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What Happened In The Digital Economy In 2015?

Danielle Beurteaux

The digital economy continued to grow in 2015 — although some regions are experiencing a slowdown, while others, where the majority of the population doesn’t have access to the Internet, are playing catch-up. Here are 8 trends that affected digital growth in 2015.

1. Mobile is here

The next wave of the digital economy will be mobile. The countries that are fueling growth have heavy mobile users, and that will drive the digital economy in those areas.

2. Solving the problems of the world

The digital economy is helping to bring people out of poverty by providing access to things like commerce, banking, and communications, providing a digital infrastructure that most developing countries aren’t providing the old-fashioned way, with banks and telecommunications. It’s also enabling an easy and efficient knowledge stream between those with the skills and resources to help and those who need help.

3. E-commerce unicorn

E-commerce is growing everywhere, and Shopify is a small-business e-commerce platform that’s part of that growth. After filing its IPO last spring, the company sold 7.7 million shares and was valued at $1.27 billion. Unicorn status: official.

4. It’s changing jobs

According to recent research, the digital economy is creating jobs, growth, and wealth for some—and leaving others behind.

5. So many ways to pay…

Digital wallets, Bitcoin….so many new ways to pay became easier to use and more accessible. But 2015 wasn’t the year of mass adoption.

6. The “sharing economy” hit some roadbumps

Lawsuits and questions about the structure of the on-demand economy has led to a deeper discussion about workers’ rights, the future of work, and what and how much regulation the future economy needs.

7. Blocking the ad blockers

Ad blocking got a spotlight when Apple allowed ad blocking on its then-latest iOS release last fall. Some websites cried foul, pointing out the loss of ad revenue that keeps them afloat. One ad blocking app developer even pulled his best-selling product from the Apple store because it “didn’t feel good,” as he explained in a blog post.

8. Concerns about privacy

Hacking, data breaches, and questions about who is gathering what data and for what purpose brought questions about privacy into the spotlight. With Europe moving to strengthen privacy regulations, a landmark lawsuit, and surveys pointing to the increasing concerns about how personal information is used, privacy was a big topic in 2015.

Want more future-focused insights on the digital economy? See 6 Ways The Digital Economy Is Reshaping The Future Of Work.

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Why The Digital Disruption Shaking Up Banks Is A Good Thing

Simon Chmielewski

It’s interesting to see the changing dynamic within the banking and insurance industries. Technology innovation is pushing traditional institutions into a corner, and they must respond by embracing the disruption.

“Embracing disruption” is a term seen at least four times daily on LinkedIn news feeds. But do organizations understand what this means?

Disruption is a simple term. At first glance, disruption seems like a negative; the Oxford Dictionary defines it as “disturbance or problems which interrupt an event, activity, or process.” This is the essence of shaking things up. And that is certainly what we are seeing in the banking industry.

In fact, the disruption emerging in the traditional banking sector by new entrants and fintechs is pushing banks to seriously reshape their traditional business models – business models that were designed based on a “relationship for life” model.

Twenty years ago, traditional banks had it easy. With minimal competition, many customers had only one banking partner from which to choose, and generally it was whoever was on the closest corner.

No one could have predicted that Google or PayPal would be the ones stealing traditional banking customers.

In his recent blog, SAP banking solutions architect Ansgar Erlenkoetter explains how these disruptive forces open up extraordinary opportunities for banks and other financial service providers. By taking a fresh look at business models and processes, leading companies are already discovering that embracing digital change can create new revenue streams and grant access to additional customer segments.

We are seeing some amazing concepts in the banking industry that showcase how innovation is creating new “bank for life” relationships. It’s not just about the onboarding, it’s how you keep your customer happy – understanding them and being able to deliver upon expectations.

At the recent SAP Australia-New Zealand Art of the Possible event series, we saw Glenn Neuber, SAP innovation director, present a live concept of how banks can monitor customer behavior in real-time, allowing the bank to predict, flag, and act before a customer decides to churn and leave. This use of analytical technology demonstrates how banks can be one step ahead in analyzing and understanding customer behavior, enabling the bank to take immediate action when a valuable customer is showing signs of considering leaving. This may be a dream come true for banks that are struggling to retain and keep their customer base happy.

Organizations need to embrace innovation, taking some tips from their fintech counterparts. Being overly cautious and risk-averse is not an option. I am finding insights into how we can reimagine the future of financial services by looking at how customers are engaging with both traditional players and the new entrants at the same time.

Now is the time for banks to look ahead and future-proof their business models to ensure the concept of customer churn is seen as an opportunity rather than a threat.

Register now to access key material which will help you map out what the new world of digital banking will look like, and to understand the strategic choices you have to succeed.

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Simon Chmielewski

About Simon Chmielewski

Simon Chmielewski is focused on growing SAP solutions in the financial services industry, covering banking, insurance, and wealth management. He is a member of the industry value engineering team, which works with the broader sales and services teams to showcase to customers the business value of and the road map for SAP solutions to guide them in the relentless transformation to digital in the financial services industry.

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.

The Robotics Race

Stephanie Overby

As robotic technologies continue to advance, along with related technologies such as speech and image recognition, memory and analytics, and virtual and augmented reality, better, faster, and cheaper robots will emerge. These machines – sophisticated, discerning, and increasingly autonomous – are certain to have an impact on business and society. But will they bring job displacement and danger or create new categories of employment and protect humankind?

