From Consumer Products To Consumer Outcomes

E.J. Kenney

Faced with new competitive threats, the consumer products industry is undergoing a transformation. New entrants with no fixed assets or large-scale capital investments pose the most powerful threat. These companies compete on a different playing field. They employ speed and agility to take market share away from incumbents.

Likewise, companies with subscription-based business-to-consumer models are capturing market share. They emphasize consumer engagement, succeeding by delivering data-driven personalized experiences and outcomes. For many consumers, these outcomes have become far more relevant and valuable than the price and availability of physical products on a retail store shelf.

A new opportunity

Consumer products firms must learn to embrace the “consumer products” to “consumer outcomes” (r)evolution. As products alone become increasingly commoditized, the premium shifts to desired outcomes. Quality, price, value, and convenience are no longer the only differentiators. Experiences that give consumers joy, confidence, control, and protection – while less tangible – are now the drivers.

So what do consumers want? Personal, relevant, and simple experiences that makes their lives easier. Commerce should be seamless, the technology invisible. In these experiences, privacy, security, and trust are assumed and assured. Consumers don’t want to be sold to or influenced: they want to be inspired, guided, and educated. Consumers will reward companies that deliver these outcomes.

Integrating an omnichannel marketplace

Many established companies are overwhelmed by these dramatic market shifts. To compete in a changing consumer landscape, they need to transform everything from consumer engagement to operations to product innovation. Put simply, they need to recreate and innovate to maintain – and, ideally, increase – market share.

Digital and direct-to-consumer models such as Dollar Shave Club – now part of Unilever – have empowered consumer product companies to challenge old operating assumptions. What’s needed is an integrated approach in marketing and new consumer models. On the other end of the spectrum, powerhouses like Amazon and Walmart have already upended supply chain mechanisms, customer expectations, and platform creation.

In short, consumer products is now an omnichannel industry, with critical components including:

  • Physical retail
  • E-commerce
  • Emerging models, including in-app purchasing
  • Embedding interactive product information into media such as video
  • Direct purchase via social media

Making the moment

New entrants and reinvented incumbents are reimagining business models, business processes, and even work itself. The goal is to create new drivers for growth based on the ability to capitalize on opportunities in the span of key moments:

  • Consumer moments: Reaching consumers directly and immediately at the point of need. Companies achieve this with personalized engagement through digital venues, such as commerce-enabled social networks, smart homes, smart cars, and smart shelves.
  • Customer moments: Driving category growth, increasing sales velocity, and ensuring on-shelf availability. This is best accomplished via digitally-enabled collaboration between retailers and channel partners. The goal is to simplify and streamline commerce and act in real time with on-demand dynamics.
  • Market moments: Responding in moments of market disruption to capitalize on new opportunities. This involves mitigating risks with agile, flexible operations and business processes that can be coupled and decoupled as needed. The key is to identify new suppliers, suggest promotion opportunities, and automatically optimize forecasts or modify capacity plans to meet future demand.

How do companies capitalize on these moments? By developing innovative solutions that spell the difference between success and failure.

Digital business is a new frontier of growth and development. Leading companies leverage new opportunities by delivering outcomes in moments of need. The goal is to be better, faster, and cheaper than before. That is how companies drive sustainable, profitable growth.

Download our “Accelerating Digital Transformation in the Consumer Products Industry” white paper now to get an even greater look at the importance of innovating and digitizing in this fast paced industry. And learn how SAP Leonardo can help your company make the move to digital.


E.J. Kenney

About E.J. Kenney

E.J. Kenney is the Senior Vice President of Consumer Products Industry Business Unit at SAP. His responsibilities include managing industry business units, business planning and strategy, go to market and investment portfolio for Consumer Products and Wholesale distribution.

How Retailers Market To Consumers Using "In-Moments"

Ralf Kern

The attention span of today’s consumer is famously fleeting and difficult to capture. Consumers have little time or patience for digital banner ads or 30-second commercials. Rather than using advertising to interrupt consumers, companies are turning to “in-moments” to target consumers when they are ready to take action.

In-moment marketing is proving to be a gold mine for retailers. Marketing is all about delivering the right message to the right person at the right moment. In-moment marketing does just this: delivering critical information at the exact moment a consumer is poised to make a spending decision.

Google calls these in-moments “micro-moments”– moments when a consumer reflexively turns to his or her phone to fulfill an immediate pressing need. Google classifies micro-moments as one of the following: “I want to know,” “I want to go,” “I want to do,” and “I want to buy.”

“The advertising game is no longer about reach and frequency,” says Lisa Gevelber, a Google vice president for marketing. Gevelber, who pioneered the micro-moments concept, believes that intent and immediacy now trump identity and brand loyalty when it comes to consumer decision-making.

