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5 Reasons You'll Embrace Digital Transformation In 2016

Dinesh Sharma

Without a doubt, the lives of everyone on this planet has been impacted by the digital economy. Approximately 2 billion of us don’t leave our homes without a smartphone in hand. We shop online for almost every conceivable product. And for the 57% who are still unconnected, they are benefiting from a growing social community that is exchanging ideas, influencing governments worldwide, inspiring change, creating awareness of injustice, and coordinating aid to those in need.

At the same time, a growing number of companies are extending the possibilities of hyperconnectivity. Kaeser Kompressoren is embedding sensors in its systems to predict potential breakdowns and generate revenue by tracking the volume of compressed air consumed by its customers. Haier Asia is doubling up its digital platform to get closer to its customers and give them exactly what they want. Even Europe’s second-largest port found a way to increase capacity by 150% without physically expanding its bustling facility.

For these companies, digital transformation is not just a strategic move – it’s a fundamental part of their survival and overall business model. In fact, a recent study by the Economist Intelligence Unit (EIU) revealed that 59% of executives view the failure to adapt to hyperconnectivity is their organization’s biggest threat.

2016: The year of real digital transformation

Despite all of this change, we have yet to scratch the surface of the possibilities the digital economy offers. Mark my words: 2016 will further prove the transformational power of the digital economy.

As we prepare to usher in a new year, here are my top predictions of how the digital economy will continue to revolutionize everything:

1. Digital masters will emerge – and win every time.

Companies that digitally transform everything they do and touch will further differentiate themselves from those that just dabble in digital services. Although the EIU reports that 19% of companies are radically changing their business model to seize the opportunities hyperconnectivity offers, they are becoming powerful brands.

Take Nike, for example. The well-known sports apparel company has transformed itself into a fitness and lifestyle brand. By actively engaging with customers through social media, mobile technology, and embedded sensors, it is fostering an empowered community. From tracking diet, activity, and fitness progress to sending reminders to get their customers moving, Nike is making sure that their customers have the support they need – whenever and wherever they need it. 

2. Digital Darwinism will become a significant threat.

Technology and society are evolving at a pace that is simply too difficult for many organizations to keep up with.  In fact, according to some predictions, 40% of the Fortune 500 are expected to no longer exist within 10 years if they do not evolve soon.

To survive, companies must be not only the strongest and the most intelligent, but they also must adapt to change.  We have all seen this firsthand as we spent the last 20 years saying goodbye to brand leaders that resisted the call and opportunity to digitize. So for the 81% that are not taking digital transformation seriously, make 2016 the year you start to get serious.

3. Digital transformation will be pervasive across every area of the business. 

To be truly transformed, companies must go beyond window dressing the customer experience, embedding a few sensors to monitor production, and monetizing a service with digital technology. They must reach deep into the bare bones of the company, going as far as human resources and finance and as high up as the executive boardroom.

Digital transformation is just the enabler – real change happens when the business culture, leadership, and processes of profit centers and cost centers embrace it and evolve with it. The cloud, mobile technology, networks, and analytics present every business area with a unique opportunity to gain greater efficiency, perform instant data analysis, and achieve better collaboration. Not only does digital transformation help companies modernize and become an attractive employer brand for younger talent, but it also creates a seamless customer experience, promotes more effective collaboration, and empowers the entire workforce.

One brand that shows the power of such an undertaking is Burberry. Famous for its digital retail experience online and in physical stores, the luxury retailer has taken its personalization strategy to its employees too. By making it easier for employees in all areas to sell the brand to customers, Burberry is experiencing increased engagement across its workforce. And in the end, that means a better customer experience – anytime, anywhere, and through any channel.

4. The sales funnel will disappear – for good.

For decades, the sales funnel has been used as a visual representation of separating qualified buyers from the rest of the prospect pool. However, thanks to the Internet and social network, the sales process has accelerated to the point where the funnel is no longer relevant.

CEB recently uncovered that the average buyer is 57% through the purchase decision process before their first interaction with a sales representative or channel. Plus, companies only have 12% of their customer’s mindshare through the buying experience.  As a result, customers tend to fall through the funnel undetected and without a defined journey.

