common modular components across product lines. Of course, not every aspect of a Lutron product is customized – just the ones customers care about. The rest is built on common platforms that are shared.
  1. Make sure employees continuously interact with customers. Continuous interaction, through sales and service, helps Lutron figure out what parts of its products need to be customized.
  1. Widen the ranges of functions and features in new and old product lines. There’s a certain finality to customization in customers’ minds. They got it just the way they wanted it. But if the product suddenly does more than it used to, that sense of finality goes away and customers become more open to replacing it.
  1. Think ahead of customers. Most importantly, Lutron thinks about how customers might want to alter or improve a product before they begin producing it in order to create profitable processes for bespoke products.

Processes designed to anticipate

Early on in the product lifecycle, Lutron’s designers and engineers meet to brainstorm the kinds of individualization customers may want. For example, when Lutron decided to launch ultra-quiet, precision-controlled window treatments, it created a process for the automated window shades so that they could incorporate custom materials designated by the customer – a specific red fabric, for example – while still maintaining product quality. They created a “customer-supplied material process” so the company could accept and safely store the fabrics, some of which might be valuable or irreplaceable.

Don’t customize everything

Lutron still churns out mass produced products. Mass production will never die – at Lutron or anywhere else. But a complementary and profitable make-for-me model of manufacturing has sprung up alongside it.

Lutron’s model gives it a head start in the make-for-me future. We are witnessing the beginning of the democratization, decentralization, and hyper-personalization of manufacturing – just in time, just in place, and just for me. As a broad spectrum of customization emerges, from truly unique lots of one to the typical “list of options” model that exists today, companies will have to figure out where they fit – and fit profitably – on that continuum.

We recently interviewed other experts along with Lutron about where the make-for-me future is going. You can read our findings in the in-depth report The Make-for-Me Future.

Comments

Tina Gunn

About Tina Gunn

Tina Gunn is the content marketing manager for the Enterprise Americas team at SAP Concur. Tina earned her degree in Journalism from the University of Washington and brings her experience in content strategy and digital marketing to SAP Concur. When she’s not creating thought leadership and sales enablement content, Tina writes fiction and screenplays of the horror and sci-fi genres.

4 Ways To Customize Products Without Breaking The Bank

Christopher Koch

Imagine you ran a company that lets customers specify whatever they want in your products – custom sneakersincluding using their own materials.

You’re probably thinking that the company has to be small and focused on artisanal products: custom jewelry, custom bicycles, etc., that lend themselves to catering to every whim of the customer. But there is a company that is neither small nor in it for the sake of art or lifestyle (read just enough money to make rent).

Lutron Electronics has built a manufacturing and services business based on customization. It began when founder Joel Spira invented the electronic light dimmer in the late ’50s. Today, it offers 17,000 products, all built around the concept of customer-driven customization.

Lutron can match any color – that Benjamin Moore Palladian blue you painted the nursery, say – and deliver a light switch cover to match. Its new motorized window shade products can incorporate custom fabrics sent in by customers.

The tension between order and chaos

In an interview with my colleague Stephanie Overby, Spira says that his company’s embrace of a profitable make-for-me model is governed by a constant tension between order and chaos, between standard modules and creativity in engineering, between costs and customization in production, and between customer satisfaction and information overload in sales. The chaos increases new business. The order boosts profitability.

4 practices to make customization work

Lutron focuses on four practices when customizing its products:

  1. Create common modular components across product lines. Of course, not every aspect of a Lutron product is customized – just the ones customers care about. The rest is built on common platforms that are shared.
  1. Make sure employees continuously interact with customers. Continuous interaction, through sales and service, helps Lutron figure out what parts of its products need to be customized.
  1. Widen the ranges of functions and features in new and old product lines. There’s a certain finality to customization in customers’ minds. They got it just the way they wanted it. But if the product suddenly does more than it used to, that sense of finality goes away and customers become more open to replacing it.
  1. Think ahead of customers. Most importantly, Lutron thinks about how customers might want to alter or improve a product before they begin producing it in order to create profitable processes for bespoke products.

Processes designed to anticipate

Early on in the product lifecycle, Lutron’s designers and engineers meet to brainstorm the kinds of individualization customers may want. For example, when Lutron decided to launch ultra-quiet, precision-controlled window treatments, it created a process for the automated window shades so that they could incorporate custom materials designated by the customer – a specific red fabric, for example – while still maintaining product quality. They created a “customer-supplied material process” so the company could accept and safely store the fabrics, some of which might be valuable or irreplaceable.