Targeting consumers in the “I-want-to-buy” micro-moment

Retailers have a wealth of data at their disposal for targeting customers “in the moment.” For example, GPS data provides precise location information, so retailers know if a customer is in their store or close to a store location. Apps can track every tap and swipe, giving retailers insight into which products a customer is viewing and even how long customers linger on a specific product page. Smartphone sensors like accelerometers can even identify if people are sitting, walking, or driving, providing an added layer of insight into consumer behavior and purchasing intent. Companies that use these advanced analytics are better positioned to capitalize on consumer intent and immediacy.

Before the store. Smartphone shopping has created a new “front door to the store.” Companies are using ads triggered by proximity to target customers who are searching for products but not yet at the store. These local inventory ads show real-time store inventory and even prompt consumers to place products on hold for pick up.

Google reports that retailers make $8 for every $1 they invest in local inventory ads. Precise inventory ads that connect customers and real-time inventory data from real data repositories such as SAP Customer Activity Repository (CAR) solution with highly contextual information are much more than just another ad. They connect offline and online in new ways to create new levels of customer experience and additional opportunities, allowing retailers to drive store traffic via digital marketing. I would even go so far to say, that relevant context- and location-based promotions will be perceived as intrusive, but rather extremely helpful in those critical customer “micro-moments.”

At the store. Consumers use their smartphones while shopping to compare prices at other stores/online retailers, look up product information, and check online reviews. Each of these actions is a signal that the customer is in the “I-want-to-buy” micro-moment. Retailers are capitalizing on these moments by sending in-store push notifications offering discounts, promotions, and loyalty rewards.

Targeting consumers in the “moment of need”

While targeting consumers in or near stores is one effective option, companies are also considering other ways to use advanced analytics to target customers in the moment of an immediate need. For example, the New York Times reported that Red Roof Inn linked flight data from the aviation software company FlightAware with Google’s search ad system to target travelers stranded at airports. Red Roof Inn targeted very precise moments, such as when O’Hare Airport in Chicago experienced a major flight cancellation. The instant a major flight cancellation occurred, New York digital agency 360i automatically raised the hotel chain’s bids for mobile ad space. This temporary bump in ad spending placed Red Roof Inn in the top spot in three-quarters of search results for queries such as “hotels near O’Hare.” According to 360i, this strategy resulted in Red Roof Inn experiencing a 60 percent increased in hotel room bookings.

Learn how to innovate at scale by incorporating individual innovations back to the core business to drive tangible business value: read Accelerating Digital Transformation in Retail. Explore how to bring Industry 4.0 insights into your business today: read Industry 4.0: What’s Next?


Ralf Kern

About Ralf Kern

Ralf Kern is the Global Vice President, Business Unit Retail, at SAP, responsible for the future direction of SAP’s solution and global Go-to-Market strategy for Omnicommerce Retail, leading them into today’s digital reality.

Five Strategies Shaping The Future Of Retail

Paul Dearlove

In January, I attended the National Retail Federation conference in New York City. This opened my eyes to the enormous disruption technology is creating in retail. To survive this disruption, retailers must rethink their game plan. If they don’t, their competitors will.

Here are 5 strategies retailers must consider to future-proof their success:

1. Attract customers with in-store experiences

Did you know that Nike’s New York store now offers customers an in-store basketball court? As customers play, cameras analyze their footwork and generate shoe recommendations.

By investing in such innovative, engaging experiences, retailers can bring their offline experience into the age of Brick and Mortar 2.0.

2. Enhance assortment planning with AI

What if retailers could know exactly what their customers wanted? Marketing and inventory management would be minimized, allowing retailers to invest in an engaging shopping experience.

By adopting AI-driven Business Analytics, retailers can understand exactly what their customers want. This allows retailers to right-size their operations, which involves establishing small outlets that stock exactly what local shoppers are looking for. By offering smaller, smarter product inventories, retailers will reap higher ROI.

3. Coach customers through their decision journey

Winning customer loyalty is a game, and consumers are coming to the field with more knowledge than ever before. They can spend hours researching reviews and comparing prices before coming to a decision. To convert consumers into customers, retailers must meet them at every moment of their decision journey.

In a way, retailers must approach this like the coach of a sports team. They must manage their customer’s game plan, guiding them towards their goal with advice at critical moments in their decision journey. This involves learning what each customer responds to andoffering them the best assistance on dynamic channels. That could include smart messenger bots on social media or in-store AR assistants.

4. Give customers a greater connection to products

Most customers want to touch products before they buy. To cater to this, consider digital twin technology. This technology can put virtual copies of products into the hands of consumers, including virtual changing rooms and 360-degree product shots. By bringing online shoppers closer to products, you can make them feel more secure about purchasing online.

Customization can also bring customers closer to products. By connecting customers to the manufacturing process through drop shipping and 3D printing, retailers can get closer to offering customers their perfect product.