We talked to SAP’s Kai Goerlich, along with Doug Stephen of the Institute for Human and Machine Cognition and Brett Kennedy from NASA’s Jet Propulsion Laboratory, about the advances we can expect in robotics, robots’ limitations, and their likely impact on the world.

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qa_qWhat are the biggest drivers of the robot future?

Kai Goerlich: Several trends will come together to drive the robotics market in the next 15 to 20 years. The number of connected things and sensors will grow to the billions and the data universe will likewise explode. We think the speed of analytics will increase, with queries answered in milliseconds. Image and voice recognition – already quite good – will surpass human capabilities. And the virtual and augmented reality businesses will take off. These technologies are all building blocks for a new form of robotics that will vastly expand today’s capabilities in a diversity of forms and applications.

Brett Kennedy: When I was getting out of school, there weren’t that many people working in robotics. Now kids in grade school are exposed to a lot of things that I had to learn on the job, so they come into the workplace with a lot more knowledge and fewer preconceptions about what robots can or can’t do based on their experiences in different industries. That results in a much better-trained workforce in robotics, which I think is the most important thing.

In addition, many of the parts that we need for more sophisticated robots are coming out of other fields. We could never create enough critical mass to develop these technologies specifically for robotics. But we’re getting them from other places. Improvements in battery technology, which enable a robot to function without being plugged in, are being driven by industries such as mobile electronics and automotive, for example. Our RoboSimian has a battery drive originally designed for an electric motorcycle.

qa_qDo you anticipate a limit to the tasks robots will be able to master as these core technologies evolve?

Goerlich: Robots will take over more and more complex functions, but I think the ultimate result will be that new forms of human-machine interactions will emerge. Robots have advantages in crunching numbers, lifting heavy objects, working in dangerous environments, moving with precision, and performing repetitive tasks. However, humans still have advantages in areas such as abstraction, curiosity, creativity, dexterity, fast and multidimensional feedback, self-motivation, goal setting, and empathy. We’re also comparatively lightweight and efficient.

Doug Stephen: We’re moving toward a human-machine collaboration approach, which I think will become the norm for more complex tasks for a very long time. Even when we get to the point of creating more-complex and general-purpose robots, they won’t be autonomous. They’ll have a great deal of interaction with some sort of human teammate or operator.

qa_qHow about the Mars Rover? It’s relatively autonomous already.

Kennedy: The Mars Rover is autonomous to a certain degree. It is capable of supervised autonomy because there’s no way to control it at that distance with a joystick. But it’s really just executing the intent of the operator here on the ground.

In 2010, DARPA launched its four-year Autonomous Robotic Manipulator Challenge to create machines capable of carrying out complex tasks with only high-level human involvement. Some robots completed the challenge, but they were incredibly slow. We may get to a point where robots can do these sorts of things on their own. But they’re just not as good as people at this point. I don’t think we’re all going to be coming home to robot butlers anytime soon.

Stephen: It’s extremely difficult to program robots to behave as humans do. When we trip over something, we can recover quickly, but a robot will topple over and damage itself. The problem is that our understanding of our human abilities is limited. We have to figure out how to formally define the processes that human beings or any legged animals use to maintain balance or to walk and then tell a robot how to do it.

You have to be really explicit in the instructions that you give to these machines. Amazon has been working on these problems for a while with its “picking challenge”: How do you teach a robot to pick and pack boxes the way a human does? Right now, it’s a challenge for robots to identify what each item is.

qa_qSo if I’m not coming home to a robot butler in 20 years, what am I coming home to?

Goerlich: We naturally tend to imagine humanoid robots, but I think the emphasis will be on human-controlled robots, not necessarily humanshaped units. Independent robots will make sense in some niches, but they are more complex and expensive. The symbiosis of human and machine is more logical. It will be the most efficient way forward. Robotic suits, exoskeletons, and robotic limbs with all kinds of human support functions will be the norm. The future will be more Iron Man than Terminator.

qa_qWhat will be the impact on the job market as robots become more advanced?

SAP_Robotics_QA_images2400x16004Goerlich: The default fear is of a labor-light economy where robots do most of the work and humans take what’s left over. But that’s lastcentury thinking. Robots won’t simply replace workers on the assembly line. In fact, we may not have centralized factories anymore; 3D printing and the maker movement could change all that. And it is probably not the Terminator scenario either, where humanoid robots take over the world and threaten humankind. The indicators instead point to human-machine coevolution.

There’s no denying that advances in robotics and artificial intelligence will displace some jobs performed by humans today. But for every repetitive job that is lost to automation, it’s possible that a more interesting, creative job will take its place. This will require humans to focus on the skills that robots can’t replicate – and, of course, rethink how we do things and how the economy works.

qa_qWhat can businesses do today to embrace the projected benefits of advanced robotics?

Kennedy: Experiment. The very best things that we’ve been able to produce have come from people having the tools an d then figuring out how they can be used. I don’t think we understand the future well enough to be able to predict exactly how robots are going to be used, but I think we can say that they certainly will be used. Stephanie Overby is an independent writer and editor focused on the intersection of business and technology.

Stephanie Overby  is an independent writer and editor focused on the intersection of business and technology

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

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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.