Don’t customize everything

Lutron still churns out mass produced products. Mass production will never die – at Lutron or anywhere else. But a complementary and profitable make-for-me model of manufacturing has sprung up alongside it.

Lutron’s model gives it a head start in the make-for-me future. We are witnessing the beginning of the democratization, decentralization, and hyper-personalization of manufacturing – just in time, just in place, and just for me. As a broad spectrum of customization emerges, from truly unique lots of one to the typical “list of options” model that exists today, companies will have to figure out where they fit – and fit profitably – on that continuum.

We recently interviewed other experts along with Lutron about where the make-for-me future is going. You can read our findings in the in-depth report The Make-for-Me Future.

Comments

Rushenka Perera

About Rushenka Perera

Rushenka is Head of Marketing at SAP ANZ.

4 Ways To Customize Products Without Breaking The Bank

Christopher Koch

Imagine you ran a company that lets customers specify whatever they want in your products – custom sneakersincluding using their own materials.

You’re probably thinking that the company has to be small and focused on artisanal products: custom jewelry, custom bicycles, etc., that lend themselves to catering to every whim of the customer. But there is a company that is neither small nor in it for the sake of art or lifestyle (read just enough money to make rent).

Lutron Electronics has built a manufacturing and services business based on customization. It began when founder Joel Spira invented the electronic light dimmer in the late ’50s. Today, it offers 17,000 products, all built around the concept of customer-driven customization.

Lutron can match any color – that Benjamin Moore Palladian blue you painted the nursery, say – and deliver a light switch cover to match. Its new motorized window shade products can incorporate custom fabrics sent in by customers.

The tension between order and chaos

In an interview with my colleague Stephanie Overby, Spira says that his company’s embrace of a profitable make-for-me model is governed by a constant tension between order and chaos, between standard modules and creativity in engineering, between costs and customization in production, and between customer satisfaction and information overload in sales. The chaos increases new business. The order boosts profitability.

4 practices to make customization work

Lutron focuses on four practices when customizing its products:

  1. Create common modular components across product lines. Of course, not every aspect of a Lutron product is customized – just the ones customers care about. The rest is built on common platforms that are shared.
  1. Make sure employees continuously interact with customers. Continuous interaction, through sales and service, helps Lutron figure out what parts of its products need to be customized.
  1. Widen the ranges of functions and features in new and old product lines. There’s a certain finality to customization in customers’ minds. They got it just the way they wanted it. But if the product suddenly does more than it used to, that sense of finality goes away and customers become more open to replacing it.
  1. Think ahead of customers. Most importantly, Lutron thinks about how customers might want to alter or improve a product before they begin producing it in order to create profitable processes for bespoke products.

Processes designed to anticipate

Early on in the product lifecycle, Lutron’s designers and engineers meet to brainstorm the kinds of individualization customers may want. For example, when Lutron decided to launch ultra-quiet, precision-controlled window treatments, it created a process for the automated window shades so that they could incorporate custom materials designated by the customer – a specific red fabric, for example – while still maintaining product quality. They created a “customer-supplied material process” so the company could accept and safely store the fabrics, some of which might be valuable or irreplaceable.

Don’t customize everything

Lutron still churns out mass produced products. Mass production will never die – at Lutron or anywhere else. But a complementary and profitable make-for-me model of manufacturing has sprung up alongside it.

Lutron’s model gives it a head start in the make-for-me future. We are witnessing the beginning of the democratization, decentralization, and hyper-personalization of manufacturing – just in time, just in place, and just for me. As a broad spectrum of customization emerges, from truly unique lots of one to the typical “list of options” model that exists today, companies will have to figure out where they fit – and fit profitably – on that continuum.

We recently interviewed other experts along with Lutron about where the make-for-me future is going. You can read our findings in the in-depth report The Make-for-Me Future.

Comments

Jennifer Horowitz

About Jennifer Horowitz

Jennifer Horowitz is a journalist with over 15 years of experience working in the technology, financial, hospitality, real estate, healthcare, manufacturing, not for profit, and retail sectors. She specializes in the field of analytics, offering management consulting serving global clients from midsize to large-scale organizations. Within the field of analytics, she helps higher-level organizations define their metrics strategies, create concepts, define problems, conduct analysis, problem solve, and execute.