Through digital transformation, sales and marketing can better address this issue by providing multiple touch points that can make the brand accessible to every existing and potential customer – no matter the path taken. Along the way, data should be collected, consolidated, and distributed across the enterprise to provide insight and power decisions at the moment of the interaction.

5. Cryptocurrency will pave the way for better data security. 

Bitcoin. Drones. Virtual reality. Cloud. All of these emerging technologies has drawn a fair amount of press lately. However, there are always naysayers fearful that these innovations will not measure up in terms of protection from cyberattacks and data breaches. And probably the most eyebrow-raising one of all is cryptocurrency. However, Bitcoin has included a level of security into its ecosystem: The blockchain.

Through redundancy, computational compliance, and high-speed processing, all transactions are logged on a publicly available general ledger and copied across thousands of servers. When a transaction is initiated, every one of those servers must agree that the information given is accurate. Should someone try to cheat or hack into the ecosystem, it will be rejected as soon as the new account identifier is detected to be unidentifiable.

Is it possible that someone can work faster than these servers? According to The Economist, it is nearly impossible to generate a new version of the blockchain quick enough to overtake more than half of the servers controlling it. As computing power and speed increases, so will the servers’ ability to process information faster than the most-competent blockchain miners.

What do you think of these predictions? Dust off your crystal ball and share how you foresee the digital economy evolving!

 

Learn more about what’s possible for your business in the digital economy. Check out these reports detailing the Economist Intelligence Unit’s research:

 

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About Dinesh Sharma

Dinesh Sharma is the Vice President of Digital Economy at SAP. He is a GM-level technology executive with leadership, technical innovation, effective strategic planning, customer and partner engagement, turnaround management and focused operational execution experience at both large enterprise and startup companies. Share your thoughts with Dinesh on Twitter @sharmad

How Integrated Project Delivery Contracts Are Changing Construction

Dustin Anderson

In the next 14 years, the construction market will nearly double, growing from $8 trillion to $15 trillion by 2030. Rapid infrastructure expansion is fueling this growth. In fact, an astounding 75% of the infrastructure that will exist by 2050 has yet to be built.

“Construction is likely to be one of the most dynamic industrial sectors in the next 15 years and is utterly crucial to the evolution of prosperous societies around the world,” says Fernando A. González, chief executive of global building materials company CEMEX.

But it’s not all good news for the construction industry. The industry is also facing serious challenges. Projects are more complex than ever before. Inefficient, wasteful practices are reducing already razor-thin profit margins. As long as companies persist with the ineffective design-bid-build delivery method, they will continue to face these problems.

The digitization of intercompany collaboration creates a unique opportunity window for construction companies to improve efficiency, optimize performance, and increase profits. To do so successfully, construction companies must move from a design-bid-build delivery method to an integrated project delivery contract system with outcome-based success measurements.

From design-bid-build to integrated project delivery

The move from design-bid-build delivery method to integrated project delivery contracts and outcome-based success measurements will help overcome historic productivity challenges in construction.

Much of the poor productivity in the construction industry can be traced to the design-bid-build (DBB) delivery method. Traditionally, an owner contracts directly with a designer and a contractor. The design firms delivers 100% complete design documents. The owner then solicits price bids from contractors to perform the work. Designers and contractors have no contractual obligation to one another for the project’s success. The owner, in turn, bears all risk associated with the completeness of the design documents and their successful execution.

Rather than fostering collaboration, the DBB method drives an adversarial relationship that causes information to be “siloed.” Each party keeps vital information to themselves in an effort to protect against litigation. The result: projects are expensive, experience cost overruns, and are rarely completed within the original time frame.

Integrated project delivery, also known as design/build (DB), is different. Under this collaborative arrangement, design and construction contractually work together in the best interest of the project. DB teams have the greatest potential for achieving goals in schedule maintenance, construction speed, and intensity. Rather than pitting teams against each other, integrated project delivery creates a single team with a sole purpose: achieving what’s best for the project. Participants are evaluated based on the outcome of the project, rather than just their particular piece.