5. Simplify shopping at every stage

In today’s complicated world, consumers are starving for simplicity. To stand out from the noise, retailers should offer simpler access to their products and services. By optimizing supply chains, retailers can offer customers simple same-day delivery. Through conversational AI, retailers can allow customers to order products with one word. By embracing simplicity, retailers will grow sales.

It’s important to remember that this isn’t retail’s first cycle of change. As with every other cycle, the retailers that survive will be those that transform themselves before disruption forces them to change.

For more on digital disruption in the retail industry, see The New Retail Reality: Moving Beyond Sales.


Paul Dearlove

About Paul Dearlove

Paul Dearlove is General Manager - Retail, SAP ANZ based in Sydney. As a former professional athlete, Paul has a keen focus on high performance and believes there are many skills that can be transferred to the corporate environment.

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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Survey: Four Ways Machine Learning Will Disrupt Your Business

Dan Wellers and Dirk Jendroska

We are entering the era of the machine learning enterprise, in which this subset of artificial intelligence (AI) capabilities will revolutionize operating models, shake up staffing methods, upend business models, and potentially alter the nature of competition itself. The adoption of machine learning capabilities will be limited only by an organization’s ability to change – but not every company will be willing or able to make such a radical shift.

Very soon, the difference between the haves and the have-nots of machine learning will become clear. “The disruption over the next three to five years will be massive,” says Cliff Justice, principal in KPMG’s Innovation and Enterprise Solutions team. Companies hanging onto their legacy processes will struggle to compete with machine learning enterprises able to compete with a fraction of the resources and entirely new value propositions.

For those seeking to be on the right side of the disruption, a new survey, conducted by SAP and the Economist Intelligence Unit (EIU), offers a closer look at organizations we’ve identified as the Fast Learners of machine learning: those that are already seeing benefits from their implementations.

Machine learning is unlike traditional programmed software. Machine learning software actually gets better – autonomously and continuously – at executing tasks and business processes. This creates opportunities for deeper insight, non-linear growth, and levels of innovation previously unseen.

Given that, it’s not surprising that machine learning has evolved from hype to have-to-have for the enterprise in seemingly record time. According to the SAP/EIU survey, more than two-thirds of respondents (68%) are already experimenting with it. What’s more, many of these organizations are seeing significantly improved performance across the breadth of their operations as a result, and some are aiming to remake their businesses on the back of these singular, new capabilities.

So, what makes machine learning so disruptive? Based on our analysis of the survey data and our own research, we see four primary reasons:

1. It’s probabilistic, not programmed

Machine learning uses sophisticated algorithms to enable computers to “learn” from large amounts of data and take action based on data analysis rather than being explicitly programmed to do something. Put simply, the machine can learn from experience; coded software does not. “It operates more like a human does in terms of how it formulates its conclusions,” says Justice.

That means that machine learning will provide more than just a one-time improvement in process and productivity; those improvements will continue over time, remaking business processes and potentially creating new business models along the way.

2. It creates exponential efficiency

When companies integrate machine learning into business processes, they not only increase efficiency, they are able to scale up without a corresponding increase in overhead. If you get 5,000 loan applications one month and 20,000 the next month, it’s not a problem, says Sudir Jha, head of product management and strategy for Infosys; the machines can handle it.

3. It frees up capital – financial and human

Because machine learning can be used to automate any repetitive task, it enables companies to redeploy resources to areas that make the organization more competitive, says Justice. It also frees up the employees within an organization to perform higher-value, more rewarding work. That leads to reduced turnover and higher employee satisfaction. And studies show that happier employees lead to higher customer satisfaction and better business results.

4. It creates new opportunities

AI and machine learning can offer richer insight, deeper knowledge, and predictions that would not be possible otherwise. Machine learning can enable not only new processes, but entirely new business models or value propositions for customers – “opportunities that would not be possible with just human intelligence,” says Justice. “AI impacts the business model in a much more disruptive way than cloud or any other disruption we’ve seen in our lifetimes.”

Machine learning systems alone, however, will not transform the enterprise. The singular opportunities enabled by these capabilities will only occur for companies that dedicate themselves to making machine learning part of a larger digital transformation strategy. The results of the SAP/EIU survey explain the makeup of the evolving machine learning enterprise. We’ve identified key traits important to the success of these machine-learning leaders that can serve as a template for others as well as an overview of the outcomes they’re already seeing from their efforts.

Learn more and download the full study here.  

 


Dan Wellers

About Dan Wellers

Dan Wellers is founder and leader of Digital Futures at SAP, a strategic insights and thought leadership discipline that explores how digital technologies drive exponential change in business and society.

Dirk Jendroska

About Dirk Jendroska

Dr. Dirk Jendroska is Head of Strategy and Operations Machine Learning at SAP. He supports the vision of SAP Leonardo Machine Learning to enable the intelligent enterprise by making enterprise applications intelligent. He leads a team working on machine learning strategy, marketing and communications.