4 Ways To Customize Products Without Breaking The Bank

Christopher Koch

Imagine you ran a company that lets customers specify whatever they want in your products – custom sneakersincluding using their own materials.

You’re probably thinking that the company has to be small and focused on artisanal products: custom jewelry, custom bicycles, etc., that lend themselves to catering to every whim of the customer. But there is a company that is neither small nor in it for the sake of art or lifestyle (read just enough money to make rent).

Lutron Electronics has built a manufacturing and services business based on customization. It began when founder Joel Spira invented the electronic light dimmer in the late ’50s. Today, it offers 17,000 products, all built around the concept of customer-driven customization.

Lutron can match any color – that Benjamin Moore Palladian blue you painted the nursery, say – and deliver a light switch cover to match. Its new motorized window shade products can incorporate custom fabrics sent in by customers.

The tension between order and chaos

In an interview with my colleague Stephanie Overby, Spira says that his company’s embrace of a profitable make-for-me model is governed by a constant tension between order and chaos, between standard modules and creativity in engineering, between costs and customization in production, and between customer satisfaction and information overload in sales. The chaos increases new business. The order boosts profitability.

4 practices to make customization work

Lutron focuses on four practices when customizing its products:

  1. Create common modular components across product lines. Of course, not every aspect of a Lutron product is customized – just the ones customers care about. The rest is built on common platforms that are shared.
  1. Make sure employees continuously interact with customers. Continuous interaction, through sales and service, helps Lutron figure out what parts of its products need to be customized.
  1. Widen the ranges of functions and features in new and old product lines. There’s a certain finality to customization in customers’ minds. They got it just the way they wanted it. But if the product suddenly does more than it used to, that sense of finality goes away and customers become more open to replacing it.
  1. Think ahead of customers. Most importantly, Lutron thinks about how customers might want to alter or improve a product before they begin producing it in order to create profitable processes for bespoke products.

Processes designed to anticipate

Early on in the product lifecycle, Lutron’s designers and engineers meet to brainstorm the kinds of individualization customers may want. For example, when Lutron decided to launch ultra-quiet, precision-controlled window treatments, it created a process for the automated window shades so that they could incorporate custom materials designated by the customer – a specific red fabric, for example – while still maintaining product quality. They created a “customer-supplied material process” so the company could accept and safely store the fabrics, some of which might be valuable or irreplaceable.

Don’t customize everything

Lutron still churns out mass produced products. Mass production will never die – at Lutron or anywhere else. But a complementary and profitable make-for-me model of manufacturing has sprung up alongside it.

Lutron’s model gives it a head start in the make-for-me future. We are witnessing the beginning of the democratization, decentralization, and hyper-personalization of manufacturing – just in time, just in place, and just for me. As a broad spectrum of customization emerges, from truly unique lots of one to the typical “list of options” model that exists today, companies will have to figure out where they fit – and fit profitably – on that continuum.

We recently interviewed other experts along with Lutron about where the make-for-me future is going. You can read our findings in the in-depth report The Make-for-Me Future.

Comments

Patrick Crampton-Thomas

About Patrick Crampton-Thomas

Patrick Crampton-Thomas is Vice President of Supply Chain Solution Management at SAP, with global responsibility for the response and supply orchestration portfolio, based in the UK. This includes the strategy and go-to-market for existing and new supply chain solutions including integrated business planning solutions, supply chain control tower, and supply chain collaboration.

4 Ways To Customize Products Without Breaking The Bank

Christopher Koch

Imagine you ran a company that lets customers specify whatever they want in your products – custom sneakersincluding using their own materials.

You’re probably thinking that the company has to be small and focused on artisanal products: custom jewelry, custom bicycles, etc., that lend themselves to catering to every whim of the customer. But there is a company that is neither small nor in it for the sake of art or lifestyle (read just enough money to make rent).

Lutron Electronics has built a manufacturing and services business based on customization. It began when founder Joel Spira invented the electronic light dimmer in the late ’50s. Today, it offers 17,000 products, all built around the concept of customer-driven customization.

Lutron can match any color – that Benjamin Moore Palladian blue you painted the nursery, say – and deliver a light switch cover to match. Its new motorized window shade products can incorporate custom fabrics sent in by customers.

The tension between order and chaos

In an interview with my colleague Stephanie Overby, Spira says that his company’s embrace of a profitable make-for-me model is governed by a constant tension between order and chaos, between standard modules and creativity in engineering, between costs and customization in production, and between customer satisfaction and information overload in sales. The chaos increases new business. The order boosts profitability.