How integrated product delivery is changing construction

Re-imagined business models fundamentally change how contractors perform, work together and retain their workforce. This shift is good for productivity and the bottom line. A study from the University of Texas at Austin comparing DB and DBB projects found that DB projects “take less time, had less cost growth, and were less expensive to build in comparison to DBB projects.” A study by Penn State found a similar positive outcome for DB projects. Compared to DBB, DB projects had a six percent reduction in change orders, were delivered 33% faster, and cost six percent less.

Beyond design build: New contract models and extensive verticalization driving change

Extensive verticalization and new contract models are forcing construction companies, contractors, and architects to reimagine their working relationships. This is an extension of the DB concept that allows contractors to reduce overall project risk and, also importantly, the owner’s perception of construction risk.

As use of integrated project delivery contracts accelerate and collaboration technology is adopted, true vertical integration of projects will expand. In turn, customer-perceived risk will diminish. The implications for supply chain simplification and cost reduction are significant, with a single entity controlling all aspects of the project from design to prefabrication and construction.

Integrated project delivery contracts are also reshaping the end delivery process. Traditionally, contractors have delivered their end product to an owner to operate and maintain. Now, to improve margins in this low-margin industry, some contractors are financing and operating what they construct. This allows construction companies to deliver facilities- and assets-as-a-service. One of the earliest examples of this model are the public-private partnerships for transportation.

It is increasingly common for transportation departments to employ public-private methodologies to construct new roads or bridges. The contractor provides the financing and construction of the asset, performs maintenance on it for 20 to 30 years, and receives payment over time, often via collection of tolls. For example, Fluor is not just building the new Tappan Zee Bridge over the Hudson River in New York, but will also operate the bridge.

Together with integrated project delivery, expect this new construction business model to make inroads in commercial, industrial, and residential construction.

Next steps: Digital solutions for new business models

As construction companies adapt to new business models like integrated project delivery, they must do so in conjunction with new digital strategies. Construction companies must digitize to grow profits and simplify operations to reduce risk. This starts with bringing together business processes, project controls, visualization, and analytics in real time to work smarter, faster, and simpler. SAP is powering this transition with digital solutions for enhanced workforce engagement, supplier optimization, and project optimization.

To find out more about digital transformation in construction, see Building a Sustainable World, How to Survive and Thrive in a Digital Construction Economy.

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Dustin Anderson

About Dustin Anderson

Dustin Anderson is a Global Industry Solutions Director for the Engineering, Construction, & Operations Industry Business Unit at SAP representing North America and Latin America. Prior to this role, Dustin worked at an SAP partner company implementing SAP Solutions. Dustin helps clients deliver value through SAP solutions.

Digital Compliance: Only Superheroes Need Apply

John Bertrand

Compliance in banking and finance is big business. If you’re wondering what I mean, consider that the four big UK banks have paid $75 billion in penalties (as of a year ago) and 20 global banks have racked up $235 billion in fines since the financial crash.

Compliance officers are in great demand, but the responsibilities and requirements for the job are so daunting that even Superman would have a difficult time filling the role.

The high need for compliance superheroes may just be starting. Two new regulations, the UK’s Senior Managers Regime (monitored by the UK’s Financial Conduct Authority, or FCA) and the EU’s Market Abuse Regulation, will test compliance officers’ ability to govern. There’s also Basel IV, which is looking like global regulation, and the FCA, which says its “enforcement division supports our objectives by making it clear there are real and meaningful consequences for firms or individuals who don’t follow the rules.”

Why should compliance be so hard that we need to find superheroes to do the job?

Let’s make digital technology the superhero instead

Given that banking worldwide is going digital, compliance should also go digital. It will take time for compliance functions to be built directly into the technology, but adding a layer of digital technology operating across the enterprise could be the short-term answer.

Incorporating digital technology into the compliance function could identify anomalous – and potentially non-compliant – actions in near-real-time. Every anomaly has a sequence of events, digital fingerprints if you like. Digital compliance picks up on those deviations from the norm and enables supervisors to quickly examine them in order to forestall malicious behavior.

Automated supervision can test trades against certain rules and levels of exposure; if the rules are breached, the system will trigger texts, emails to the management team, or other alerts for immediate action, before or after a trade.