4 practices to make customization work

Lutron focuses on four practices when customizing its products:

  1. Create common modular components across product lines. Of course, not every aspect of a Lutron product is customized – just the ones customers care about. The rest is built on common platforms that are shared.
  1. Make sure employees continuously interact with customers. Continuous interaction, through sales and service, helps Lutron figure out what parts of its products need to be customized.
  1. Widen the ranges of functions and features in new and old product lines. There’s a certain finality to customization in customers’ minds. They got it just the way they wanted it. But if the product suddenly does more than it used to, that sense of finality goes away and customers become more open to replacing it.
  1. Think ahead of customers. Most importantly, Lutron thinks about how customers might want to alter or improve a product before they begin producing it in order to create profitable processes for bespoke products.

Processes designed to anticipate

Early on in the product lifecycle, Lutron’s designers and engineers meet to brainstorm the kinds of individualization customers may want. For example, when Lutron decided to launch ultra-quiet, precision-controlled window treatments, it created a process for the automated window shades so that they could incorporate custom materials designated by the customer – a specific red fabric, for example – while still maintaining product quality. They created a “customer-supplied material process” so the company could accept and safely store the fabrics, some of which might be valuable or irreplaceable.

Don’t customize everything

Lutron still churns out mass produced products. Mass production will never die – at Lutron or anywhere else. But a complementary and profitable make-for-me model of manufacturing has sprung up alongside it.

Lutron’s model gives it a head start in the make-for-me future. We are witnessing the beginning of the democratization, decentralization, and hyper-personalization of manufacturing – just in time, just in place, and just for me. As a broad spectrum of customization emerges, from truly unique lots of one to the typical “list of options” model that exists today, companies will have to figure out where they fit – and fit profitably – on that continuum.

We recently interviewed other experts along with Lutron about where the make-for-me future is going. You can read our findings in the in-depth report The Make-for-Me Future.

Comments

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. 

Hack the CIO

By Thomas Saueressig, Timo Elliott, Sam Yen, and Bennett Voyles

For nerds, the weeks right before finals are a Cinderella moment. Suddenly they’re stars. Pocket protectors are fashionable; people find their jokes a whole lot funnier; Dungeons & Dragons sounds cool.

Many CIOs are enjoying this kind of moment now, as companies everywhere face the business equivalent of a final exam for a vital class they have managed to mostly avoid so far: digital transformation.

But as always, there is a limit to nerdy magic. No matter how helpful CIOs try to be, their classmates still won’t pass if they don’t learn the material. With IT increasingly central to every business—from the customer experience to the offering to the business model itself—we all need to start thinking like CIOs.

Pass the digital transformation exam, and you probably have a bright future ahead. A recent SAP-Oxford Economics study of 3,100 organizations in a variety of industries across 17 countries found that the companies that have taken the lead in digital transformation earn higher profits and revenues and have more competitive differentiation than their peers. They also expect 23% more revenue growth from their digital initiatives over the next two years—an estimate 2.5 to 4 times larger than the average company’s.

But the market is grading on a steep curve: this same SAP-Oxford study found that only 3% have completed some degree of digital transformation across their organization. Other surveys also suggest that most companies won’t be graduating anytime soon: in one recent survey of 450 heads of digital transformation for enterprises in the United States, United Kingdom, France, and Germany by technology company Couchbase, 90% agreed that most digital projects fail to meet expectations and deliver only incremental improvements. Worse: over half (54%) believe that organizations that don’t succeed with their transformation project will fail or be absorbed by a savvier competitor within four years.

Companies that are making the grade understand that unlike earlier technical advances, digital transformation doesn’t just support the business, it’s the future of the business. That’s why 60% of digital leading companies have entrusted the leadership of their transformation to their CIO, and that’s why experts say businesspeople must do more than have a vague understanding of the technology. They must also master a way of thinking and looking at business challenges that is unfamiliar to most people outside the IT department.

In other words, if you don’t think like a CIO yet, now is a very good time to learn.

However, given that you probably don’t have a spare 15 years to learn what your CIO knows, we asked the experts what makes CIO thinking distinctive. Here are the top eight mind hacks.

1. Think in Systems

A lot of businesspeople are used to seeing their organization as a series of loosely joined silos. But in the world of digital business, everything is part of a larger system.

CIOs have known for a long time that smart processes win. Whether they were installing enterprise resource planning systems or working with the business to imagine the customer’s journey, they always had to think in holistic ways that crossed traditional departmental, functional, and operational boundaries.

Unlike other business leaders, CIOs spend their careers looking across systems. Why did our supply chain go down? How can we support this new business initiative beyond a single department or function? Now supported by end-to-end process methodologies such as design thinking, good CIOs have developed a way of looking at the company that can lead to radical simplifications that can reduce cost and improve performance at the same time.

They are also used to thinking beyond temporal boundaries. “This idea that the power of technology doubles every two years means that as you’re planning ahead you can’t think in terms of a linear process, you have to think in terms of huge jumps,” says Jay Ferro, CIO of TransPerfect, a New York–based global translation firm.

No wonder the SAP-Oxford transformation study found that one of the values transformational leaders shared was a tendency to look beyond silos and view the digital transformation as a company-wide initiative.

This will come in handy because in digital transformation, not only do business processes evolve but the company’s entire value proposition changes, says Jeanne Ross, principal research scientist at the Center for Information Systems Research at the Massachusetts Institute of Technology (MIT). “It either already has or it’s going to, because digital technologies make things possible that weren’t possible before,” she explains.

2. Work in Diverse Teams

When it comes to large projects, CIOs have always needed input from a diverse collection of businesspeople to be successful. The best have developed ways to convince and cajole reluctant participants to come to the table. They seek out technology enthusiasts in the business and those who are respected by their peers to help build passion and commitment among the halfhearted.

Digital transformation amps up the urgency for building diverse teams even further. “A small, focused group simply won’t have the same breadth of perspective as a team that includes a salesperson and a service person and a development person, as well as an IT person,” says Ross.

At Lenovo, the global technology giant, many of these cross-functional teams become so used to working together that it’s hard to tell where each member originally belonged: “You can’t tell who is business or IT; you can’t tell who is product, IT, or design,” says the company’s CIO, Arthur Hu.

One interesting corollary of this trend toward broader teamwork is that talent is a priority among digital leaders: they spend more on training their employees and partners than ordinary companies, as well as on hiring the people they need, according to the SAP-Oxford Economics survey. They’re also already being rewarded for their faith in their teams: 71% of leaders say that their successful digital transformation has made it easier for them to attract and retain talent, and 64% say that their employees are now more engaged than they were before the transformation.

3. Become a Consultant

Good CIOs have long needed to be internal consultants to the business. Ever since technology moved out of the glasshouse and onto employees’ desks, CIOs have not only needed a deep understanding of the goals of a given project but also to make sure that the project didn’t stray from those goals, even after the businesspeople who had ordered the project went back to their day jobs. “Businesspeople didn’t really need to get into the details of what IT was really doing,” recalls Ferro. “They just had a set of demands and said, ‘Hey, IT, go do that.’”

Now software has become so integral to the business that nobody can afford to walk away. Businesspeople must join the ranks of the IT consultants.

But that was then. Now software has become so integral to the business that nobody can afford to walk away. Businesspeople must join the ranks of the IT consultants. “If you’re building a house, you don’t just disappear for six months and come back and go, ‘Oh, it looks pretty good,’” says Ferro. “You’re on that work site constantly and all of a sudden you’re looking at something, going, ‘Well, that looked really good on the blueprint, not sure it makes sense in reality. Let’s move that over six feet.’ Or, ‘I don’t know if I like that anymore.’ It’s really not much different in application development or for IT or technical projects, where on paper it looked really good and three weeks in, in that second sprint, you’re going, ‘Oh, now that I look at it, that’s really stupid.’”

4. Learn Horizontal Leadership

CIOs have always needed the ability to educate and influence other leaders that they don’t directly control. For major IT projects to be successful, they need other leaders to contribute budget, time, and resources from multiple areas of the business.

It’s a kind of horizontal leadership that will become critical for businesspeople to acquire in digital transformation. “The leadership role becomes one much more of coaching others across the organization—encouraging people to be creative, making sure everybody knows how to use data well,” Ross says.

In this team-based environment, having all the answers becomes less important. “It used to be that the best business executives and leaders had the best answers. Today that is no longer the case,” observes Gary Cokins, a technology consultant who focuses on analytics-based performance management. “Increasingly, it’s the executives and leaders who ask the best questions. There is too much volatility and uncertainty for them to rely on their intuition or past experiences.”