For example, human resources data can be coupled with trading systems to show a trader’s past behavior against the house rules and regulations. In addition, predictive analytics can show where the trader is moving along the “risk for misbehavior” scale. With digital compliance monitoring the market, the trader, and the bank’s policy, anomalies are illuminated and the probability of non-compliant activity is dramatically reduced.

Like any other superhero, the compliance supervisor must address the biggest risk, the most important regulations, first. Digital technology allows these superheroes to act faster than a speeding bullet to prevent non-compliant activity, focusing first on the most pressing business issue, then repeating until they have established a penalty-proof level of compliance.

Digital compliance, built in stages, can become a liaison between the stakeholders in the business, even including the official regulators. It not only installs a permanent digital superhero on your team, it may also prevent prison terms for “Persons Discharging Managerial Responsibilities” – even if the CEO does look good in stripes.

For more on how digitization can strengthen your business, see Algorithms: The New Means of Production.

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Robots: Job Destroyers or Human Partners? [INFOGRAPHIC]

Christopher Koch

Robots: Job Destroyers or Human Partners? [INFOGRAPHIC]

To learn more about how humans and robots will co-evolve, read the in-depth report Bring Your Robot to Work.

Download the PDF (91KB)

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About Christopher Koch

Christopher Koch is the Editorial Director of the SAP Center for Business Insight. He is an experienced publishing professional, researcher, editor, and writer in business, technology, and B2B marketing. Share your thoughts with Chris on Twitter @Ckochster.

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What Is The Key To Rapid Innovation In Healthcare?

Paul Clark

Healthcare technology has already made incredible advancements, but digital transformation of the healthcare industry is still considered in its infancy. According to the SAP eBook, Connected Care: The Digital Pulse of Global Healthcare, the possibilities and opportunities that lie ahead for the Internet of Healthcare Things (IoHT) are astounding.

Many health organizations recognize the importance of going digital and have already deployed programs involving IoT, cloud, Big Data, analytics, and mobile technologies. However, over the last decade, investments in many e-health programs have delivered only modest returns, so the progress of healthcare technology has been slow out of the gate.

What’s slowing the pace of healthcare innovation?

In the past, attempts at rapid innovation in healthcare have been bogged down by a slew of stakeholders, legacy systems, and regulations that are inherent to the industry. This presents some Big Data challenges with connected healthcare, such as gathering data from disparate silos of medical information. Secrecy is also an ongoing challenge, as healthcare providers, researchers, pharmaceutical companies, and academic institutions tend to protect personal and proprietary data. These issues have caused enormous complexity and have delayed or deterred attempts to build fully integrated digital healthcare systems.

So what is the key to rapid innovation?

According to the Connected Care eBook, healthcare organizations can overcome these challenges by using new technologies and collaborating with other players in the healthcare industry, as well as partners outside of the industry, to get the most benefit out of digital technology.

To move forward with digital transformation in healthcare, there is a need for digital architectures and platforms where a number of different technologies can work together from both a technical and a business perspective.

The secret to healthcare innovation: connected health platforms

New platforms are emerging that foster collaboration between different technologies and healthcare organizations to solve complex medical system challenges. These platforms can support a broad ecosystem of partners, including developers, researchers, and healthcare organizations. Healthcare networks that are connected through this type of technology will be able to accelerate the development and delivery of innovative, patient-centered solutions.

Platforms and other digital advancements present exciting new business opportunities for numerous healthcare stakeholders striving to meet the increasing expectations of tech-savvy patients.

The digital evolution of the healthcare industry may still be in its infancy, but it is growing up fast as new advancements in technology quickly develop. Are you ready for the next phase of digital transformation in the global healthcare industry?

For an in-depth look at how technology is changing the face of healthcare, download the SAP eBook Connected Care: The Digital Pulse of Global Healthcare.

See how the digital era is affecting the business environment in the SAP eBook The Digital Economy: Reinventing the Business World.

Discover the driving forces behind digital transformation in the SAP eBook Digital Disruption: How Digital Technology is Transforming Our World.

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About Paul Clark

Paul Clark is the Senior Director of Technology Partner Marketing at SAP. He is responsible for developing and executing partner marketing strategies, activities, and programs in joint go-to-market plans with global technology partners. The goal is to increase opportunities, pipeline, and revenue through demand generation via SAP's global and local partner ecosystems.