Many experts expect this trend to continue as the confluence of automation and data keeps chipping away at the organizational pyramid. “Hierarchical, command-and-control leadership will become obsolete,” says Edward Hess, professor of business administration and Batten executive-in-residence at the Darden School of Business at the University of Virginia. “Flatter, distributive leadership via teams will become the dominant structure.”

5. Understand Process Design

When business processes were simpler, IT could analyze the process and improve it without input from the business. But today many processes are triggered on the fly by the customer, making a seamless customer experience more difficult to build without the benefit of a larger, multifunctional team. In a highly digitalized organization like Amazon, which releases thousands of new software programs each year, IT can no longer do it all.

While businesspeople aren’t expected to start coding, their involvement in process design is crucial. One of the techniques that many organizations have adopted to help IT and businesspeople visualize business processes together is design thinking (for more on design thinking techniques, see “A Cult of Creation“).

Customers aren’t the only ones who benefit from better processes. Among the 100 companies the SAP-Oxford Economics researchers have identified as digital leaders, two-thirds say that they are making their employees’ lives easier by eliminating process roadblocks that interfere with their ability to do their jobs. Ninety percent of leaders surveyed expect to see value from these projects in the next two years alone.

6. Learn to Keep Learning

The ability to learn and keep learning has been a part of IT from the start. Since the first mainframes in the 1950s, technologists have understood that they need to keep reinventing themselves and their skills to adapt to the changes around them.

Now that’s starting to become part of other job descriptions too. Many companies are investing in teaching their employees new digital skills. One South American auto products company, for example, has created a custom-education institute that trained 20,000 employees and partner-employees in 2016. In addition to training current staff, many leading digital companies are also hiring new employees and creating new roles, such as a chief robotics officer, to support their digital transformation efforts.

Nicolas van Zeebroeck, professor of information systems and digital business innovation at the Solvay Brussels School of Economics and Management at the Free University of Brussels, says that he expects the ability to learn quickly will remain crucial. “If I had to think of one critical skill,” he explains, “I would have to say it’s the ability to learn and keep learning—the ability to challenge the status quo and question what you take for granted.”

7. Fail Smarter

Traditionally, CIOs tended to be good at thinking through tests that would allow the company to experiment with new technology without risking the entire network.

This is another unfamiliar skill that smart managers are trying to pick up. “There’s a lot of trial and error in the best companies right now,” notes MIT’s Ross. But there’s a catch, she adds. “Most companies aren’t designed for trial and error—they’re trying to avoid an error,” she says.

To learn how to do it better, take your lead from IT, where many people have already learned to work in small, innovative teams that use agile development principles, advises Ross.

For example, business managers must learn how to think in terms of a minimum viable product: build a simple version of what you have in mind, test it, and if it works start building. You don’t build the whole thing at once anymore.… It’s really important to build things incrementally,” Ross says.

Flexibility and the ability to capitalize on accidental discoveries during experimentation are more important than having a concrete project plan, says Ross. At Spotify, the music service, and CarMax, the used-car retailer, change is driven not from the center but from small teams that have developed something new. “The thing you have to get comfortable with is not having the formalized plan that we would have traditionally relied on, because as soon as you insist on that, you limit your ability to keep learning,” Ross warns.

8. Understand the True Cost—and Speed—of Data

Gut instincts have never had much to do with being a CIO; now they should have less to do with being an ordinary manager as well, as data becomes more important.

As part of that calculation, businesspeople must have the ability to analyze the value of the data that they seek. “You’ll need to apply a pinch of knowledge salt to your data,” advises Solvay’s van Zeebroeck. “What really matters is the ability not just to tap into data but to see what is behind the data. Is it a fair representation? Is it impartial?”

Increasingly, businesspeople will need to do their analysis in real time, just as CIOs have always had to manage live systems and processes. Moving toward real-time reports and away from paper-based decisions increases accuracy and effectiveness—and leaves less time for long meetings and PowerPoint presentations (let us all rejoice).

Not Every CIO Is Ready

Of course, not all CIOs are ready for these changes. Just as high school has a lot of false positives—genius nerds who turn out to be merely nearsighted—so there are many CIOs who aren’t good role models for transformation.

Success as a CIO these days requires more than delivering near-perfect uptime, says Lenovo’s Hu. You need to be able to understand the business as well. Some CIOs simply don’t have all the business skills that are needed to succeed in the transformation. Others lack the internal clout: a 2016 KPMG study found that only 34% of CIOs report directly to the CEO.

This lack of a strategic perspective is holding back digital transformation at many organizations. They approach digital transformation as a cool, one-off project: we’re going to put this new mobile app in place and we’re done. But that’s not a systematic approach; it’s an island of innovation that doesn’t join up with the other islands of innovation. In the longer term, this kind of development creates more problems than it fixes.

Such organizations are not building in the capacity for change; they’re trying to get away with just doing it once rather than thinking about how they’re going to use digitalization as a means to constantly experiment and become a better company over the long term.

As a result, in some companies, the most interesting tech developments are happening despite IT, not because of it. “There’s an alarming digital divide within many companies. Marketers are developing nimble software to give customers an engaging, personalized experience, while IT departments remain focused on the legacy infrastructure. The front and back ends aren’t working together, resulting in appealing web sites and apps that don’t quite deliver,” writes George Colony, founder, chairman, and CEO of Forrester Research, in the MIT Sloan Management Review.

Thanks to cloud computing and easier development tools, many departments are developing on their own, without IT’s support. These days, anybody with a credit card can do it.

Traditionally, IT departments looked askance at these kinds of do-it-yourself shadow IT programs, but that’s changing. Ferro, for one, says that it’s better to look at those teams not as rogue groups but as people who are trying to help. “It’s less about ‘Hey, something’s escaped,’ and more about ‘No, we just actually grew our capacity and grew our ability to innovate,’” he explains.

“I don’t like the term ‘shadow IT,’” agrees Lenovo’s Hu. “I think it’s an artifact of a very traditional CIO team. If you think of it as shadow IT, you’re out of step with reality,” he says.

The reality today is that a company needs both a strong IT department and strong digital capacities outside its IT department. If the relationship is good, the CIO and IT become valuable allies in helping businesspeople add digital capabilities without disrupting or duplicating existing IT infrastructure.

If a company already has strong digital capacities, it should be able to move forward quickly, according to Ross. But many companies are still playing catch-up and aren’t even ready to begin transforming, as the SAP-Oxford Economics survey shows.

For enterprises where business and IT are unable to get their collective act together, Ross predicts that the next few years will be rough. “I think these companies ought to panic,” she says. D!


About the Authors

Thomas Saueressig is Chief Information Officer at SAP.

Timo Elliott is an Innovation Evangelist at SAP.

Sam Yen is Chief Design Officer at SAP and Managing Director of SAP Labs.

Bennett Voyles is a Berlin-based business writer.

Read more thought provoking articles in the latest issue of the Digitalist Magazine, Executive Quarterly.
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Cloud Computing: Separating Myth From Reality

Misa Rawlins and Krishnakant Dave

Across industries, many enterprise leaders believe and understand that cloud computing is here to stay. Globally, public cloud services market revenue is projected to reach US$411 billion by 2020, compared with $260 billion in 2017, according to research firm Gartner, Inc. Cloud technology in all its forms—software, platform, or infrastructure as a service—is rapidly becoming essential to the needs of business today. With cloud computing, organizations can simplify IT, save costs, scale rapidly, drive standardization and user adoption, and start getting ahead of tomorrow’s needs when it comes to customer engagement, the supply chain, the workforce, a simplified finance function, and more.

Despite the short- and long-term advantages, some executives remain uncertain about the next steps or have lingering questions about the benefits of moving to the cloud. For many leaders, separating the cloud myths from the facts can prove daunting. Start here, with these insights that can help you bust big myths about the cloud and start moving confidently toward a cloud-enabled transformation of your organization.

Myth No. 1: Moving to the cloud is too costly. “Costly” is a relative term. The cloud can be costly – but costs should be weighed against benefit and return once requirements and migration plans are in place. Rapidly evolving business demands, for example, can dramatically alter cloud-related requirements. Meanwhile, new technologies are dramatically redefining the art of the possible with the cloud. Because migrating to the cloud is not a true “plug-and-play” proposition, and many enterprise leaders underestimate what a migration or implementation involves, some organizations can be surprised by the costs of a cloud transformation. Without a clear understanding of the potential benefits—without a clear business case for moving to the cloud—the focus on costs can overshadow the return on investment. Knowing the value that cloud solutions can bring—not just the costs—can help manage expectations.

Myth No. 2: The benefits of the cloud aren’t substantial enough. As vendors adopt a “cloud-first” stance for many solutions and product updates, organizations that move to the cloud may have a competitive advantage—no matter the size of the enterprise. Cloud solutions continue to offer abundant and increasing functionality. And with the help of an end-to-end solution provider, you can configure cloud solutions to the specific needs of your industry and your business. For larger organizations, rapidly deployable cloud solutions can help support growth or the unique needs of certain business units, such as new acquisitions or foreign subsidiaries, for example. For smaller organizations, the cloud can help you position your organization to tap new opportunities and tame growth challenges.

Myth No. 3: Cloud is too risky. All digital technologies and all business models come with inherent risk. In a hyperconnected world, no system is immune from cyber attacks, insider threats, data leakage, or related risks. No transformation project is a guaranteed success. Market changes, new competition, regulatory issues, and other factors can require you to change your cloud strategy overnight.

Because the risks are real, take advantage of resources and capabilities that can help reduce risk and ensure that your technology investments align tightly with clear business objectives. The maturity of the software goes a long way toward mitigating risk with cloud projects. You can add an extra layer of capabilities such as managed cloud services to provide active, hands-on oversight of cloud applications and infrastructure—helping you to avoid service interruptions and address issues proactively.

Myth No. 4: Cloud computing is still an immature technology. Like other evolving technologies, cloud is advancing every day. Those who wait for the next generation of cloud offerings may find themselves missing out on tangible benefits as competitors leverage cloud technology to sharpen their edge. Across industries, leading organizations are not waiting. Many view cloud technology as evolving but necessary, and they are leveraging it effectively today. Some, for example, are tightly integrating cloud software solutions to streamline supply chain processes, boost information transparency, and improve decision-making across the board—all the while tapping the cloud benefits of cost savings and scalability. Others are confidently turning to infrastructure solutions delivered and running solutions in a private or hybrid cloud. Still others are turning to cloud platform solutions to extend the power of existing applications, build modern analytics platforms, or support new Internet of Things business models. Turning the cloud to your advantage may depend less on the maturity of the technology and more on the power of your imagination.

Myth No. 5: Moving to the cloud will be easy. Cloud technology can help organizations streamline and simplify their IT landscapes and their business processes, reducing needs around capital expenses and infrastructure while helping to save costs. But migrating to the cloud requires more than simply plugging in technology. It requires an ability to address a host of considerations—data migration, the business-specific capabilities of solutions, change management, governance, systems integration, security, and more.

A cloud transformation is more than a plug-and-play project or a traditional system implementation. It requires progressive thinking and an ability to align technology with your business needs and processes— for today and for the future. Migrating to the cloud is a journey. Moving forward with the cloud will require a vision of your “to be” state—your destination—as well as a strategy for getting you there.

To learn more, and to find out what IDC thinks about the future of the cloud, please read this study that presents a strategic blueprint for enterprises on their digital transformation journey.

For more information on how to simplify innovation with cloud technology, learn more about SAP Cloud Platform.

Ready to reimagine the potential of the cloud? Contact us to get the conversation started.

Contact Krishnakant Dave at kdave@deloitte.com and follow him on Twitter: @kkdave

Contact Misa Rawlins at mrawlins@deloitte.com and follow her on Twitter: @misa_rawlins

www.deloitte.com/SAP

SAP@deloitte.com

@DeloitteSAP

This article originally appeared on Deloitte.com and is republished by permission.

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Misa Rawlins

About Misa Rawlins

As a senior manager and consultant in Deloitte’s SAP practice, Misa Rawlins enjoys helping her clients not only to figure out how to solve their current business problems, but also to envision how a modern cloud platform can transform their organizations moving ahead. Within the practice, she has specifically chosen to take a leadership role around the sales and delivery of SAP S/4HANA Cloud because she considers it the wave of the future. She has made it her mission to deeply understand this technology to better advise clients on what moving to a cloud infrastructure really means.

Krishnakant Dave

About Krishnakant Dave

As a principal in Deloitte’s global SAP practice, KK Dave is a consulting leader for Deloitte’s largest clients; part of the U.S. SAP leadership team where he spearheads Deloitte's cloud offerings; and leader of global go-to-market efforts in the wholesale distribution and manufacturing sector. In these roles, he assists clients in their business transformation journeys using the absolute latest SAP toolset, which presently comprises SAP S/4HANA, SAP Cloud Platform, and SAP S/4HANA Cloud, among other technologies.